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Alexandra Jancikova, Karel Brychta, TQM and Organizational Culture as

Significant Factors in Ensuring Competitive Advantage: A Theoretical
Perspective, Economics & Sociology, Vol. 2, No 1, 2009, pp. 80-95.

Alexandra Jancikova TQM AND ORGANIZATIONAL

Faculty of Economics and
Administration CULTURE AS SIGNIFICANT FACTORS
Masaryk University Brno IN ENSURING COMPETITIVE
[email protected]
ADVANTAGE: A THEORETICAL
PERSPECTIVE
Karel Brychta ABSTRACT. The aim of the paper is to analyse TQM
Faculty of Business and and organizational culture as factors influencing
Management business performance on the present demanding
Brno University of Technology markets. It provides more complex view of TQM
[email protected] concept and role of organization culture within
successful TQM implementation. The paper presents
core principles of TQM and some issues concerning
TQM implementation. The core principles of TQM -
continuous improvement and customer satisaction -
Received: July, 2008 play vital part in sustaining company´s competitiveness
1st Revision: February, 2009 in present competitive environment. Considering the
Accepted: March, 2009 organizational culture is the driving force of TQM
implementation, its role is discussed further in the
paper

JEL Classification L2, M14 Keywords: TQM, EFQM Model Excellence, organizational culture,
total quality culture, TQM implementation, competitive advantage

1. Entrepreneurial environment and TQM

Nowadays due to highly competing environment, the competitive ability of the

company depends first of all on its competence when solving the problems related to external
environment, e.g. responding to changes of customer needs and expectations, competitors´
innovations or adjusting to the macroeconomic conditions. Thus it is inevitable for the
company to be concerned with the instruments and means improving the company ability to
respond to environmental changes and perceive new trends. A company operating on the
competitive market must adjust not only its products and services but also its internal
processes, systems and sources to customer requirements. It is also important to monitor the
competition and its innovations together with new trends. These trends can be characterized
as follows (Rudzki, 2004; Vokurka & Lummus, 2003):
 immediate movement of the capital all around the world,
 movement from mass production to customized products,
 product operation cycle declining year by year,
 increased reliance on purchased materials and outside processing connected with
the reduction of the number of suppliers,

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 greater emphasis on organizational and process flexibility,

 necessity of coordinating processes,
 empowerment of employees,
 competitive pressure to introduce new products more quickly.

The trends mentioned above have significantly contributed to the fact that many
companies have adopted the motto “doing right things right” and “continuous improvement”
which are considered to be the main principles of TQM.
TQM contains no new revolutionary elements, it is a systematic and consistent
assertion of some methods within the framework of the organizational structure, clearly aimed
at quality and customer satisfaction. TQM is based on the fact that quality is connected with
supposed or specified customers needs. Successfully implemented TQM concept activates the
employees´ interest to continuously improve all processes in the company.
There is no shortage of views on the present state and also usage of TQM and how it
impacts on organizations (McAdam and Henderson, 2004). There are a lot of definitions of
total quality management. TQM is a management philosophy with the aim of achieving
continuous improvement of all processes in the organization which lead to better business
performance. TQM is about creating security for the organisation and giving a better deal for
stakeholders (Bertram, 1993). McDonald (1993) suggests that TQM should be viewed as a
change agent rather than a business objective in its own right which corresponds with the
statement of Bertram (1993) that TQM replaces existing activities and is not an add on. In
short, TQM is a management philosophy with the aim of achieving continuous improvement
and a better overall performance (Agus, 2005). Similar view on the TQM is represented by
Frehr (1999) who states that TQM is based on two basic principles that are customer
orientation and continuous improvement. It is obvious that successful implementation of
TQM should significantly contribute to reaching the state when everything connected with the
production is made first-rate (Ishikawa, 1993).
The results of several surveys proved that successfully implemented TQM has positive
impact on business performance (e. g. Sun et al., 2004; Agus, 2005; García-Bernal et al,
2004). The correlations among TQM, ISO 9000 certification and the improvement of
performances are shown in table 1.

