Progress in quality management practices in Australian manufacturing firms – A comparative study using survey data from 1994 and 2001
Dr Daniel I. Prajogo Bowater School of Management & Marketing, Deakin University, Australia Email:
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Dr. Damien J. Power Department of Management, University of Melbourne, Australia Email:
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1 Progress in quality management practices in Australian manufacturing firms – A comparative study using survey data from 1994 and 2001
ABSTRACT This paper presents a comparative study of quality management practices among Australian manufacturing firms using two sets of survey data which were collected in 1994 and 2001, and a number of significant differences are noted. In particular, firms are investing less in training and development of employees, and see themselves as needing to provide greater levels of leadership in pursuing best practice. At the same time, employee satisfaction does not occupy the same position of importance as an organisational performance metric that it did in the early 1990’s. Perhaps most significantly, the development of supplier relationships for joint problem solving is counted to be far more important in 2001 than it was in 1994. Keywords: organisational practices, organisational performance, Australia
INTRODUCTION AND RESEARCH BACKGROUND Development of quality management practices in Australia is dated back in the early 1980’s when the manufacturing sector suffered from poor performance compared to its international competitors (AMC, 1990). Increasing international competition, and particularly the demand for quality, has forced the Australian manufacturing industry to consider TQM adoption as part of its survival and competitive strategy. The quality movement in Australia gained its momentum as a result of the announcement of government policies on quality in 1987 when the federal government introduced a number of incentive schemes for encouraging firms to implement TQM (Foley, 1987). The federal government has also facilitated the adoption of TQM by Australian firms, most notably through the National Industry Extension Scheme (NIES). At the same time, the Australian Quality Council (AQC), formerly known as the Total Quality Management Institute, and the Australian Organisation for Quality (AOQ) were established to assist TQM diffusion in Australia. The AQC soon developed a model or set of guidelines for implementing and measuring TQM practices in the form of the Australian Quality Award (AQA) which then evolved into the Australian Business Excellence Framework (ABEF). During the period between the mid-1980s and the mid-1990s quality and TQM flourished and became a top priority throughout Australia with most firms (irrespective of their size) attempting to adopt and implement TQM programs. This was also driven by the increasing demands for quality assurance from customers (government and non-government organisations), most notably through ISO 9000 certification.
2 A number of empirical studies have been conducted in Australia over the past ten years to gauge the development and maturity of TQM implementation, particularly among manufacturing firms. A reliable source of information about empirical studies on TQM in Australia can be found in the work by Rahman and Sohal (2002) reviewing a large number of studies that were conducted between 1985 and 1999, from those based on single case studies (for example, Sohal (1995)) to those involving large sample size, such as the AMC (Australian Manufacturing Council) survey conducted in 1994 (AMC, 1994). Most of these studies were devoted to investigating the impact of TQM implementation on organisational performance at various levles, particularly quality. Mandal et al. (1999), however, lamented that most of the surveys in Australia only reported developments of TQM over a short period. This is despite the common belief that TQM should be implemented as a long-range planning and strategy, and that firms will only benefit from it after persistently implementing it over a number of years (5 or more). As such, there is a need to study TQM practices after more than a decade of TQM diffusion across Australian industry, particularly given the fact that quality appears to be no longer a top priority for many firms. Rahman and Sohal (2002), for example, pinpoint the declining number of attendances at conferences on quality. We believe that this trend is driven by two major factors, internal and external. From the external point of view, most organisations may have been sufficiently familiar with TQM and therefore TQM can be considered as reaching its ‘saturated’ stage. Secondly, and more importantly, there is an argument suggesting the shift of the competitive bases from quality to other sources, such as flexibility, and most notably, innovation (Hamel and Prahalad, 1994). The decline of TQM is further evidenced by the fact that many firms have found TQM (and ISO 9000) to be disappointing, and delivering little obvious value to the business, despite large sums being invested. From an internal point of view, as organisations becoming mature in TQM, they may also shift the emphasis on specific TQM practices. New TQM adopters tend to be more focused on ‘hard’ aspects of TQM such as tools, techniques, and certification, whilst more mature TQM firms are more balanced between ‘hard’ and ‘soft’ (i.e. people and culture) aspects (Terziovski et al., 1997). In addition, the understanding of quality and TQM itself has evolved, particularly from being focused on quality as
3 conformance, into continuous improvement and business excellence. This shift should affect the emphasis of organisations on different aspects of TQM. We believe that these facts warrant a study that aims at tracking the progress of the adoption of quality management practices among Australian firms.
RESEARCH QUESTION Based on this research background, an empirical study was designed to assess the change in TQM implementation among Australian firms over a seven year period (1994 and 2001) which is articulated in the following question: Is there any difference of quality management practices in Australian manufacturing firms between the year 1994 and 2001?
