Total quality management (TQM) and sustainable company performances: Examining the relationship in Malaysian firms

ABSTRACT This paper investigates the relationship between Total Quality management (TQM) elements and sustainable company performances. TQM models prescribe several important factors: starting with effective leadership that executes brilliant strategies, emphasizing best practices in quality improvements while recognizing the stakeholders' needs. This research employs TQM as the research framework while also taking into consideration the resource-based views (RBV) on the arguments concerning internal capabilities. An instrument is developed to measure the related TQM constructs and is found to be reliable. Using exploratory factor analysis, it is found that the items clearly fall into six factors: leadership, best practices, customer focus, employee focus, community focus and productivity focus. Another factor analysis on measures of company sustainable performance has resulted in a single factor. The study proceeds with the multiple regression analysis to test the relationship between the dependent, sustainable company performances and the independent factors, the dimensions of TQM. The percentage of variance explained by the three factors is 77 percent with leadership values obtaining 55 percent. In terms of the relationship with performances, all are significantly influenced by customer focus which assumes the highest coefficient of 0.46. It is therefore argued that the leadership within the TQM constructs is the most influencing factor; while to impact on company performance, best practices and stakeholder focus must be implemented. Theoretical and practical implications are discussed. Keywords: TQM, Stakeholder focus, Malaysia, Company performance 1. INTRODUCTION Total Quality Management (TQM), upheld as the management concept and practices, continues to evolve into more specific areas and keeps attracting attention (Bou-Llusar et. al., 2009; Molina et. al., 2007; Yeung et. al., 2006; Nair, 2006). Recent studies of TQM in Malaysia have brought to our attention different issues that spread across industries. For example several authors speaks of service quality (Ramayah et. al., 2011; Sia and Muthusamy, 2011, Ramli et. al., 2009), quality practices and quality costs in manufacturing company (Cheah et. al., 2010; Islam and Karim, 2011), TQM Implementation in the Small Medium Entreprises (SME) (Abdullah, 2010); TQM/ISO and the contextual fit (Abdullah and Ahmad, 2009), TQM and organizational performances such as customer satisfaction, operational flexibility and avoiding conflicts (Idris et al, 2010; Wen et al, 2009; Wan Yusoff et. al., 2010; Arumugam et. al., 2009; Teh et. al., 2009), and TQM relations with other organizational functions such as the HRM (Ooi, et. al., 2009; Hassan, 2010) Among the still debated issues concerning those studies is the factors of TQM which would lead to improving various organizational performances. Wen et al, 2009, for example, suggest that leadership, customer focus, information and analysis, and human resource focus are found to have significant and positive association with customer satisfaction as perceived by Malaysian service sector's managers. In another important TQM study, Dow et. al., (1999) concludes that only three dimensions; employee commitment, shared vision, and customer focus yield a positive correlation with quality outcomes. In another study done in Australia, Samson and Terziovski (1999) conclude that the main predictors of performance are 'soft' elements of TQM such as leadership, human resource management, customer focus, while the hard factors such as planning and process management, information and analysis, are neither significantly related or negatively related. Therefore, the study leads to one common conclusion- the importance of focusing on the 'soft' elements of TQM. Another important gap that emerges from the literature is apparent when there is a growing concern on the emergence of important organizational stakeholders. …