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Journal of Small Business Management 2001 39(4), pp.


Quality Practices for a Competitive

Advantage in Smaller Firms
by Donald F. Kuratko, John C. Goodale, and Jeffrey S. Hornsby

This exploratory study examines the quality practices used in smaller en-
trepreneurial firms. The current literature defines flexibility as one of the primary
competitive priorities for smaller firms. This study develops an exploratory proposition
that relates the characteristics of quality systems used by small firms, and their value,
to the competitive priority of flexibility. A survey of 184 small firms in the U.S. was
conducted using the classification scheme for quality systems consistent with the
Malcolm Baldridge National Quality Award (MBNQA) performance criteria. Overall,
the results support the proposition that small firms tend to employ quality practices
that enable change and that position the firm to pursue flexibility as a competitive
priority. The paper concludes with a discussion of the insights generated by the findings
and directions for future research.

Small businesses are mighty min- gies, skills, processes, or products

nows, reflecting the competitive (Ibielski 1997, p. 1).
spirit that a market economy
needs for efficiency; they provide Small business productivity has been
an outlet for entrepreneurial tal- the driving engine of the U.S. economy for
ents, a wider range of consumer the past two decades. With the beginning
goods and services, a check to mo- of the new millennium, the degree of pro-
nopoly inefficiency, a source of in- ductivity demonstrated by smaller firms
novation, and a seedbed for new will be vital to a continued economic
industries; they allow an economy surge. Stressing quality can produce the
to be more adaptable to structural desired productivity results (Deming
change through continuous initia- 1986). The general definition of productiv-
tives embodying new technolo- ity is the ratio of outputs to inputs. In this

Dr. Kuratko is the Stoops Distinguished Professor of Entrepreneurship and founding director
of the Entrepreneurship Program in the College of Business at Ball State University in Muncie,
Indiana. His research has concentrated in the areas of entrepreneurship, corporate entrepreneur-
ship and small business.
Dr. Goodale is an assistant professor of Management in the College of Business at Ball State
University in Muncie, Indiana. His research has concentrated in the areas of quality and operations
in service businesses.
Dr. Hornsby is professor of Management and director of the Human Resources Management
Program at Ball State University in Muncie, Indiana. His research has concentrated on corporate
entrepreneurship and human resource management issues in small business.


context, pursuit of higher quality levels inefficient system for executing the quality
leads to fewer inputs via less rework and principles. In studies that have examined
fewer failures, and more outputs via im- TQM (Ernst & Young 1993; Black and Por-
proved competitive position and in- ter 1996; Shin, Kalinowski, and El-Enwin
creased demand (Gitlow, Oppenheim, and 1998), it becomes apparent that there is
Oppenheim 1995). Perhaps most impor- agreement on the guiding principles of
tantly, a fundamental principle of the Total total quality. However, the actual imple-
Quality Management (TQM) philosophy is mentation remains the challenge.
an intense focus on customer satisfaction This exploratory study utilizes the
(Noori and Radford 1995; Hodgetts 1998). framework of the MBNQA to examine the
Focus on the customer enables the firm to quality practices used in 184 small firms.
recognize changing market conditions and The purpose of the study is to identify
effect appropriate change. Hence, the re- which quality strategies and tools are used
lationships between productivity and qual- by the firms, and to relate their value to the
ity go beyond operational efficiency and competitive priority of flexibility.
incorporate the uncertain and dynamic na-
ture of the competitive environment in
which the smaller firm participates.
Competitive Priorities
In this context, it is important to analyze in Smaller
the role of quality practices that enable Entrepreneurial Firms
smaller firms to pursue competitive priori- Various entrepreneurial firm models
ties, such as flexibility. Following the lead contribute insight on competitive priori-
of larger firms, smaller firms are moving ties and behaviors of these firms. As an
into quality programs at a “phenomenal example, Jelinek and Litterer (1995)
rate” (Meyer 1998). In examining the ob- l o o k e d a t t h e o r g an iz a tion o f en-
jective measures of quality in U.S. firms, trepreneurial firms and found difficulties
Andreichuk (1992) stated, “It’s a common analyzing them using traditional organiza-
misconception that big firms with exten- tion theory. They proposed that a new
sive human and financial resources can do cognitive model be used to focus on cog-
a better job of educating and motivating nition shared among members of the firm.
their workers to make quality improve- They posited that this new model could
ments. The truth is that smaller companies account for the constant innovation result-
can be even more successful at soliciting ing from entrepreneurial activity and focus
employee support and involvement be- it as systemic flexibility. They point to
cause there are fewer management layers shared management as a structural ele-
to permeate and fewer people to convince ment that facilitates an organizational
of the benefits” (p.29). culture and strategy that achieves en-
As a way to improve the overall com- trepreneurial activity. At the operational
petitiveness of U.S. industries, Congress level, control systems (for example, quality
created the Malcolm Baldridge National control systems) are critical for recogniz-
Quality Award (MBNQA) in 1987. Each ing anomalies (mindful alertness) which
year there can be two MBNQAs given to can be information for coordinated deci-
applicants in each of three categories: sion-making that produces results (ex-
manufacturing, service, and small busi- ploiting opportunities). So at the surface,
ness. However, although total quality has the purpose of control in entrepreneurial
now become an expectation in contempo- firms is likely radically different than in
rary business, the debate continues as to less entrepreneurial firms. Shared man-
the real effectiveness of TQM programs. agement and control systems in smaller
Shin, Kalinowski, and El-Enwin (1998) ar- entrepreneurial firms have much to do
gued that TQM programs fail due to an with the firms’ propensity for ambiguity


