Lien Herliani Kusumah. Mercu Buana University, Jakarta, Indonesia

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1 Journal of US-China Public Administration, ISSN December 2013, Vol. 10, No. 12, D DAVID PUBLISHING The Essential Factors of TQM Implementation in Small Industries in Indonesia Lien Herliani Kusumah Mercu Buana University, Jakarta, Indonesia The research aims to describe and identify the essential factors in implementation of TQM (Total Quality Management) principles in small industries in Indonesia. It was conducted by explorative and qualitative methods. Assessment of the implementation of TQM principles is done using the EFQM (European Foundation for Quality Management) Excellence Model. The result shows that the principles of TQM have been implemented in small industries in Indonesia especially in small industries which have QCC (Quality Control Circle). This implementation is supported by evidences in each principle. The implementation of TQM in small industry should be done through a process of adaptation, which is important because each organization is tailored, so each organization will differ in implementing TQM. Keywords: TQM (Total Quality Management) principles, QCC (Quality Control Circle), small industries, EFQM (European Foundation for Quality Management) Excellence Model, Indonesia Researches and studies about the implementation and success of Total Quality Management (TQM) which have been conducted mostly refer to the condition of the large-scale industry, such as done by Spitzer (1993), Kelner (1998), Lee and Gharajedaghi (1998), Shiba (1998), Foley (2000), Romano (2000), Zhao (2000), Zhao and Bryar (2000), Yam, Pun, Chin, and Gill (2000), Field (2001), Jones (2001), Sun (2001), Salaheldin (2003), Tejaningrum (2003), Margareth (2004), Sukmono (2005), Raja, Bodla, and Malik (2011). This does not mean that only large-scale industry can implement TQM and be successful. The Quality Gurus said that successful implementation of TQM in organizations does not depend on the business of manufacturing or services, nor does it depend on the size of the organization whether large, medium, or small business. Special studies on the implementation of quality management in small industries are grouped into two parts. First, about the process of implementing quality management in small industries: including motivation (Nwankwo, 2000), resource requirements (Struebing & Klaus, 1997), size and organizational characteristics (Ghobadian & Gallear, 1997), and TQM conceptual framework for small industry (Yusof & Aspinwall, 2000); Second, concern in quality management as a means of achieving a better small industries performance: The paper is supported by OEAD Austria, the team of Suku Dinas Perindustrian bidang IKM in 11 provinces in Indonesia, and the author also thank and give great honor to all the companies of SMEs in 11 provinces in Indonesia for all the time, information, and the big support. Corresponding author: Lien Herliani Kusumah, Ph.D., SE, MT, senior lecturer in Study Program of Magister Management; and head of Study Program of Magister Industrial Engineering, Mercu Buana University; research fields: quality mgt system, small and medium enterprise (SME s), co-operatives organization, management and organizations, governance, and industrial management.

2 THE ESSENTIAL FACTORS OF TQM PRINCIPLES IMPLEMENTATION 1191 including business excellence model (Hewitt, 1997; Kusumah, 2006; Bryar, 2000; Armitage, 2002), the International Standard of Organization (ISO) 9000 (Williams, 1997; Sun & Cheng, 2002; Lewis et al., 2007), International Business Profile for small industries (Dalrymple, 2000), the impact of quality management on the small industries performance (Kusumah, 2002; Rahman, 2001; Demirbag, Koh, Tatoglu, & Zaim, 2006; Malik, Iqbal, Shaukat, & Yong, 2010). In general, there is a perception that is maintained by small business owners about the difficulty of implementing quality programs that undermine the motivation to pursue the achievement of quality. Struebing and Klaus (1997) describe four small industry perceptions that become obstacles in implementing quality programs, such as the perception of cost, perception of adequate staffing, employee perceptions of resistance, and the perception of loss of momentum. Those four cases are the obstacles for small industries in implementing quality programs and achieving success generally. Development of industry and commerce at present and in the future is faced with external challenges, namely the occurrence of a very dynamic development in the pattern of economic relations and trade among nations. The process of globalization and liberalization of world trade on the one hand, and regional trade liberalization on the other hand, requires a small industry to improve its performance. Facing national and international market competition significantly, every business organization must implement the quality of the business. It is very clear, because in this era every business organization including small industry will be faced to intense competition and transparent. Therefore, the advantages of product quality, price, delivery, and guarantees are required for small industries in order that they are able to compete and cooperate. Small Industry Different definitions of small industries are usually based on measures of Siropolis (1997): (1) Total assets: the amount of cash, inventory, land, machinery, and other resources being owned; (2) Owners equity: Total investments are made by investors, often showing capital. Generally in a company, investors are the share holders who purchase shares and the creditors are those who lend money or give credit; (3) Yearly sales revenue; (4) Number of employees. Each size has a point on the merits, but the number of employees has more than others. These measures are: (1) Inflation-Proof: It is not influenced by changes in the purchasing power of the dollar; (2) Transparent (transparent): It is easy to see and understand; (3) Can be compared (comparable): This allows comparisons the size among of the business activities within the same industry; (4) Availability (available): It is easy to obtain from business activities. Small Business Administration (SBA) defines that small industry has been as an organization that is independently owned and operated and not dominant in its field. It presents that the definition of small industry is diverse, from those with less than 100 workers to those with more than 500 workers. More detailed descriptions about the number of employees are also used, as follows: under 20 employees, categorized as very small; between 21 up to 99, categorized as small; between 100 up to 499, categorized as medium size; and more than 500, categorized as large.

