How Effective Is TQM

June 5, 2002
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GRAND RAPIDS — Total Quality Management (TQM) was the hottest business paradigm for manufacturers in the 1980s.

Then the 1990s came along and a growing number of critics blasted TQM for its lackluster gains.

So how effective has TQM been? That's difficult to determine as usually only anecdotal case studies written by company executives who practice TQM are available, while detailed, independent works are few and far between.

Perhaps the most noteworthy independent study was done a few years ago. Two business professors, Vinod Singhai of the Georgia Institute of Technology and Kevin Hendricks of the College of William and Mary, conducted a five-year study in which they followed 600 public companies.

Some of the firms sang the TQM mantra of customer satisfaction, employee involvement and continuous improvement to the tune of being awarded for their performance, while the others were not honored.

"After all, TQM is about continuous improvements," said Singhai about taking a long-term look at the system. "Small improvements over a long period of time, hopefully, will add up to big improvements in performance."

Their findings? The TQM award winners averaged a 44 percent higher stock price return, a 48 percent greater growth in operating income and a 37 percent higher growth in sales than the non-award winners. But that trio of findings wasn't their most significant.

What took Singhai and Hendricks by surprise was that smaller firms in their TQM-award-winning sample did better than larger companies. That wasn't supposed to happen, as TQM was touted as the management style for big firms with lots of employees and shareholders.

But these smaller companies showed larger increases in operating income than their bigger counterparts, 63 percent to 22 percent. The small firms also posted higher gains in sales, 39 percent to 20 percent, and grew at a faster rate with a 21 percent increase in employment compared to a 9 percent rise for the big companies.

Overall, the study implies that small firms seemed more committed to practicing TQM than large ones.

Maybe that explains why some very large manufacturers have produced some very shoddy products recently. Bridgestone/Firestone, Mitsubishi, Intel, Hewlett-Packard, Toshiba and Palm Inc. have all had quality problems. Some have issued recalls, others have liability issues, while a few have faced both.

Doug Bartholomew, a writer with Industry Week, suggested that after large firms made quality improvements in the 1980s, these companies moved on to other things in the past decade. He felt that business reengineering, supply-chain management and e-commerce squeezed out TQM from the boardroom agenda.

"By the late 1990s it was common for consultants and even some in manufacturing to say things like, 'Oh, quality is a given — you have to have quality, or you can't compete.' The attitude was, since we've achieved quality in manufacturing, nobody has to worry about it anymore," wrote Bartholomew.

"Don't believe it. Look around you. Products break, don't function properly, fail prematurely, or don't work from the get-go," he added. "The fact is, quality is coming back to haunt manufacturers like a hastily slapped-together monster in a low-budget 1950s horror film."

What's his solution? Bartholomew recommends that firms have a product testing process that can be checked at every step.

Ralph Mroz, a principal with the Customer Manufacturing Group, reports that another part of the problem is that a company's marketing and sales department is event-driven and may have a tendency to resist applying the quality control aspect found in TQM. He suggests that sales and marketing be tightly woven into TQM.

"The reason is simple — you can't maintain quality control of a process if you can't describe the work cells of the process, and precisely define the desired outputs of those work cells," wrote Mroz in Electronic Business.

"However, with a complete, detailed and integrated marketing/sales practice in place, the time-proven tool of quality management can be applied."

As for Singhai, he agrees and feels that executives should avoid the trendy management system of the month and stick with what works. And, for him, that is TQM.

"Paradigms are going to come and go. But managers should be careful about switching paradigms quickly. There is strong evidence TQM works, and pays off handsomely," he said. "But it takes time. You can't expect returns overnight."

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