absorption. Ambiguity absorption de- ity) are more profitable when markets are
scribes the managerial system of the not focused on price competition. Markets
smaller entrepreneurial firm and gives the under price competition are generally
firm the characteristic of flexibility. The characterized by infrequent change, op-
ambiguity absorption factor seems to be erations with low unit-costs, and stand-
supported in previous models which have a r d i z e d p r o d u c t s a nd p r o c e ss e s .
approached entrepreneurship as behavior Competing in markets with frequent
and described entrepreneurial firms as or- change, product scope, and flexible proc-
ganizations with entrepreneurial postures esses are more typical of the smaller firm.
(Covin and Slevin 1991; Herron and Sapi- Further, quality systems must enable entre-
enza 1992; Johnson 1990; Naffziger, Horn- preneurs to compete by positioning op-
sby, and Kuratko 1994). erations in a manner that supports
In support of their model of en- exploiting opportunities in the dynamic
trepreneurial posture, Covin and Slevin marketplace.
(1991) focused on frequent and extensive
product innovation as one of the defining Recent Research on
behaviors. The operational implications are Quality for Smaller Firms
substantial. Designing systems for flexibility The recent literature is replete with ar-
is essential to taking advantage of opportu- ticles on TQM related to world class learn-
nities that arise as small business managers ing (Luthans, Hodgetts, and Lee 1993);
and entrepreneurs are mindfully tracking training (Niehoff and Whitney-Bammerlin
product/market life cycles and opportuni- 1995); implementation (Shin, Kalinowski,
ties. Zahra (1993) reaffirms the view of Covin and El-Enwin 1998); employee involve-
and Slevin; however, he calls for deeper ment (Lawler 1994); benchmarking (Ro-
specifications of entrepreneurial firm behav- gers 1998); planning (Thisse 1998); value
ior, structure, and strategy. chain (Gehani 1993); control (Sitkin, Sut-
Chaganti, Chaganti, and Mahajan cliffe, and Schroedern 1994); and work
(1989) surveyed 192 small manufacturing performance (Waldman 1994). There is
firms and found “. . . a general lack of vari- even the review of barriers to quality ef-
ety in the strategies that are associated with forts (Katz 1993; Whalen and Rahim 1994)
profitable small firms” (p. 33). They used as well as the more significant failures as-
two of Porter’s (1980) generic types of sociated with quality management pro-
competitive strategy—cost leadership and grams (Harari 1993; Holoviak 1995;
differentiation—that address a competi- Brown, Hitchcock, and Willard 1994;
tive environment driven by price and pro- Korukonda, Watson, and Rajkumar 1999).
motion, respectively (Porter 1985). Spencer (1994) conducted a critical evalu-
Chaganti, Chaganti, and Mahajan (1989) ation of the models of organization and
found that differentiation achieved by a TQM, while Dean and Bowen (1994)
quality-image orientation contributed to called for improved research and practice
profitability if the firm was participating in regarding TQM.
a market with high levels of promotion. In In regards to the quality effort in small
addition, they found that a broad product businesses, there has not been a great deal
scope (flexibility) contributed to profit- of research. There are a few studies, such
ability unless the firm was in a market with as Shea and Gobeli (1995) examining
high promotion. Their findings point to the experiences of ten small firms with
the importance of a quality image in mar- TQM, and Hodgetts, Kuratko, and
kets where smaller firms can gain substan- Hornsby (1999) relating the scenarios
tial headway. These researchers suggest of MBNQA winners in the small business
that smaller entrepreneurial firms with a category. However, the few articles that do
quality image and product scope (flexibil- appear tend to be conceptual with little