METHODOLOGY Source of empirical data This study used two sets of data that was drawn from two separate surveys. The first survey was conducted in 1994 by the Australian Manufacturing Council (AMC) involving 3,000 manufacturing firms in Australia and New Zealand. The content of the survey was developed based on the Best Manufacturing Practices Model (BMP Model) focusing on an integrated approach to continuous improvement in all facets of an organisation’s operations. For this study only the data collected from Australian companies was used. 962 Australian organisations replied giving a response rate of 32%. This survey consisted of 246 questions developed by a committee of academics, site managers and prominent members of the Australian Quality Awards Foundation. The second survey was conducted between late November 2000 and late February 2001 using a sample of 1,000 managers who were members of the Australian Organisation for Quality (AOQ). The targeted respondents were middle and senior managers in Australian companies who had knowledge of past and present organizational practices relating to continuous improvement and innovation. The survey covered various industries in both manufacturing and non-manufacturing sectors. A total of 194 managers responded, whilst 150 questionnaires were returned to the researchers with RTS (Return to Sender) messages, indicating that the addresses were no longer valid. By discounting the number of RTS mails, the final response rate accounted for 22.8%.
4 Before proceeding to data analysis, it is important to acknowledge that technically, the ability of this study to be used in a longitudinal sense is limited since the population and sample size are different between the two surveys. However, two matters could support the value of this study. First, both surveys captured a significant portion of the population of Australian firms. Secondly, the AMC survey was focused on best practice, and specifically, related to Total Quality Management (TQM) which was a dominant paradigm during the 1990s. The fact that most studies that used the AMC data set, such as Samson (1997), Beamount and Sohal (1997), Terziovski et al. (1997), Samson and Terziovski (1999), and Dow et al. (1999), for conducting empirical studies on TQM confirms that it is significantly associated with TQM-related issues. The respondents to the 2001 survey were members of the Australian Organisation for Quality (AOQ), and as such were also involved in, and aware of, the nature and content of TQM related practices. Item selection The contents of the two surveys were screened to identify the items which are identical in terms of meaning, and in terms of the wording. Eighteen items measuring organisational practices based on TQM principles were found to be identical. TQM practices
Organisational practices are divided into five categories following the structure of the AMC data set, namely (strategic) planning, leadership, people management, customer focus, and process management. There are four aspects of (strategic) planning that include ! Disseminating a mission statement throughout the company to gain support from employees. ! A comprehensive and structured planning process for both short and long-term goals which was regularly set and reviewed. ! Incorporating customer requirements, supplier capabilities, and needs of other stakeholders, including the community in the company’s plans, policies and objectives. ! The company’s strategy covering all manufacturing operations is clearly articulated in a written statement and agreed to by the senior manager.
5 Two items under the leadership category included the role of senior managers in developing a culture of improvement, learning, and innovation as well as bringing unity of purpose to the company by eliminating barriers between individuals and/or departments. Under people management, five items were included: ! Providing an organisation-wide training and development process, including career path planning, for all our employees. ! Maintaining effective both ‘top-down’ and ‘bottom-up’ communication processes. ! Measuring employee satisfaction formally and regularly. ! Maintaining a work environment that contributes to the health, safety and well-being of all employees. ! Actively using employee flexibility, multi-skilling and training to support performance improvement. Under customer focus, four items were included: ! Searching and identifying customers’ current and future requirements. ! Effectively disseminating customer requirements throughout the workforce. ! Maintaining an effective process for resolving external customers’ complaints. ! Systematically and regularly measuring external customer satisfaction. Under process management, three items were included: ! Building internal customer-chain in the processes. ! Having site-wide standardised and documented operating procedures. ! Working closely with our suppliers to improve each others’ processes. ! Work closely with suppliers in product development.
DATA ANALYSIS Data analysis consisted of two major parts, data screening and comparative analysis. In the data screening process, we attempted to balance the sample size and sample profile between the two sets of data. Comparative analysis used MANOVA and t-tests to assess if there are any differences between the two sets of data based on the selected items were included in this study.
6 Data screening Data screening was necessary because the AMC data set was larger than the 2001 survey, potentially affecting the significance of the analysis. In order to make the comparative study more feasible, we treated the AMC data set as a “population” from which a new set of data was drawn by matching the profile of the respondents to those of the 2001 survey in terms of industry sector and organisational size. This data screening process consisted of two steps. Firstly, demographic data in terms of industry sector and organisational size of the 2001 survey was analysed. Since 17 firms did not complete either or both of these two items, we were left only with 85 firms. The demographic description of the sample is presented in Table 1 below.
Table 1 Demographic of the sample of 2001 survey based on sector and size ASIC Subdivision Food and beverage Textiles Clothing and footwear Wood and wood products Paper and paper products Chemical petroleum
Small ( 1-99) 2 2 1 3 2 8
Large (>100) 5 2 1 4 2
ASIC Subdivision Non-metallic mineral Basic metal products Fabricated metal products Transport equipment Other machinery Miscellaneous manufacturing
Small ( 1-99) 1 8 5 2 7 10
Large (>100) 1 2 4 6 5 2
In the second step, we randomly drew data from the AMC data set following the distribution of the 2001 survey in terms of sector and size presented in Table 1. Comparative analysis MANOVA testing was conducted that resulted in a significant p value (p