Table 1: Correlations among TQM, ISO 9000 certification and the improvement of
performance
(Sun et al., 2004, p. 143).

Time of research 2001 - 2002

Indicator
TQM ISO
Quality improvement 0,253** 0,133*
Cost reduction 0,139* 0,170**
Flexibility improvement 0,175**
Delivery improvement 0,140*
Customer service 0,135*

Notes: *Correlation is significant at the 0,05 level;

**Correlation is significant at the 0,01 level

Such results are relatively expected because of the principles on which TQM is based.
However, the principles are not always fully implemented. MacDonald (1993, pp. 4 - 5)

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identified eleven principle reasons for the disappointment experienced by many companies in
connection with TQM implementation:
 lack of management commitment,
 lack of vision and planning,
 satisfaction with the quick fix,
 the process has become tool-bound,
 easy acceptance of packaged methodologies,
 quality has become constraining,
 culture change versus project approach,
 creation of a quality empire,
 management did not change,
 people were not involved,
 lack of real business measures.
It is obvious that if the company wants to implement TQM successfullly it is
necessary to establish thoroughly and systematically fundamental principles of TQM.
Bertram refers to seven fundamental principles of TQM that are crucial for successful
TQM implementation (Bertram, 1993, p. 7):
 meeting customer requirements,
 involvement of all employees,
 support by systems,
 achieving a right first time approach,
 through measurement,
 ensuring continuous improvement,
 management support.
To sum up, customer focus and continuous improvement can be considered as the core
total quality management principles.

2. Continuous improvement and customer orientation

It is obvious that one of the company´s most important ability is to respond to changes
and adjust to the external environment. The delivery time has become together with quality
and price one of significant competitive factors. The customers demand three fundamental
product attributes:
 the product should work best,
 it should cost least,
 and should be delivered within as short time as possible.
In principle, the producers view the product attributes almost the same, however, there
is one significant difference:
 our product should work better than competitors´ products,
 it should cost less than competitiors´ products,
 and it should be delivered more quickly than competitiors products.
In ensuring the competitive advantage, it is neccessary to take into account all of three
above mentioned categories: price, quality and delivery time. These categories are
interconnected and mutually affect each other and cannot be considered separately (see fig. 1).
Taking account of the increasing customer requirements, it is evident that the
issue of continuous improvement is of vital importance for companies at highly
competitive markets and helps to form and sustain company´s competitive ability.
Continuous improvement of quality increases competitiveness (see fig. 2).
However, it is not always valid. The basic presumptions are primarily as follows:
- the company is operating on the competitive market,

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- the advanced product is still in the same class after the improvement,
- quality orientation brings economic effects (growth of buyers´ interest, saving of
materials, productivity increase, cost reduction for rework, ...),
- the company is able to provide premium price but only within a certain limited
time,

Figure 1: Relationship of the price, quality and delivery time

- due to the pressure of the entrance of imitated products of the competitors, the
company is forced to decrease the price,
- continuous improvement of the product quality connected with the growth of
provided value to the customer and providing premium price make effective price
policy towards vis-a-vis competitors possible (especially for the older products
imitated by competition),
- decrease of the price of older products causes sufficient growth of demanded
quantity.
It is obvious that the competitiveness is based on a combination of price and quality.
With equal quality and an established reputation suppliers are competitive only if their prices
are as low as those of rivals (Dictionary of Economics of the Oxford Reference, 2004). A new
supplier without an established reputation may need a lower price than rivals to compete.
With lower quality than rivals´ quality, a firm may not be competitive even with a low price;
with a reputation for superior quality, a supplier may be competitive even with a higher price
than rivals.
In order to understand the statement “the competitiveness is based on a combination of
price and quality”, it is important to comprehend the content of the term “quality”
appropriately. To meet this condition, quality is therefore defined with correspondence to
Juran´s definition (1989) as “fitness for use”. According to Juran, quality consists of freedom
from deficiencies and of those product features responding to customer needs.
The component of quality labelled as production quality (Juran´s freedom from
deficiencies) cannot be ignored. Costs connected with production with deficiencies (i. e. costs
for craps, liquidation, rework and many others) represents within production firms roughly 5
– 35% of the total revenues (Brust and Gryna, 2002).
The implementation of TQM should also help to solve such a problem. Such
contention is supported Agus (2005) who confirms that TQM has significant and strong
impact on product quality performance and business performance (see fig. 3).
In accordance with fig. 3, TQM is aimed at reaching business performance. It is
apparent that the main focus of entrepreneurial subjects is to secure excellent business
performance and concurrently to maximize the market value of the company.