empirical findings. A central theme in the smaller entrepreneurial firms. This section
literature is developing a quality philoso- describes the seven categories of the
phy throughout the firm (for example, MBNQA framework presented in relation
TQM). One would expect firm leadership to our focus on smaller entrepreneurial
to implement programs that develop a firms. This meta-framework of quality
high-quality internal environment and are strategies and tools helps provide the
consistent with strategic objectives of the boundaries for strategies and tools consid-
firm, such as flexibility in small firms. ered in this study. These categories were
Firm flexibility can take different forms used as the basis for the instrument that
(DeMeyer et al. 1989). Product flexibility was newly developed and utilized for this
addresses the firm’s ability to handle diffi- research effort.
cult, nonstandard orders; to meet special
customer specifications; and to produce Leadership
products characterized by numerous fea- This category comprises the guidance
tures, options, sizes, and/or colors. Proc- the firm receives from senior leadership.
ess flexibility (product mix flexibility) Guidance consists of different roles that
addresses the firm’s ability to produce impact the values of the organization. Key
small quantities of products cost efficiently areas of focus in the MBNQA are the lead-
so that changes in product mix are easy to ership system and company responsibil-
accommodate. Tangential to these two ity/citizenship. The leadership system
types of flexibility, volume flexibility ad- involves how senior managers build and
dresses the firm’s ability to rapidly adjust sustain a company-wide system dedicated
capacity in order to accelerate or deceler- to high expectations, high performance,
ate production in response to changes in individual development, initiative, organ-
customer demand. Chaganti, Chaganti, izational learning, and innovation (Ireland
and Mahajan (1989) identified product and Hitt 1999). Examples of strategies and
scope as the relative breadth of the firm’s tools used by small firm leadership to fur-
product line. Thus, product flexibility clearly ther quality include philosophies like TQM
maps well to their product scope, and proc- (Spencer 1994), Deming’s Philosophy
ess flexibility has some overlap with product (Deming 1986), or Six-Sigma (Defeo
scope. It could be argued that small business 1999), as well as developing organiza-
managers that compete with flexibility tional structures and high-level improve-
would employ quality strategies and tools ment processes that enhance quality.
that facilitate the ability to design and pro-
duce a variety of items. Therefore the main Strategic Planning
exploratory proposition is: The strategic planning performance
Of the quality strategies and tools con- category addresses the planning under-
sidered by smaller entrepreneurial firms, taken by the firm. How a company devel-
the most used and most useful strategies ops and sets its strategic directions are key.
and tools will include ones that promote Documentation is important, as it permits
flexibility in product, process, and vol- tracking and control of progress and per-
ume in order to facilitate competition formance. Also, effective use of strategic
with strategies that focus on product and planning includes passing higher-level
service scope. strategy and objectives to operations in
order to develop operational systems for
Quality Strategy and meeting business and customer perform-
Tools: An MBNQA Context ance requirements. A systematic approach
The premise of this study is that there to this communication is a vital compo-
are quality strategies and tools that are nent to this category. The strategic plan-
consistent with the strategic objectives of ning process is very established in the


management literature and is used in Human Resource Focus
many smaller organizations (Lyles et al. Creating a high-performance work-
1993; Kuratko and Naffziger 1992; place and developing employees that em-
Naffziger and Kuratko 1991). Besides for- br a c e ch a n g e are im po r ta n t
mal strategic planning processes, exam- responsibilities of the human resource
ples of quality strategies and tools used by management (HRM) function (Burk
small firms in this category include pursuit 1997). HRM should be integrated with the
of ISO9000 standards (Noori and Radford operations of the firm and aligned with the
1995), and disseminating customer re- strategic objectives of the firm. Research
quirements and expectations (Reed, Le- suggests that smaller entrepreneurial firms
mak, and Montgomery 1996). generally have key challenges with HRM
because the small size of the firm often
Customer and Market Focus does not warrant hiring professionals ex-
The customer is at the center of quality clusively dedicated to HRM activities
strategies and is linked to many quality (Hornsby and Kuratko 1990; Wager 1998;
tools (Rucci, Kirn, and Quinn 1998; Ander- Bacon et al. 1996). Critical to the viability
son and Narus 1998). This category spans of smaller entrepreneurial firms is foster-
a large domain, beginning with developing ing the climate of embracing change and
knowledge about the customer, to exam- making change work to the firm’s advan-
ining the performance of companies tage (Duberley and Walley 1995). Exam-
through complaint resolution. Under- ples of quality strategies and tools in this
standing the customer and the market- category include training and education
place involves listening to customers and programs (Niehoff and Whitney-Bammer-
studying customer satisfaction data (Beck- lin 1995), employee involvement pro-
ett-Camarata, Camarata, and Barker 1998). grams (Lawler 1994), and employee
Firms that are effective in this will have empowerment (Goodale, Koerner, and
processes set up to communicate with, Roney 1997).
and receive communication from, custom-
ers. The systems that serve as customer Process Management
interfaces are key. The MBNQA framework Efficient and effective processes require
also accounts for customer satisfaction integrated tasks from product/service de-
and relationship enhancement. Uncondi- sign to post-sale customer service. Quality
tional service guarantees is an example of has historically taken a process-focus at the
this kind of quality strategy or tool used by front end, with programs like quality func-
small firms (Hart 1988). tion deployment (QFD) which turns the
interfacing of customers and product de-
Information and Analysis sign into a manageable system. Just-in-
The information and analysis category time (JIT) operating systems, albeit much
examines the central communication net- less sophisticated than typical material re-
work of the high-quality firm. Information quirements planning (MRP) systems, are
is the key for aligning operations with the consistent with rigorously raising quality
firm’s strategic objectives (Brynjolfsson levels by minimizing waste. In addition, JIT
and Hitt 1996). Further, effective use of systems may be appropriate for small and
information drives the firm’s continuous entrepreneurial firms by focusing process
improvement in performance and com- improvement on increasing flexibility. One
petitiveness. Examples of quality strategies promising innovation is JIT II (Pragman
and tools in this category include system- 1996), where suppliers provide repre-
atic collection and dissemination of the sentatives of the supplying firm (called in-
company’s cost, sales, net income, and plants) inside the buying firm in order to
market share data (Profiles 1992). facilitate efficient and effective management


