Total Quality Management and Organizational Performance: the Role of Performance Measurement System

Escalation in globalization, information and advancement in manufacturing technologies have constantly contribute to the increase in demand and in the competitive manufacturing business environment. Align with the challenges facing the companies, there is a need for companies to devise relevant strategies to help them cope with the changes and sustain their competitiveness. Total Quality Management (TQM) is a management philosophy and strategy that can help improve the quality of product and production processes. Prior research highlights the importance of implementing performance measurement system (PMS) in assisting the implementation of TQM practices. Incorporating contingency theory and socio-technical system theory, this study aims to examine the relationship between TQM practices and organisational performance and to determine the influence of PMS use in the relationship. Data were collected using selfadministered questionnaire survey on a sample of Malaysian manufacturing companies. Our results support the view that more extensive PMS benefits performance as we find that, firms implementing TQM with more advanced PMS especially those that include financial and nonfinancial measures have higher performance. The results revealed that the relationship is more significant for companies using more advanced PMS compared to companies that used traditional PMS.

[1]  Mahmoud M. Yasin,et al.  A literature review of manufacturing performance measures and measurement in an organizational context: a framework and direction for future research , 2004 .

[2]  Arawati Agus,et al.  A linear structural modelling of Total Quality Management practices in manufacturing companies in Malaysia , 2001 .

[3]  Rajiv D. Banker,et al.  Productivity Measurement and Management Accounting , 1989 .

[4]  Yuserrie Zainuddin,et al.  The performance consequence of multiple performance measures usage , 2008 .

[5]  Toomas Haldma,et al.  Influencing Contingencies on Management Accounting Practices in Estonian Manufacturing Companies , 2002 .

[6]  S. Rahman.  A comparative study of TQM practice and organisational performance of SMEs with and without ISO 9000 certification , 2001 .

[7]  Fredrik Nilsson,et al.  Performance measurement at Nordic companies , 2000 .

[8]  Mile Terziovski,et al.  The link between total quality management practice and organisational performance , 1999 .

[9]  Derek Steeple,et al.  A FRAMEWORK FOR AUDITING AND ENHANCING PERFORMANCE MEASUREMENT SYSTEMS , 2000 .

[10]  Robert H. Chenhall,et al.  Reliance on manufacturing performance measures, total quality management and organizational performance , 1997 .

[11]  Kim Langfield-Smith,et al.  Factors Influencing the Role of Management Accounting in the Development of Performance Measures within Organizational Change Programs , 1998 .

[12]  Robert A. Simons.  Accounting control systems and business strategy: An empirical analysis , 1987 .

[13]  G. Reid,et al.  The impact of contingencies on management accounting system development , 2000 .

[14]  Jonas Hansson,et al.  A core value model for implementing total quality management in small organisations , 2003 .

[15]  J. Bisbe,et al.  The Role of Performance Measurement Systems in Strategy Formulation Processes , 2010 .

[16]  Mohd Faiz Hilmi,et al.  TQM and Malaysian SMEs Performance: The Mediating Roles of Organization Learning☆ , 2014 .

[17]  Thomas L. Albright,et al.  An investigation of the effect of Balanced Scorecard implementation on financial performance , 2004 .

[18]  Che Ruhana Isa,et al.  JUST-IN-TIME MANUFACTURING AND PURCHASING PRACTICES AND BUSINESS PERFORMANCE: AN EXPLORATORY STUDY , 2008 .

[19]  Alan S. Dunk,et al.  RELIANCE ON BUDGETARY CONTROL, MANUFACTURING PROCESS AUTOMATION AND PRODUCTION SUBUNIT... , 1992 .

[20]  Fco. Javier Lloréns Montes,et al.  Factors affecting the relationship between total quality management and organizational performance , 2003 .

[21]  Falconer Mitchell,et al.  Utilising a typology of management accounting change: An empirical analysis , 2005 .

[22]  Darren George,et al.  SPSS for Windows Step by Step: A Simple Guide and Reference , 1998 .

[23]  Arawati Agus,et al.  Enhancing Production Performance and Customer Performance Through Total Quality Management (TQM): Strategies For Competitive Advantage , 2011 .

[24]  Zarinah Abdul Rasit,et al.  The influence of comprehensive performance measurement system (CPMS) towards managers' role ambiguity , 2014 .

[25]  K. Langfield-Smith,et al.  Adoption and benefits of management accounting practices: an Australian study , 1998 .

[26]  R. Chenhall.  Integrative strategic performance measurement systems, strategic alignment of manufacturing, learning and strategic outcomes: an exploratory study , 2005 .

[27]  Kenneth A. Merchant,et al.  The effects of financial controls on data manipulation and management Myopia , 1990 .

[28]  Sally K. Widener,et al.  Associations between strategic resource importance and performance measure use: The impact on firm performance , 2006 .

[29]  Alicia Santidrián,et al.  The usefulness of a performance measurement system in the daily life of an organisation: a note on a case study , 2003 .

[30]  Rosemary R. Fullerton,et al.  AN EXAMINATION OF THE RELATIONSHIPS BETWEEN JIT AND FINANCIAL PERFORMANCE , 2003 .

[31]  Y. T. Mak,et al.  Differences in Strategy, Quality Management Practices and Performance Reporting Systems between ISO Accredited and Non-Iso Accredited Companies , 1996 .

[32]  S. H. Appelbaum.  Socio‐technical systems theory: an intervention strategy for organizational development , 1997 .

[33]  K. Langfield-Smith,et al.  The relationship between strategic priorities, management techniques and management accounting: an empirical investigation using a systems approach , 1998 .

[34]  Robert W. Ruekert,et al.  The Organization of Marketing Activities: A Contingency Theory of Structure and Performance , 1985 .

[35]  Malcolm Smith,et al.  Determinants of management accounting Controlsystem in Malaysian manufacturing companies , 2010 .

[36]  David R. Upton.  Just‐in‐time and performance measurement systems , 1998 .

[37]  David Sinclair,et al.  Effective process management through performance measurement: part I – applications of total quality‐based performance measurement , 1995 .

[38]  Zahirul Hoque,et al.  Linking Balanced Scorecard Measures to Size and Market Factors: Impact on Organizational Performance , 2000 .

[39]  R. Schroeder,et al.  Relationships between implementation of TQM, JIT, and TPM and manufacturing performance , 2001 .

[40]  Ekrem Tatoglu,et al.  An analysis of the relationship between TQM implementation and organisational performance: evidence from Turkish SMEs , 2006 .

[41]  M. Farah,et al.  Lean management adoption level in middle eastern manufacturing facilities , 2013 .

[42]  K. Tan,et al.  Just in time, total quality management, and supply chain management: understanding their linkages and impact on business performance , 2005 .

[43]  Malcolm Smith,et al.  Research Methods in Accounting , 2003 .

[44]  Uma Kumar,et al.  Performance measurement by TQM adopters , 2007 .

[45]  R E Miles,et al.  Organizational strategy, structure, and process. , 1978, Academy of management review. Academy of Management.

[46]  Uday S. Murthy.  Accounting , 2002, Encyclopedia of Information Systems.

[47]  Johanna Hyvönen.  Strategy, performance measurement techniques and information technology of the firm and their links to organizational performance , 2007 .