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Since defect reduction in relation to quality is no longer enough, companies must build
their quality programs by integrating and connecting all key quality-work processes to
accelerate customer value.
Continuous improvement of the
quality of the products and
connected services

A possibility to get in Making own formely Positive impact on

a bonus price within produced products the value provided
certain time obsolete to customer

Decrease of the prices of the older

(“less quality”) products

Positive impact on
firm operating Growing demand
results

Weakening of the competition by

means of suitable chosen pricing
policy

GROWING
COMPETITIVENESS

Positive
impact on image

Figure 2: Continuous improvement as a factor for forming competitiveness.

Naturally, the way each company determines achievement of customer leadership

depends on the particular conditions of the markets, pricing, product and service maturity, and
global competitive forces. Notwithstanding these facts, there are common denominators that
create foundations for establishing the necessary initiatives. There should be a focus on the
quantification of answers to fundamental questions, such as:
 How can we make our consumecustomers continually more satisfied and more
secure through what they buy from us?
 How can we make our business and industrial customers more competitive
through what they buy from us?
Successful market alignment of a company´s customer quality leadership program
requires to focus customer satisfaction strategy on objectives and results for enhanced quality
value (Feigenbaum and Feigenbaum, 2004).

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TQM Product Quality Business

Performance Performance
1. Top management
Commitment 1. Perceived Quality 1. Revenue Growth
2. Customer Focus 2. Conformance 2. Sales Growth
3. Supplier Relations 3. Performance 3. Market Share
4. Benchmarking 4. Reliability 4. Profits
5. Traing 5. Durability 5. High Demand
6. Employee Focus 6. Features 6. Product Turnover
7. Zero Defects 7. Serviceability 7. Productivity
8. Process Improvement 8. Aesthetics 8. Efficiency
9. Quality Measurement

Figure 3: Relationship between TQM, Product Quality Performance, and Business Performance
(Agus, 2005, p. 94).

Customer-focused performance represents the key dimension and the decisive source
of company competitive advantage. Customer value may be the most important factor in
determining the superiority of customer-focused performance since customer satisfaction can
be generally considered as the consequence of customer value.
The activities best suited to today´s competitive environment may be those that help
the company to achieve superior customer-focused performance through which the interests
of other stakeholders can be also met (Wang and Lo, 2003; see fig. 4).

Overall performance:
 Offerings (Products and services);
 Competences (Internal processes,
Growth, Capabilities and skills)
Customer focused Shareholder-based
performance: performance:
 quality, sacrifice, value  Revenue growth, return on
and satisfaction assets

Employee-based
performance:
 Personal development,
empowered teams, and
employee satisfaction

Figure 4: Relationship among dimensions of performance (Wang and Lo, 2003, p. 487).

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When implementing TQM concept, there is a strong need for measurement. The
making steps towards TQM were more difficult as there was widespread confusion about the
elements of TQM and how they should be implemented.
The reason for this is that TQM is rather an abstract philosophy and has no clear guidelines
for its implementation (Mann and Voss, 2000). However, TQM elements are nowadays more
clearly understood through the development and worldwide acceptance of quality award
models. Researchers and managers agree on the importance of organizations adopting a total
quality management model (García-Bernal et al.). The quality award model most widely used
in Europe is that developed by the European Foundation for Quality Management (EFQM)
(Sun et al., 2004).