of the relationship (that is, interfacing tacted refused to be interviewed. Those
product design and management of in- who chose not to participate typically gave
bound logistics). Lastly, statistical process reasons such as they were too busy or they
control (SPC) takes a number of different never participate in surveys. During the
forms, but essentially improves process interview, a pre-tested, structured ques-
variability in a very rigorous fashion. tionnaire developed by the authors was
completed for each firm. A structured
Business Results survey instrument was used to limit the
The business results category takes the variation among interviewers. Also, demo-
form of data pertaining to customer graphic questions were asked first, fol-
satisfaction, company finances, supplier lowed by questions about the firm’s
performance, and company-specific op- quality practices. Although more-in-depth
erations. The dissemination of business probes or open-ended questions would
results is a key issue in any firm. Smaller have been helpful to clarify thought proc-
entrepreneurial firms usually do not re- esses, a structured approach was used in
quire the information infrastructure or so- this study to increase reliability and validity
phistication that larger firms need. The key in responses obtained. The student re-
for smaller firms is collecting the data and search assistants were required to include
developing employees in order to be able a business card from the respondent with
to understand the feedback and how to every completed survey. Respondents
incorporate it into their decision-making were called to verify accurate completion
(Rucci, Kirn, and Quinn 1998). of the instrument. This data collection pro-
cedure has been used in similar studies of
Method of the Study entrepreneurial firms (McEvoy 1984;
Data for the analysis conducted for this Hornsby and Kuratko 1990; Lyles et al.
study were collected from 184 owner/ 1993).
managers of small businesses located in
the U.S. Midwest (Indiana, Ohio, Michigan, Instrumentation
and Kentucky). These owner/managers and The quality practices survey developed
their businesses were randomly selected and utilized for this research was com-
from Chamber of Commerce directories prised of 120 questions. The first five ques-
and were interviewed by students in a tions assessed respondent demographics
small business course using a structured while the remaining 115 items covered
interview format that resulted in a ques- quality practices and tools from the quality
tionnaire being returned for each firm. literature. The authors divided the items
among the seven MBNQA categories dis-
Sample and Procedures cussed earlier in this article. For each item,
A total of 30 students were trained in the respondents were asked to indicate the
the administration of the questionnaire. extent to which their organization used
The owners were contacted by telephone the quality tool or strategy and to rate its
and advised that the study was part of an value to the firm. If the respondent did not
ongoing university effort to study small use a particular set of strategies or tools,
businesses. They were then asked to they were instructed to skip that section.
participate and an interview time was es- Use. The first measure was designed to
tablished.1 Only a few of the owners con- measure the frequency of a particular

1The student research assistants were instructed to conduct at least six interviews each in Indiana,
Ohio, Michigan and Kentucky. Many students’ families were located in these states which made
it easier for some of them to work from their homes during university breaks.


item’s (quality tool or strategy) use. If the data, which seemed appropriate for this
respondent indicated that they were using exploratory study. Frequency data are re-
or planning to use a tool or strategy, it ported for the value-added categories. Ad-
was recorded as a positive response. The ditional quality strategies and tools are
positive responses were summed for the reported if the Value Added Weighted
extent-of-use measure. A binomial vari- Average (VAWA) was among the five high-
able and standard deviation were used est when categories were assigned:
for testing statistical significance be- Created severe problems = –2, Minor
tween items. problems = –1, No contribution = 0,
Value. The second measure was de- Moderate contribution = +1, and High
signed to measure the value-added contri- contribution = +2. The results are broken
bution of each item to the firm’s business out by MBNQA categories.
success. The research assistants were in-
structed to ask the respondent to estimate Leadership
the value-added contribution of the qual- Table 1 shows the five most frequently
ity strategy or tool to the firm’s business used quality strategies and tools address-
success. Value-added was defined here as ing the Leadership category in the
the actual increase of utility from the MBNQA performance criteria, as well as
viewpoint of the customer (Cox and any other quality strategies and tools that
Blackstone 1998). The response possi- were among the highest based on the
bilities were: +2 = High contribution, VAWA. As shown, official communication
+1 = Moderate contribution, 0 = No con- of high expectations and customer orien-
tribution, –1 = Minor problems, and tation were among the most used (ap-
–2 = Created severe problems. For the proximately 50 percent of all firms) and
purpose of this exploratory study, the fre- among the most valuable. Interestingly,
quencies of the responses were reported although high expectations may be an
for each quality strategy or tool being used. organizational value, official communi-
cation of organization values, though
Results widely used, was not one of the practices
This section presents some descriptive considered the most valuable by the re-
results from the survey of quality practices spondents. Quality strategies and tools
in small businesses. The majority of re- in the Leadership category that were con-
spondents came from the service sector sidered valuable but not widely used by
(45 percent) and the manufacturing sector these firms were organizational struc-
(29 percent). The remaining respondents ture designed for flexibility, improve-
came from retail (19 percent) and whole- ment processes personally used by
sale (3 percent). Four percent of the re- senior executives, and a total quality
spondents refused to classify their industry management (TQM) program.
type. The average size of the firms surveyed Although small firms considering an
was 83.5 employees (22.4 salaried and organizational structure designed for
61.1 hourly). The average age of the firm flexibility to be valuable supports the
was approximately 33 years, and the aver- exploratory hypothesis, the relatively
age years under current ownership was low number of firms actually using it
approximately 20 years. does not. Flexible organizational struc-
In analyzing the data, the focus was on tures are purposefully designed to be
determining the quality strategies or tools “flatter,” have fewer functional areas,
that generated the five highest values for widely use information technology, and
the number of firms indicating their use. widely use the team approach. Although
This standard was defined somewhat arbi- on the surface small firms appear to be
trarily by observing natural breaks in the naturally positioned to pursue this


