THE IMPACT OF TOTAL QUALITY MANAGEMENT SYSTEM ON SUSTAINABILITY OF SMALL AND MEDIUM BUSINESSES IN SOUTH AFRICA P. KHOLOPANE.

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1 International Association for Management of Technology THE IMPACT OF TOTAL QUALITY MANAGEMENT SYSTEM ON SUSTAINABILITY OF SMALL AND MEDIUM BUSINESSES IN SOUTH AFRICA P. KHOLOPANE Abstract Small business sustainability is the capacity of small businesses to manage their resources over long periods of time whilst achieving profit, increasing market share, and maintaining customer satisfaction and business growth relative to that of their competitors. These indicators include job growth, high turnover and profits. However, there is the notion that small businesses in townships in South Africa outside metropolitan areas have been struggling to incorporate these key elements to sustain themselves. This paper investigates how total quality management (TQM) can impact the sustainability of small manufacturers leading to success of the company. The TQM system approach is integrative and requires a high level of commitment from every member of an organization. Some key factors that can be used to promote the culture of TQM are, fostering a continuous drive towards improving products and services and committing to a continuous re-evaluation of processes related to planning, production and service to achieve improvement goals. Others are providing on-the-job training to develop and retain valuable staff, including opportunities for extensive education and selfimprovement for everyone and tasking everyone within the organization towards achieving the transformational goals of TQM. The findings show that implementation of these factors can spearhead sustainability of the company leading to high quality and productivity. Key words: Small business, Total quality management, Sustainability, Manufacturing, Townships. 1. Introduction Small manufacturing businesses in the townships are faced with several challenges that hinder them from implementing total quality management. According to Mthente (2012), small manufacturing businesses face a number of challenges due to lack of access to appropriate equipment and technology. Much of this stems from an inability to afford new manufacturing equipment and machinery. Other challenges are insufficient opportunities for training staff members, thus leading to a shortage of technical skills. In some case, this manifests through an inability to keep up with industry trends due to a lack of appropriate skills and knowledge, and poor quality and inconsistency and supporting infrastructure. 1934

2 2. Small Manufacturing Businesses (SMMEs) Small Manufacturing Businesses (SMMEs) are the engine of growth. They are key in creating jobs and employment in the country. Research from the National Treasury on SMMEs in South Africa (2008) states that eight out of ten new jobs created in South Africa are in SMMEs and thus SMMEs are essential for a competitive and effective market. They play the competitive game differently from the big corporates, their nimble approach to competition drives efficiency and productivity. The geographical location of SMMEs, which are mostly outside of the big metropolitan areas, provides an opportunity to employ local people which is critical for poverty reduction and encouragement of economic activity. They are productive drivers of inclusive economic growth and development in South Africa and around the world, and drive diversification through their development of new and unsaturated sectors of the economy. They thus play a particularly important role in developing countries. The study focuses on how total quality management (TQM) can impact the sustainability of small manufacturers leading to success of the company, and the impact of implementing best practices of quality management in fostering a continuous drive towards improving products and services. It also focuses on the seven TQM practices which are vital to sustainability of SMMEs which are: Top management s commitment to quality Employee involvement Customer focus Fact-based management Incentive and recognition system process Monitoring and control and Continuous improvement Performance Measurement. Performance measurement is very essential for the valuable management of an organization. 3. Total Quality Management (TQM) Total quality management can be defined as a managerial tactic targeting at attaining quality in an extensive sense (Saket, 2003). It is a significant element of production or services in keeping the customer satisfied and there are different definitions and competing views of the term quality by different people. A common element of the business definition is that the quality of a product or service refers to the perception of the degree to which the product or service meets the customer s expectations. Crosby (1979) defined quality as the conformance to requirements or specifications and also suggested that to manage quality adequately it must be measured as the degree to which a set of inherent characteristics fulfil requirements. TQM is a principal which involves the mutual cooperation of everyone who aids the business process of an organization and it involves all the stakeholders of an organisation. Dale, Broaden and Lascelles (1994) defined TQM as a philosophy embracing all activities through which the needs and expectations of the customer and the community, and the objectives of the organization are satisfied in the most efficient and cost effective way by maximizing the potential of all employees in a continuing drive for improvement. Total Quality Management (TQM) has received general acceptance by diverse sectors of the economy such as manufacturing (Foropoulos and Psomas, 2009). Noronha (2002) indicated that no other management issues since Frederick Taylor s Scientific Management at the beginning of 1935