3. EFQM Model Excellence

The EFQM was formed in 1988 by fourteen leading European businesses as an
instrument for increasing competitiveness through the use of TQM philosophy. The model
and the associated self-assessment process have given new direction to the quality movement
and have driven deep and lasting changes into participating organizations (Dale et al., 2000).
EFQM model is based on nine basic categories (see fig. 5).
The EFQM Model is structured in nine basic criteria, five at an enablers level and four
at a results level. Those criteria allow the evaluation of the position of an organisation
referring to excellence. Each of them is defined globally and is then structured in a variable
number of subcriteria (Martín-Castilla, 2002).

ENABLERS RESULTS

People
People
Results

Leadership Policy & Processes Customer

Strategy Results
Key
Performance

Results
Partnerships Society
& Results
Resources

INOVATION AND LEARNING

Figure 5: EFQM Excellence Model (Committed to Excellence Information Brochure, 2005, p. 17).

The fundamental concepts of excellence are applicable to all organisations regardless

of sector, industry or size. The main principles of the EFQM Excellence Model are as follows
(Committed to Excellence Information Brochure 2005, p. 14):

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1. results orientation,
2. customer focus,
3. leadership & constancy of purpose,
4. management by processes & facts,
5. people development & involvement,
6. continuous learning, improvement & innovation,
7. partnership development, and
8. corporate social responsibility.

Ruiz-Carillo and Fernandez-Ortiz (2005, p. 31) have come to a conclusion that EFQM
quality model is an effective tool to measure the basis of the competitive advantage. Garíca-
Bernal et al. (2004) state that the firms with a higher level of quality in all of the criteria of the
EFQM Excellence Model obtain better results whereas firms with the lowest scores in all of
the variables obtain the worst results.
The EFQM Excellence Model is a suitable instrument for self-assessment as the basis
for continuous improvement (Grant et al., 2003). Not only improvement but also successful
implementation of TQM can be achieved but it is conditioned by involving people and their
willingness to participate in change programmes. The issue of change in the organizations is
connected with the organizational culture which is discussed further in the text.

4. The concept of culture

The concept of organizational culture is considered to be a complex and multi-layer
phenomenon that can be defined in many ways. There exist more than a hundred definitions
of culture (Kroeber & Kluckhohn, 1952). However, the concept of culture appropriate for the
study of organizations has its origin in anthropology. One of the most cited anthrological
definition of culture is that of Tyler ([1871]1958, in Hildebrandt et al., 1991). He defines
culture as follows:
„culture or civilization, taken in its wide ethnographic sense, is that complex whole
which includes knowledge, belief, art, morals, law, custom, and any other capabilites and
habits acquired by man as a member of society“.
It is remarkable that as early as in 1950´s the well-known expert on quality
management, Juran, proposed the use of the anthropological concept of culture in
organizations in order to create a beneficial change within the organizations (Hildebrandt et
al., 1991).
Although there is no agreement on how the organizational culture should be defined, it
is possible to summarize the major content components of the organizational culture in
Schein´s definition. He asserts that organizational culture is:
„a pattern of shared basic assumptions that the group learned as it solved its
problems of external adaptation and internal integration, that has worked well enough to be
considered valid and, therefore, to be taught to new members as the correct way to perceive,
think, and feel in relation to those problems“ (Schein, 1992, p. 12).
It is obvious from Schein´s definition of organizational culture that culture evolves in
the organization as the members of the culture deal with problems connected with external
pressures and changes, and internal conflicts. The culture is also strongly influenced by the
original ideas of the founders of the company as well as by the successful solutions and
responses to the critical events. Hence, it is useful to distinguish two major sets of problems
that all groups must deal with (Schein, 1992, p.11):
 survival, growth and adaptation in the external environment,
 internal integration that permits daily functioning and adaptability.

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Furthermore, Schein (1992) proposed that organizational culture consists of three layers
according to the degree to which the culture is visible to the observer (see fig. 6) .

Figure 6: Cultural levels and their content (Schein, 1992, p. 17).