Table 1
Results for the MBNQA Leadership Category:
Most Used and Highest Value Strategies and Tools
Strategy Use Rank1 Number of Firms Percent Responding
or Tool Using Strategy2 to Level of Value Added3

Problems None Moderate High

Official communication
of organization values 1a 98 0.0 3.4 43.2 53.4
Official communication
of high expectations 1a 93 1.2 2.4 39.8 56.6
Official communication
of customer orientation 3a,b 87 0.0 0.0 33.8 66.2
Organizational structure
designed for flexibility 4b 70 3.1 0.0 23.1 73.8
Improvement processes
personally used by
senior executives 4b 69 0.0 3.1 28.1 68.8
Total Quality Management
(TQM) program NR4 60 0.0 2.0 40.8 57.1

Multivariate F-test of equal means rejected at p < .01.
n = 184 respondents.
Respondents rated items: created severe problems, minor problems, no contribution, moder-
ate contribution, and high contribution.
NR = Not ranked among five highest in use, however VAWA is among the five highest.
Note: letter superscripts a and b identify groups with significant differences using Duncan’s
multi-range test (p < 0.05).

strategy, the purposeful pursuit of this sion, strategic objectives and goals, and
strategy is not apparent in Table 1. strategies to achieve goals were among the
five most used and among the most valu-
Strategic Planning able. Although stating a quality focus in the
The five most frequently used quality mission statement is widely used, it was
strategies and tools in the Strategic Plan- not one of the strategies or tools among
ning category based on the number of the highest in value. Other quality strate-
firms using it, as well as the quality strate- gies and tools that were among the highest
gies and tools that were among the highest in value but not among the most used were
based on VAWA, are shown in Table 2. A formal and documented company action
formal and documented company mis- plans to execute strategies and systematic


Table 2
Results for the MBNQA Strategic Planning Category:
Most Used and Highest Value Strategies and Tools
Strategy Use Rank1 Number of Firms Percent Responding
or Tool Using Strategy2 to Level of Value Added3

Problems None Moderate High

Formal and documented

company mission 1a 99 0.0 12.4 49.4 38.2
Formal and documented
company strategic objectives
and goals 1a 95 0.0 1.2 48.2 50.6
Formal and documented
company strategies
to achieve goals 1a 93 1.3 2.5 40.5 55.7
Quality focus stated
in company mission 1a 93 0.0 7.3 41.5 51.2
Formal and documented
company action plans
to execute strategies 5b 74 1.5 1.5 44.6 52.3
Systematic dissemination
of customer and company
performance requirements NR4 66 0.0 3.2 33.9 62.9

Multivariate F-test of equal means rejected at p < .01.
n = 184 respondents.
Respondents rated items: created severe problems, minor problems, no contribution, moder-
ate contribution, and high contribution.
NR = Not ranked among five highest in use, however VAWA among the five highest.
Note: letter superscripts a and b identify groups with significant differences using Duncan’s
multi-range test (p < 0.05).

dissemination of customer and company sis, because the nature of strategic plan-
performance requirements. ning is relatively general. On the other
These results reflect the wide use of hand, the nature of action plans is struc-
strategic planning in these small firms. tured and detailed. Committing to the
However, the use of operational plan- structure of an action plan, as op-
ning or action plans was significantly p o s e d t o o p e r a t ing m o r e f le x ib ly
less frequent. This appears to be con- within strategic objectives, appears
sistent with the exploratory hypothe- counter to the exploratory hypothesis.