3 International Association for Management of Technology the century have created such a profound impact as the TQM movement (Ross, 1993). The TQM mechanism relies on the premises of considering TQM as an integral part of the business plan, and quality is a function of all the managerial aspects throughout the organisation (Noronha, 2002). Small businesses must use total quality management as a tactic and style in order to be able to achieve customer satisfaction and gain a competitive edge in the business environment. They must adopt the principle of quality integration, customer satisfaction, continuous improvement, prevention rather than inspection, factual based decision and workforce involvement (Saket, 2003). In order for small businesses to achieve quality, they need to make sure that all the activities of engineering, marketing; administration and manufacturing are considered within their quality system. Achieving quality for small manufacturing businesses will entail integrating all the factors that affect TQM (Ross, 1993). The effective implementation of TQM will increase customer satisfaction with service offerings (Omachonu and Ross, 1994). Quality enhances customer loyalty through satisfaction; this in turn can generate repeat business and lead to the attraction of new customers through positive word of mouth which will in turn help in cost reduction. This Omachonu and Ross (1994), noted will provide a competitive edge for the company. The improvement in quality will result in increased market share and profitability as illustrated in Figure 1 below. * Figure 1: Adaption of the effect of quality management Source: Omachonu and Ross (1994) Small firms are very different from large ones in many areas, including management style, production processes, available capital, purchasing practices, inventory systems, and negotiating power. Yam, Lo, Tang and Lau (2011) suggest the application of TQM to small firms by recognizing more attractive conditions in small firms than in large ones. Some TQM elements and programs are more compatible with small manufacturers; other TQM benefits may be more significant to small firms (Mohamad, Muda and Abu, 2011). 1936

4 International Association for Management of Technology Saraph, Benson, and Schroeder (1989) identified, validated and established strong empirical support for the importance of TQM: (1) Customer focus; (2) top management s commitment; (3) quality data and reporting; (4) training; (5) role of quality assurance department; (6) employee involvement; (7) process management; (8) product/service design (Mohamad et al., 2011). Proper application of TQM to small manufacturing should evolve around leadership, people policy, processes and partnerships. This will always lead to business performance cascading to good performance of employees as they produce quality products and thus satisfying customers/clients. In most cases the community will benefit as shown in figure 2 below. Figure 2: TQM success. Source: Saraph et al.(1989) It is noted that intensive cooperation, empowerment and open communication facilitate innovation (Mintzberg, 1992). Three major reasons can be identified as the basis for innovation (Alamdari, 1999); To satisfy customer s needs and requirements To meet the corporate objectives of the company To outperform competitors through product differentiation. These three reasons are interrelated, as one is said to lead the other. The satisfaction of customers will lead to increased patronage which will eventually lead the company to meet its corporate objective of profitability, thus making more money for SMMEs. According to Muffatto and Panizzolo (1995), a high level of customer satisfaction is obtained solely by providing services or products whose features will satisfy customer s requirements or needs. This will start with inputs by the customer, whereby goods and services will be processed using strict TQM practices, and quality products are produced to benefit customers as outputs, as shown in figure 3 below. INPUTS Customer Wants Needs PROCESS Total Quality Management Source: Muffatto and Panizzolo (1995) Figure 3. Model of TQM process OUTPUTS Satisfied Customer

5 The main arguments of most authors are that increased customer satisfaction will increase customer loyalty and will bring about repeat purchases. On the contrary, it is believed that unsatisfied customers will defect to other services which are expected to meet their needs. In an attempt to prevent the churn caused by poor services, and reap the benefits of increased patronage, organisations place much emphasis on services that will make customers satisfied. Since service quality is defined by customers, organisations operating the TQM approach take measures to involve customers in their quality design. According to Wilkinson et al. (1998) customer focus provides a common goal for all organizational activities and members, as it incorporates the design of quality specification. 4. Case study The study was conducted at the Soweto Township, west of Johannesburg in South Africa. Soweto is the most popular black urban residential area in the country, with a population of around 1 million. Soweto s perennial problem since its inception has included poor housing, overcrowding, high unemployment and poor infrastructure. This has seen settlements of shacks made of corrugated iron sheets becoming part of the Soweto landscape. Apartheid planning did not provide much in terms of infrastructure, and it is only in recent years that the current democratic government has spearheaded moves to plant trees, tar roads, develop parks, and install electricity and running water to some parts of the township. Studies have shown that most Soweto SMMEs fail because of poor management, insufficient capital, lack of planning and overexpansion. According to the South African Bureau of Labour Statistics, BED (2012), published by the Small Business Administration (SBA), about half of all business establishments in Soweto survive at least five years, and a third survive ten years or more. This is a far cry from the previous long-held belief that 50 percent of businesses fail in the first year and 95 percent fail within five years. Most managers of SMMEs in Soweto are not well trained in running a business and therefore do not have long term plans but rather focus on the short term. They lack the quality culture essential to achieve this goal (Bacal & Associates). This is associated with poor and inferior learning opportunities forced by the apartheid regime on mostly black South Africans in the past. It has been observed that during their initial period, most black managed SMMEs fail to educate the workforce on the needs of quality systems. There is a lack of support from all management to ensure application of quality systems to produce the desired outcome. As it will be shown in the survey, the implementation of quality systems did not have the support and knowledge of all employees. On implementation of quality systems, the management fail to evaluate the cause of defects arising out of the process, product or services. The success or failure of TQM processes and principles are always judged in terms of performance of the organisation regarding amount of produce, profit, and 1938