5. The relationship between total quality management and organizational culture

Nowadays, the concept of organizational culture is the subject of considerable interest
in the literature on quality management. The cultural impacts on quality management and the
mutual relationship between TQM and organizational culture have been discussed since the
beginning of the 1990´s (Hildebrandt et al., 1991; Westbrook, 1993).
Total quality management and the organizational culture are interrelated (Lukasova et
al., 2004; Sousa-Poza et al., 2001). The system of quality management - if it is succesfully
implemented - influences the content of the organizational culture. On the other hand, the
content of the organizational culture influences the quality system implementation and its
functionality (Lukasova et al., 2004).

Figure 7: Relationship between TQM and organizational culture (Sousa-Poza et al., 2001).

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Not only there is a link between an organizational culture and total quality
management, some authors equate organizational culture to total quality managemen e. g.
Kanji & Yui claim that „total quality management is the culture of an organization committed
to customer satisfaction through continuous improvement“ (Kanji & Yui, 1997, p. 417).

6. TQM implementation and cultural change

Nowadays, total quality management is not considered to be simply an implementation
of methods, techniques and tools, it is a complex cultural shift from the traditional
management to management focusing on the way to total quality company (Lukasova et al.,
2004). According to Deming, TQM is a management philosophy that requires a radical
cultural change from traditional management to continuous improvement management style
in an organization (Deming, 1986).
Implementation of TQM concept is not an easy task because it requires a total change
in organizational culture, shifting of responsibility to management, and continuous
participation of all in the quality improvement process (Lahke and Mohanty, 1994).
Implementation of TQM requires changes to the shared assumptions, frames of reference, and
understanding that most organizations have developed through interaction with their
environment. These changes will impact basic beliefs and values that employees hold about
work (Ngowi, 2000, in Irani et al., 2004). Many companies have realized the importance of
diagnosing of organizational culture prior to TQM implementation (Maull et al., 2001) so that
they could reveal typical content components of the organizational culture supporting or
constraining cultural change.
Lahke & Mohanty (1994) asserted that the following measures are essential for
obtaining cultural change:
 the organizational policies, procedures and processes must emphasize quality,
 everyone in the organization must have a clear understanding of the importance of
quality in achieving their business objectives,
 people at all levels must be aware of the requirements and needs of the customer,
 the structure of the organization should allow for continuous improvement,
 there should be integration of internal and external customer requirements in the
business plan,
 use of customer-based measures of performance is important,
 there is a need to develop strong communication lines,
 customer commitment should be fostered, and
 emphasis on customer-oriented values and beliefs must by supported by top
management.
The organization intending to implement TQM succesfully needs to possess such a
culture that deals effectively with changes associated with adaptation to external environment
and responses to internal processes. The concept of total quality management as the cultural
phenomenon must be understood in connection with those two mentioned processes - external
adaptation and internal integration (Kujala, 2002).
The issue of process of external adaptation and internal integration has been brought
forward in Competing Values Model (Quinn and Rohrbaugh, 1981) when explaining
differences in the values underlying different organizational effectiveness models. The
framework „connects the strategic, political, interpersonal, and institutional aspects of
organizational life by organizing the different patterns of shared values, assumptions, and
interpretations that define an organization´s culture“ (Denison and Spreitzer, 1991, p. 3). The
competing values model comprises two axes reflecting different value orientations of
organizational culture (see fig. 8 ).

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Fig. 8: Competing Values Model (Quinn & Rohrbaugh, 1981, in Dellana & Hauser, 1999).

The vertical axis - flexiblity-control dimension - is related to the organizational