3 1192 THE ESSENTIAL FACTORS OF TQM PRINCIPLES IMPLEMENTATION Virtues conceptually in defining a small company are essentially based on the company that has a specific cost structure and in the form of inputs are divided into land, labor, and capital. In particular, it is Diermen (1997): (1) The use of labor came from the family (the distinction of labor inputs) (Chayanov, 1986); (2) The number of divisions few and low labor costs (the distinction of labor inputs); (3) The use of simple physical capital and financial capital available locally (the distinction of capital inputs), and production sites close to the family home (distinction land inputs); (4) To avoid double sense, the concepts of small firms and industrial systems need to be defined. Small is a relative concept that can vary among different countries. Total Quality Management (TQM) of TQM Quality management principles give understanding and guidance in the application of quality management. By applying the principles of quality management organization, it will produce benefits for customers, owners, people, suppliers, and the general social environment. The principles of TQM is a comprehensive rules and fundamental beliefs to lead and run an organization (Forsberg, 1995), which aims at continuous of performance in the long run by focusing on consumers as well as addressing the needs of all stakeholders. There are several opinions regarding the description of the principles of TQM according to Besterfield, Besterfield-Michna, Besterfield, and Besterfield-Sacre (2003), Goetsch and Davis (2000), Russell and Taylor III (2000), Forsberg (1995), Ho (1995), and Ehresman (1995). Therefore, the existing studies on TQM principles can be grouped into four factors: people and relationships, approach, measure, and the tools and technique. Each major factor is composed of several special factors (see Table 1). TQM Implementation Models In general, a model is a series of steps that are logically arranged to provide a guideline for the implementation process so as to achieve the main goal. The practical TQM models are referred to as the business excellence model. This study used the EFQM (European Foundation for Quality Management) Excellence Model since this model has several advantages as follows: (1) It is used form of self-assessment, which the company directs to assess the progress of its own; (2) It is based on the real condition compared to other TQM models, and this makes the model easier to quantify the success of TQM programs owned. EFQM Excellence Model using the form which represents the most comprehensive TQM models from existing models. Although each organization is unique, this model provides a generic framework of criteria that can be applied in depth to any organization or part of the organization. The model contains nine criteria, consisting of five as the enablers criteria that include the organization in the future, namely leadership, strategy, people, partnership and resources, processes, and products and services; four as the results criteria cover what an organization to accomplish through enablers criteria, namely people results, customer results, society results, and business results.

4 THE ESSENTIAL FACTORS OF TQM PRINCIPLES IMPLEMENTATION 1193 Table 1 The Various Ways of TQM Key factor Besterfield et al. (2003) Leadership, People and customer satisfaction, relationship employee involvement, supplier partnership Approach Measure Tools and technique Continuous process Performance measures Benchmarking, information technology, QMS (ISO 9000), EMS (ISO 14000), QFD, quality by design, FMEA, products liability, TPM, management tools, SPC, experimental design, taguchi s quality engineering Goetsch and Davis (2000) Russell and Taylor III (2000) Strategically based, long-term commitment, unity of purpose, Leadership, customer focus, strategic planning, obsession with customer oriented, quality, teamwork, employee education and responsibility, training, cooperation, training freedom through and education control, employee involvement and empowerment Continual process Scientific approach to decision making and problem solving Continuous Statistical methods Seven tools, problem solving and decision making, QFD, Benchmarking, optimizing and the cost of quality, controlling seven QC tools, processes through SPC, quality awards, continuous ISO 9000, benchmarking, just-in-time Methodology Forsberg (1995) Leadership, customer-focused organization, involvement of people, mutually beneficial supplier relationship Process approach, system approach to management, continual Factual approach to decision making ISO 9000, control charts, work flows, fact-to-act process Ho (1995) Management led, ownership and commitment, recognition and pride, prevention not detection, total customer satisfaction, right first time, ownership and commitment, training and education, co-operation and teamwork Continuous The cost of quality Benchmarking, seven QC tools. Ehresman (1995) Ensuring customer satisfaction, working together, appropriate personal initiatives Managing processes, continuously Collect and analyze data, statistical methods, solve problems, creative-thinking techniques, ISO 9000, quality awards This study is an empirical research using exploratory and qualitative research methods. Characteristics of the implementation of TQM principles are the nine criteria of the EFQM Excellence Model. They are used to identify the characteristics (strength, scope, and field) of TQM implementation in small industries in Indonesia, and assessment using the EFQM SME scorebook. Data were collected by using depth interview. The study participants are small industries which have been conducting production activities which belong to the nine sub-sectors according to the BPS (Badan Pusat Statistik) potential industry and have received coaching to improve the quality of government, particularly the Department of Industry. The research sample is 39 organizations of small industries which are determined through a two-stage: The first stage determines the area samples, and the next stage also determines the small industrial samples at random. Small industries are selected as the sample dispersed in selected provinces (following proportions spread) as follows: West Java (8%), Central Java (5%), Yogyakarta Special Region (10%), East Java (13%), Bali (5%), West Nusa Tenggara (15%), Lampung (10%), West Sumatra (8%), North Sumatra (8%), South Kalimantan (8%), and South Sulawesi (10%). While the spread of the sample in the potential sub-sectors include manufacturing subsector (following the proportion of distribution): the food industry, beverages, and tobacco (18%), textiles, apparel, and leather (22%), industrial wood, bamboo, rattan, grass, and the like including home