In fact, this finding suggests that a poten- were not among the most used were analy-
tialgapinstrategicplanninginsmallfirms sis of return on quality (ROQ) and the
is a method for controlling detailed tasks systematic collection of company market
without action plans. share data.
The results reflect a purposeful effort by
Customer and Market Focus small firms to distribute financial data to
Table 3 presents the five most fre- decision-makers in the firm. Even distrib-
quently used quality strategies and tools uting market share data, which was not
addressing the Customer and Market Fo- widely used, was considered to be valu-
cus category, as well as the quality strate- able. However, aiding decision-makers
gies and tools that were among the highest with systematic forecasting or charting of
based on the VAWA. Measurement of cus- performance measures did not appear to
tomer satisfaction and service quality were be among the most valuable quality strate-
both among the most used and among the gies and tools. This may reflect how finan-
most valuable. Measurement of customer cial data is used to make decisions in these
retention and systematic evaluation of fu- small firms. Decision-makers are appar-
ture customer needs were among the most ently finding the data useful, but not the
used but were not practices among the analysis of the data. This demonstrates a
most valuable. Other quality strategies and gap in the use of financial data by small
tools in the Customer and Market Focus firms.
category that appeared valuable but were
not among the most used were official Human Resource Focus
complaint resolution programs, value- Table 5 shows the five most frequently
added analysis, and unconditional service used quality strategies and tools address-
guarantees. ing the Human Resource Focus category in
The high value placed on official com- the MBNQA performance criteria and the
plaint resolution programs, value-added quality strategies and tools that contribute
analysis, and unconditional service guar- the most value based on the VAWA. Train-
antees reflects the recent codification of ing programs for quality and employee
traditional and operational processes involvement programs were both among
commonly known as “good business prac- the most used and among the most valu-
tice.” In other words, only recently have able. Employee/team financial reward pro-
these quality tools been receiving substan- grams were among the five most widely
tial attention by researchers. This is an used quality strategies and tools but not
important finding, since codification of among the most valuable. Other valuable
these practices helps establish these opera- quality strategies and tools in the Human
tional tools as systematic in a small firm. Resource Focus category that were not
among the five most used were employee
Information and Analysis empowerment programs and employee
The five quality strategies and tools recruitment strategies that consider qual-
most used for the Information and Analysis ity issues.
category in the MBNQA performance crite- The results point to two areas in small
ria, and the quality strategies and tools that firms that are usually addressed by the
contribute the most value based on VAWA, entity responsible for human resource
are shown in Table 4. Systematically col- management (HRM) and indicate the
lecting company sales data, cost data, and need for strong HRM in small firms. First,
net income data were among the most the results indicate that training programs
used and among the most valuable. Other are one of the most widely used quality
valuable quality strategies and tools in the strategies and tools when considering all
Information and Analysis category that items on the survey instrument. Taking


Table 3
Results for the MBNQA Customer and Market Focus
Category: Most Used and Highest Value Strategies and Tools
Strategy Use Rank1 Number of Firms Percent Responding
or Tool Using Strategy2 to Level of Value Added3

Problems None Moderate High

Measurement of
customer satisfaction 1a 112 0.0 2.0 26.3 71.7
Measurement of service quality 1a 103 0.0 2.3 24.1 73.6
Measurement of
customer retention 3b 82 0.0 1.5 41.2 57.4
Official complaint
resolution program 3b 78 0.0 1.4 38.4 60.3
Systematic evaluation of
future customer needs 3b 68 0.0 5.9 29.4 64.7
Value-added analysis NR4 41 2.9 0.0 28.6 68.6
Unconditional service
guarantee NR 52 0.0 7.0 25.6 67.4

Multivariate F-test of equal means rejected at p < .01.
n = 184 respondents.
Respondents rated items: created severe problems, minor problems, no contribution, moder-
ate contribution, and high contribution.
NR = Not ranked among five highest in use, however VAWA is among the five highest.
Note: letter superscripts a and b identify groups with significant differences using Duncan’s
multi-range test (p < 0.05).

advantage of state-of-the-art quality strate- knowledgeable about identifying individ-

gies and tools appears to be a priority for ual differences.
small firms, and appears to be valuable.
Second, employee recruitment strategies Process Management
that consider quality issues appear to be Table 6 shows the five quality strategies
very valuable. One might feel that this hap- and tools with the highest number of firms
pens naturally in the employee hiring employing each strategy or tool, and the
process, but considering small firm size, most valuable based on VAWA average.
hiring decisions may be made by non-HRM These quality strategies and tools address
personnel and perhaps by personnel not the Process Management category in the


Table 4
Results for the MBNQA Information and Analysis Category:
Most Used and Highest Value Strategies and Tools
Strategy Use Rank1 Number of Firms Percent Responding
or Tool Using Strategy2 to Level of Value Added3

Problems None Moderate High

Company sales data

systematically collected 1a 126 0.0 3.4 25.6 70.9
Company cost data
systematically collected 1a 125 0.0 4.3 19.7 76.1
Company net income
data systematically collected 1a 120 0.0 5.2 26.1 68.7
Forecasting used on company
performance data in order
to improve 4b 77 2.95 4.4 50.0 42.6
Charting used on company
performance data in order
to improve 4b 69 0.0 5.4 48.2 46.4
Return on quality (ROQ)
analysis NR4 37 0.0 3.3 46.7 50.0
Company market share
data systematically collected NR 51 0.0 10.2 36.7 53.1

Multivariate F-test of equal means rejected at p < .01.
n = 184 respondents.
Respondents rated items: created severe problems, minor problems, no contribution, moder-
ate contribution, and high contribution.
NR = Not ranked among five highest in use, however VAWA among the five highest.
One respondent indicated that strategy or tool created severe problems; one respondent indi-
cated that strategy or tool created minor problems.
Note: letter superscripts a and b identify groups with significant differences using Duncan’s
multi-range test (p < 0.05).