preference toward structuring. Flexibility-oriented organizations support decentralization and
differentiation, while control-oriented organizations support centralization and integration.
The horizontal axis - internal-external dimension is related to organizational
preference toward change. Internally-focused organizations emphasize maintenance of the
existing system, while externally-focused organizations seek improvements in changes in
external environment. Each quadrant represents specific culture type: group culture,
adhocracy culture, hierarchical culture and rational culture (see fig. 8 for details). Dellana &
Hauser (1999) in their research found out that “the ideal cultural profile for supporting TQM
may be characterized to a degree by the adhocracy culture type, and secondarily by the group
culture type” (Dellana & Hauser, 1999, p. 14). It is obvious that the flexiblity-oriented
organizations, such as those with group or adhocracy cultures, are related with a climate of
trust and a positive attitude toward the organization, therefore less resistance to TQM
implementation can be expected (Dellana & Hauser, 1999).
Tata & Prasad (1998) examined the structural and cultural influences on TQM
implementation through building blocks of total quality management and suggested that
organic structures and flexiblity-oriented cultures are more conductive to the success of TQM
implementation, compared to mechanistic structures and control-oriented cultures (Tata &
Prasad, 1998, p. 704, see fig. 9).

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Fig. 9: A model of relationship between organizational culture/structure and TQM implementation

(Tata & Prasad, 1998, p. 708, arranged).

7. Total quality culture

The implementation of TQM concept requires a supportive infrastructure and quality
culture (Pun, 2001). The organizations with adaptive culture can satisfy changing demands of
customers, employees and shareholders more quickly and can outperform organization
without such a culture. Such culture can be labelled as quality culture.
In general, quality culture has certain characteristics which can be described as follows
(Kanji & Wallace, 2000, p. 981):
 a quality culture which is lively and progressive can be found to be constantly
evolving and helping to change the business,
 a progressive quality culture within a business readily evaluates and respondes
to stimuli,
 like religious or political groups, business organizations also have the extreme
quality culture, i. e. culture tries to preserve what is considered to be the true
original set of beliefs,
 large social migration sometimes creates hybrid quality cultures by the
multinational companies,
 changes in quality culture of an organization occur when a leader provides
stimulation with ideas that challenge tradition, e. g. Henry Ford, David
Packard and Walt Disney,
 behind all successful business organizations there have been leaders who
revived and changed the quality culture of their organizations,
 in most cases quality cultural changes are based on retaining and developing
what is good in an existing quality culture and adding to it new total quality
management principles that will stimulate organizational progress and create
business excellence.

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Kanji and Yui (1997) provided the details concerning creating the quality culture (see
fig. 10) and framed the model of total quality culture (see fig. 11 for details).

Fig. 10: Creating quality culture (Kanji & Yui, 1997, p. 426).

Fig. 11: Model of total quality culture (Kanji & Yui, 1997, p. 427).

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The outcomes of TQM implementation are not only of financial nature but also the
change of behaviours, attitudes and processes in the organization. The transformation to total
quality culture starts with the awareness of quality management principles and concepts in an
organization. The awareness of quality is initiated by quality education and training and
supported by structural and progressive change of management systems. The total quality
culture must be then nurnured by appropriate management systems (Pun, 2001).

Conclusion
Total quality management is an instrument for systematic and efficient interconnection
of the subject. TQM is based on the theory of participation and that is why its aim is to create
better firm for stakeholders. This fact is reflected in the EFQM Excellence Model that
includes also a social responsibility. TQM is strongly oriented to performance and its
successful implementation should lead to a better results: improvement both financial and
non-financial indicators. To meet this presumption, there is a need to duly and systematically
fulfil the TQM principles, i. e. customer focus and continuous improvement. These principles
are of vital importance for firm competitiveness. Successful market alignment of a company´s
customer quality leadership program requires it to focus its customer satisfaction strategy on
objectives and results for enhanced quality value (Feigenbaum and Feigenbaum, 2004). Thus,
TQM plays a significant role in ensuring firm competitiveness.
The successful implementation of TQM concept is a long-run endeavor due to the fact
that it requires cultural change. Organizations implementing total quality management need at
least three to four years for TQM to be accepted by the employees, and eight to ten years for it
to be fully implemented (Troy & Schein, 1995). The organizational culture is complex
phenomenon which is difficult to change. According to Liberatore (1993), organizational
culture resists change because it is so established and ingrained that any attempt to change the
culture may “declare war” on the systems. Nevertheless, organizational culture might need to
changed in order to facilitate the implementation of TQM concept into the organization so
that it can sustain its competitive ability in today´s dynamic market-place.

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