An investigation into how business excellence can contribute to sustained organizational performance in both private and public sector organizations

Business Excellence, or Total Quality Management as it is also known, is a philosophy that may be traced back to the 1950's when Deming and Juran showed the way to the Japanese at the end of the second world war (Oakland (2003a)). Some of the principles may even be traced back to the Egyptians (Tanner and Walker (2002)). Despite this, Business Excellence theory is it an early stage of development (Dale, Wu et al. (2001)). For over a decade, organizations have pursued the benefits of adopting a Business Excellence approach and have sought external recognition through the achievement of regional, national and even continent Quality Awards (Porter and Tanner (2003)). One day soon, there could even be a 'World Quality Award'. The research set out with two clear aims. Firstly, there was an objective to add to the growing body of knowledge supporting the benefits of the adoption of Business Excellence. Secondly, there was a desire to provide an insight into why Business Excellence delivers such benefits. The thesis makes a contribution in both these areas. The research was also novel in that both private and public organizations were included in the study, and it represents one of the few studies to examine public sector organizations at a time when the UK government is investing heavily in Business Excellence as a way to improve public services (PriceWaterhouseCoopers (2000)). The work also partially replicated the research of two other authors, Hall (Hall (1991); Hall (1992); Hall (1994)) and Lindgren (2001), and not only provides support for their findings, but also support for the current work. The research examined how Business Excellence could lead to a source of competitive advantage (or source of organizational advantage, as it was termed, as the sample included both public and private organizations). Use was made of the resource-based view of the firm as a basis for the theory underpinning the research ((Tena, Llusar et al. (2001)) taking a scientific Structure - Conduct – Performance perspective (Barney (1991a)). The literature review identified an initial research model that had the constructs of Organizational Context, Environmental Dynamics, Leadership Excellence and Strategic Capability as independent variables, and Performance across a number of Stakeholder groups as the dependent variable. A positivist approach was taken to collect data using a self-reporting postal questionnaire from 193 organizations. Use was made of existing instruments following Churchill‟s 9-step process (Churchill and Iacobucci (2002)), with some instruments being converted for use in the public sector. Although primarily a positivist approach, the research also made use of social construction techniques in the design of the questionnaire and to validate the findings (Jick (1979); Easterby-Smith, Thorpe et al. (2002)). The first area examined was the benefits of Business Excellence. A comprehensive review of the literature concluded there was a strong case for its use, although the majority of work had been conducted on the American Malcolm Baldrige National Quality Award (MBNQA) framework and not on the more local EFQM Excellence Model® framework. A number of hypotheses were developed, covering areas such as the difference in benefit reported between small and large organizations, and whether whole organizations demonstrated more benefit than business units. There was also an interest in whether there was a difference in the benefits achieved between public sector and private sector organizations. The two most frequently used methodologies for studying Business Excellence benefits was found to be share price event studies and surveys, with the latter being used in the current work. A Leadership Excellence instrument was used to operationalize Business Excellence following a review of the critical success factors of Business Excellence. The results indicated that Business Excellence had a positive relationship with overall performance, as well as with individual performance indicators representing different stakeholder groups. Business Excellence had a positive relationship with key performance outcomes representing the organization, employee satisfaction representing the employees, and customer satisfaction representing the customers. These relationships were found for both private and public sector organizations. Societal satisfaction, the fourth results area representing society as a stakeholder, did not appear to be correlated with the Business Excellence approach. Despite an acceptance that leadership is a driver of organisational performance, there is very little empirical evidence to support this generalization (Bolden (2004); Burgoyne, Hirsh et al. (2004)). Although not part of the original scope of the research, as a leadership instrument has been used to operationalize Business Excellence, the research contributes to the leadership body of knowledge, providing such empirical evidence of a positive relationship. The second area considered was the sources of competitive advantage, or sources of organizational advantage, as the sample included both public and private organizations. Partially replicating the work of Hall, employee-know how was found to be a main source of advantage in public sector organizations, with employee know-how and reputation being important in private sector organizations. The time to develop the advantage was measured in terms of „Replacement periods‟, and this was found to be in the order of 2 to 3 years in most cases, with reputation having a slightly higher replacement period. The third area examined the relationship between the ease with which organizations respond to change, termed „Strategic Capability‟ in this study, and the performance achieved. The result provided support for the concept of dynamic capabilities (Teece, Pisano et al. (1997); Eisenhardt and Martin (2000); Zott (2003)). It was concluded that Business Excellence and the ability of an organization to react to change exhibited a relationship supporting the „mental buffer‟ theory of Savolainen (2000a). The dynamics of the external environment was also considered to see if this affected the relationships based on the theory of Eisenhardt and Martin (2000), but no such relationship could be found. This lack of a relationship was attributed to either measurement and/ or sampling issues. The fourth area and final examined sought to establish a relationship between Business Excellence, strategic capability and performance. Prahalad (2000) argued the most important challenge facing managers in the 21st century was the challenge to manage change in fast-moving environments. The current work developed a framework to aid the understanding of dynamic capabilities and this framework represents a contribution to theory. It is hoped the framework will be of value to both practitioners and researchers as this exciting area of strategy is taken forward.