MBNQA performance criteria. Perhaps due Table 6 does reflect strategies and tools
to the large number of available alterna- that were valuable. Documentation of all
tives in this category, there were no strate- business processes, a team approach to
gies or tools that were considered both job design, formal quick-response pro-
among the most used and most valuable. grams, formal and documented continu-


Table 5
Results for the MBNQA Human Resource Focus Category:
Most Used and Highest Value Strategies and Tools
Strategy Use Rank1 Number of Firms Percent Responding
or Tool Using Strategy2 to Level of Value Added3

Problems None Moderate High

Training programs for quality 1a 114 1.0 0.0 36.4 62.6

Employee involvement
program 2b 89 0.0 3.8 33.8 62.5
financial rewards 2b 84 1.4 8.1 39.2 51.4
recognition program 2b 81 2.9 5.8 36.2 55.1
Formal education program 2b 72 0.0 1.5 39.7 58.8
Employee empowerment
program NR4 46 0.0 4.5 34.1 61.4
Employee recruitment
strategies that consider
quality issues NR 39 0.0 2.9 38.2 58.8

Multivariate F-test of equal means rejected at p < .01.
n = 184 respondents.
Respondents rated items: created severe problems, minor problems, no contribution, moder-
ate contribution, and high contribution.
NR = Not ranked among five highest in use, however VAWA is among the five highest.
Note: letter superscripts a and b identify groups with significant differences using Duncan’s
multi-range test (p < 0.05).

ous improvement programs, and formal Business Results

programs for incorporating customer re- Finally, the quality strategies and tools
quirements into product/service design all used to address the Business Results cate-
appeared to be valuable. gory in the MBNQA performance criteria
Interestingly, a formal quick response are presented in Table 7 (only four items
program achieved the highest VAWA out of were included in this part of the survey).
all items on the survey instrument. How- Only collecting and disseminating cus-
ever, the number of firms employing it was tomer satisfaction results throughout the
low—a key finding in this study. organization was among both the most


Table 6
Results for the MBNQA Process Management Category:
Most Used and Highest Value Strategies and Tools
Strategy Use Rank1 Number of Firms Percent Responding
or Tool Using Strategy2 to Level of Value Added3

Problems None Moderate High

Brainstorming 1 79 2.7 4.1 37.8 55.4

Documentation of all
business processes 1 75 0.0 5.3 28.1 66.7
Team approach to job design 1 71 0.0 1.8 30.9 67.3
Customer satisfaction
questionnaires 1 65 0.0 12.7 40.0 47.3
Documentation of all
production processes 1 63 0.0 1.9 23.1 75.0
Formal quick-response
program NR4 33 0.0 7.7 7.7 84.6
Formal and documented
continuous improvement
process NR 43 0.0 2.7 24.3 73.0
Formal program for
incorporating customer
requirements into
product/service design NR 54 0.0 2.2 26.7 71.1

Multivariate F-test of equal means not rejected at p < 0.05. Duncan’s multi-range (p < 0.05)
did not identify any significant groups.
n = 184 respondents.
Respondents rated items: created severe problems, minor problems, no contribution, moder-
ate contribution, and high contribution.
NR = Not ranked among five highest in use, however VAWA is among the five highest.

used and the most valuable in the MBNQA The results indicate that quality strate-
Business Results category. Although not gies and tools in the MBNQA Business
among the most used, collecting and dis- Results category were not widely used or
seminating financial results and costs valuable relative to the other items on the
of quality were among the highest with survey instrument. It may be perplexing
respect to the VAWA in the MBNQA Busi- that in Table 7 the collection and dissemi-
ness Results category. nation of company financial results were


Table 7
Results for the MBNQA Business Results Category:
Most Used and Highest Value Strategies and Tools
Strategy Use Rank1 Number of Firms Percent Responding
or Tool Using Strategy2 to Level of Value Added3

Problems None Moderate High

Customer satisfaction
results collected and
disseminated throughout
organization 1a 84 0.0 2.7 41.1 56.2
Company financial results
collected and disseminated
throughout organization 2b 60 1.7 8.6 37.9 51.7
Company costs of quality
collected and disseminated
throughout organization 3c 36 0.0 6.7 46.7 46.7
Supplier and partner results
collected and disseminated
throughout organization 3c 25 5.04 10.0 45.0 40.0