6 consumer happiness and employee satisfaction. But most of the organisations fail to develop this strategic link and hence fail to achieve their desired results (Bacal & Associates). 5. Methodology The data collection was done through the use of questionnaires sent to various SMMEs within Soweto. The questionnaire contained thirty four questions, which were designed with clear and concise instructions on how they should be completed. It highlighted the imperatives involved in total quality management (TQM) and the sustainability of small manufacturers. The wording used for questions was simple and to the point, and familiar to the target population. Previous company records were used as well as secondary data. This data was used to compare the current and the previous performance of SMMEs. Multiple TQM factors were developed in questionnaires namely leadership, employee management, information and analysis, supplier management, process management, customer focus and continuous improvement. The questionnaires included a five-point Likert scale anchor at (1) strongly disagree and (5) strongly agree indicating disagreement or agreement with each item. Based on the data obtained during the qualitative phase, questionnaires were constructed to identify which factors were most closely associated with total quality management (TQM) and its impact in the sustainability of small businesses leading to success of the company. Out of the questionnaires that were distributed, 70% were returned and 20% were half completed and were rejected. Approximately 80 percent of the SMMEs employees were randomly selected to participate in the questionnaire survey. 6. Data analysis After all candidates had completed the questionnaires, reliability was calculated using Cronbach s method of analysis. Cronbach s alpha is generally used as a measure of the reliability of a set of questions in a survey instrument. It measures the interrelatedness of a set of items, although a high value for alpha does not imply unidimensionality (where the items measure a single latent construct). Alpha is an important concept in the evaluation of assessments and questionnaires (Tavakol and Dennick, 2011). Cronbach s alpha is a test of reliability that requires only a single test administration to prove a unique estimate of the reliability for a given test. 1939

7 International Association for Management of Technology The value of alpha (α) may lie between negative infinity and 1. However only positive values of α make sense. Generally, the alpha coefficient ranges in value from 0 to 1 and may be used to describe the reliability of factors extracted from dichotomous (that is, questions with two possible answers) and/or multi-point formatted questionnaires or scales (i.e., rating scale: 1 = poor, 5 = excellent) (Streiner and Norman, 1989). The results were tabulated as shown in Table 1 below: Table 1: Results of the survey Mean Standard Deviation Alpha Value Leadership Employee Management Information Analysis Supplier Management Process Management Customer Focus Continuous Improvement It should also be noted that while a high value for Cronbach s alpha indicates good internal consistency of the items in the scale, it does not mean that the scale is unidimensional. (Joseph and Gliem, 2003). In this study, The Cronbach s Alpha Based on Standardized Items is 0.72 which is relatively high. It thus indicates good internal consistency of the items in the scale, and that most of the questionnaires conducted by employees proved to be reliable, showing that SMMEs believe in TQM application. Actually, because TQM focuses on specifically meeting customer satisfaction needs and wants, it therefore confirms that perhaps TQM is easier in the small business world. This is due to the fact that SMMEs play the competitive game differently from the big corporates, and their nimble approach to competition drives efficiency and productivity. The challenge for TQM for small business owners is understanding the market share, learning how to listen to customers, and knowing when 1940

8 to make changes. If TQM is implemented correctly, the small business owner can utilize the process to make changes to a product or service upon customer and market demand. 7. Recommendations In order for business to successfully implement the TQM process, eight items must be considered: Employee Participation The small business owner must encourage or even reward total employee participation, especially in the areas of customer satisfaction. Evaluating Processes Everyone in the company from the highest to the lowest employees must learn to evaluate whether a process is gaining or losing customer satisfaction. Using Vision and Mission Statements TQM works best when combined with a company s vision and mission statement. While the vision may never change, if the mission or the how you are delivering your product or service isn t working, you need to change your mission. Utilizing Various Strategies This can involve market research, employee surveys, looking at market share, and realizing when a product is obsolete as far as your customers are concerned. Be Willing To Improve All the Time Here again, if the improvement is not followed, TQM won t work. If something isn t working, you need to change it. Effective Communication If no communication exists between customer and employees and the business owner on how improving business processes will be implemented, the strategies you ve analysed will be for naught. 8. Conclusion Management of the organization has a major role to play in terms of ensuring a culture which permits every member to be involved and contribute to quality improvement through the involvement of employees in detecting and monitoring quality performance. The idea behind the implementation of TQM in SMMEs is to ensure that adequate attention is given to quality so as to give room for an error free transactional process and less room for customer complaints while maximizing customer satisfaction. It is proven that satisfied customers are more willing to recommend quality service to others as shown in this research. From the research data analysis it can be seen that the core principles of TQM are always emphasized in some way within the SMME. The survey indicated that leadership, employee management, information and analysis, supplier management, process management, customer focus and continuous improvement are indispensable concepts to be implemented. 1941

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