The Impact of Total Quality Management Components on Small and Medium Enterprises' Financial Performance in Jordan

ABSTRACTTotal Quality Management (TQM) is increasingly lambasted by management gurus and the business media for a lackluster impact on the bottom line. The question of whether the adoption of TQM improves financial performance has been discussed for several years.However, most research has examined large organizations, and it has been recognized that TQM studies on small and medium enterprises (SMEs) is limited (Parkin and Parkin 1996; Walley 2000). This paper presents a study of the impact of TQM components on small and medium enterprises' financial performancein Jordan while also providing a review of global TQM research.Keywords: TQM, SMEs, Global TQM, JordanINTRODUCTION:Since the 1980's, when the Total Quality Management (TQM) concept was first defined, (Deming, 1986, Crosby, 1979, Juran, 1986), practitioners and researchers tried to give more definitions to defend this business philosophy, the first organic ground based system that emphasizes a systems approach to quality. TQM is a set of techniques, principles, processes, and best practices that over time have been proven effective (Rao et al., 1996). TQM utilizes techniques that improve as well as get better product quality and processes and thereby help a firm improve competitive performance (Grant et al., 1994). Proponents of TQM argue that the philosophy can be applied to any organization (Powell 1995). The effectiveness of TQM as a system for organizational improvement has been widely reviewed in the literature. TQM is an important management tool, which can offer business with stability, growth, and prosperity (Issac et al., 2004). In order to achieve the requirement of quality, firms have to put the effort on the implementation of TQM. Therefore, firms will introduce quality management practice to integrate internal information communications with TQM philosophy effectively. In addition, the application of TQM mechanisms is also important to develop the relationship between organizations and their suppliers. Moreover, the application of TQM can also increase the satisfaction of the customer by providing preeminent products or services.Evidence concerning the impact of TQM on business performance is based on a wide range of indicators that differ across studies and are in some cases are contradictory, especially regarding financial performance, which is measured in terms of ROA (return on assets), or ROI (return on investment). There are many studies have investigated the link between TQM and organization performance, however, that studies have concentrate on large organizations, and that could give a light on recognizing that TQM studies on small and medium enterprises (SMEs) is limited (Parkin and Parkin 1996; Walley 2000). Therefore, this study focuses on the impact of TQM components on SMEs financial performance in Jordan.LITERATURE REVIEW:Christos B. FotopoulusE Hendricks and Singhal, 2001a,b); whereas other research reports a negative incidence of TQM on all of the measures (Chapman et al. 1997). Other research has found a neutral result (Adam, 1994; Powell, 1995; York and Miree, 2004). Hence, that indicates the inconsistent results of those studies, However, that could lead to a methodological problem and conceptual approaches used by researchers which may have led to conflicting results but, in response.Moreno Luzon (1993) examined the effectiveness of TQM in a survey of 44 small manufacturing companies in Valencia, Spain. …