Multivariate F-test of equal means rejected at p < .01.
n = 184 respondents.
Respondents rated items: created severe problems, minor problems, no contribution, moder-
ate contribution, and high contribution.
One respondent indicated that strategy or tool created severe problems.
Note: letter superscripts a, b, and c identify groups with significant differences using Duncan’s
multi-range test (p < 0.05).

not found to be widely used whereas in disseminating it to decision-makers in

Table 4, sales, costs, and net income items small firms are widely used and valuable
were shown to be widely used. The cate- practices.
gories and the category headings may have
influenced these findings. Respondents Discussion and
may have had a more operational mind-set Conclusions
when considering the items in the MBNQA Based on the findings of this explora-
Information and Analysis category, and tory investigation, there are a number of
viewed the MBNQA Business Results as interesting observations and implications
official data for year-end or tax purposes. about quality management and flexibility
Because of the number of financial items in smaller firms. Systematic collection of
in Table 4 that were widely used, it can be business performance information (sales,
asserted that collecting financial data and costs, and net income), measurement of


customer satisfaction, and training pro- The results from the Process Manage-
grams for quality were the most widely ment category reflect firms using a wide
used (60–70 percent) practices in the variety of alternatives. However, some key
MBNQA performance criteria. In addition, findings were the high value reflected by
these practices were considered to be the responses to: (1) the team approach to
among the most valuable to the firm. job design, which is consistent with an
This study views the adoption of any effective method for enabling shared man-
high-level quality practices in the MBNQA agement and ambiguity absorption; and
Leadership category as consistent with (2) the formal quick-response programs
managing small firms in dynamic environ- which enable flexibility in responding to
ments. These practices provide direction customers.
when employees are under shared man- It is important to note that there are
agement and require ambiguity absorp- limitations to this exploratory study. Al-
tion (Jelinek and Litterer 1995). This though there was an attempt to be as
facilitates management of systemic flexibil- nearly comprehensive as possible in
ity (Covin and Slevin 1991) and therefore specifying quality strategies and tools for
supports the main proposition of this the respondents to consider, the instru-
study. Based on the same logic, the overall ment can never achieve complete speci-
structure provided by the items in the Stra- ficity. For example, according to Table 3,
tegic Planning category supports the main 112 responding firms (60.9 percent) in-
proposition of this study. Interestingly, dicated that measurement of customer
more operational planning practices like satisfaction was a quality strategy or tool
action plans when competing in a dynamic that they used. However, only 65 firms
environment were not as widely used as (35.3 percent) indicated that customer
one might expect. satisfaction questionnaires was a quality
Results from the Customer and Market strategy or tool used by the firm. The
Focus, Information and Analysis, Business correlation (Spearman’s rho) between
Results, and Human Resource Focus cate- these two variables was significant at
gories also support the main proposition. p < .01 (two-tailed). Thus, the former
In terms of Customer and Market Focus, statistic does not completely specify the
the most widely used and most valuable methods used to measure customer sat-
practices focused on developing the firm’s isfaction. It is believed that in this case
customer knowledge. Designing systems the remaining 47 firms used other op-
to be flexible requires excellent communi- tions for measuring customer satisfac-
cation between decision-makers in small tion be sides customer satisfaction
firms, and the results from the Information questionnaires. Other widely used meth-
and Analysis and Business Results catego- ods for measuring customer satisfaction
ries support the practice of systematically include counting customer complaints
collecting and disseminating customer and counting products returned under
and company data. Recognizing employ- money-back guarantees. Unfortunately,
ees as valuable assets is key to managing neither of these quality strategies or
small firms in dynamic environments. Be- tools were items on the questionnaire.
cause responsiveness is key to flexibility, Future research in this area should fo-
practices that enable employees to act on cus on at least three questions. First, what
behalf of the firm effectively leverage the impact do the various quality practices
firm’s competencies. Employee training and have on business success criteria such as
involvement programs address these behav- sales growth, productivity, and profitabil-
iors. Results from the Human Resource Fo- ity? Second, are there demographic differ-
cus category show these programs as widely ences such as geographic location, size,
used and valuable in the firms surveyed. industry type, and age of the small business


in the implementation of quality practices? Chaganti, R., R. Chaganti, and V. Mahajan
Finally, what impact are larger client or- (1989). “Profitable Small Business
ganizations having on smaller firms and Strategies under Different Types of
their strategic focus relating to quality? Competition,” Entrepreneurship: The-
In summary, the results of this study ory and Practice 13(3), 21–35.
provide a reflection of quality manage- Covin, J.G., and D.P. Slevin (1991). “A Con-
ment practices in small firms participating ceptual Model of Entrepreneurship as
in dynamic markets. Furthermore, the data Firm Behavior,” Entrepreneurship: The-
provide direction toward examining impli- ory and Practice 16(1), 7–25.
cations of small firm size on quality man- Cox, J.F., and J.H. Blackstone (1998).
agement and practices. APICS Dictionary, 9th edition. Falls
Church, Va.: APICS—The Educational
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