5 1194 THE ESSENTIAL FACTORS OF TQM PRINCIPLES IMPLEMENTATION furnishings (13%); paper industry and paper goods, printing and publishing (3%), industrial non-metallic mineral products, except petroleum and coal (8%); industry of metal goods, machinery, and equipment (18%), as well as other manufacturing industries (18%). Research Findings Profile of Small Industries The profile of small industries of this study focuses on Quality Control Circle (QCC) formal ownership aspect. The QCC formal ownership describes the group of small companies on the grounds owned or not QCC formally in his organization. Whether owned or not the QCC is the result of quality coaching conducted by the Department of Industry. Proportion of grouping in this study is 72% of small industries already owned the QCC formal and 28% not yet. Factors of TQM Implementation The results of empirical research indicate that the factors are implemented in small industries which have owned the QCC formation according to the principles of TQM are shown in Table 2 through 7 (see Table 2 to Table 7). Table 2 The Phenomenon of Implementation of TQM With Evidence of at Least 75% Consumer satisfaction Consumer perceptions of products 4 At least 75% People satisfaction Additional measures were related to the satisfaction of the people 2 At least 75% Results of operations Financial measures of organizational performance 3 At least 75% Total of indicators 9 Table 3 The Phenomenon of Implementation of TQM With Evidence of at Least 50% Strategy Formulating strategies and plans 7 At least 50% Management of people Developing and reviewing those plans 1 At least 50% Resource management Managing information resources 3 At least 50% Quality and process management system Managing resources and suppliers of raw materials 6 At least 50% The focus on consumers 4 At least 50% Managing the quality system 1 At least 50% Managing the key processes 6 At least 50% People satisfaction The perception of people toward the organization 6 At least 50% Impact on society Community involvement 5 At least 50% Results of operations Size of the additional achievements of the organization 9 At least 50% Total of indicators 48 Table 4 The Phenomenon of Implementation of TQM With Evidence of at Least 25% Leadership Implementation of commitment to TQM culture 6 At least 25% Moving the in the organization 5 At least 25%

6 THE ESSENTIAL FACTORS OF TQM PRINCIPLES IMPLEMENTATION 1195 Table 4 continued Strategy Communicate and implement strategies and plans 2 At least 25% Renew and improve strategies and plans 4 At least 25% Management of people Ensuring the involvement and empowerment 3 At least 25% Resource management Managing financial resources 4 At least 25% Managing other resources 3 At least 25% Quality and process management system Managing the processes of continuous 4 At least 25% Consumer satisfaction Additional measures were related to customer satisfaction 3 At least 25% Total of indicators 34 Table 5 The Phenomenon of Implementation of TQM With Evidence of Less Than 25 % Strategy Communicate and implement strategies and plans 1 Less than 25% Management of people Developing and reviewing people management plans 3 Less than 25% Quality and process management system The focus on consumers 1 Less than 25% Managing the processes of continuous 2 Less than 25% Consumer satisfaction Additional measures were related to customer satisfaction 1 Less than 25% Total of indicators 8 Table 6 The Phenomenon of Implementation of TQM With No Evidence * Number of indicators Number of evidences (%) Resource management Managing other resources 1 No evidence Quality and process management system Managing the quality system 1 No evidence Managing the processes of continuous 1 No evidence People satisfaction The perception of people toward the organization 1 No evidence Additional measures were related to the satisfaction of the people 1 No evidence Results of operations Financial measures of organizational performance 2 No evidence Size of the additional achievements of the organization 1 No evidence Total of indicators 8 Note. * There is no evidence that does not mean at all or completely absent. Individually some companies show evidences of implementation. Table 7 The Recapitulation of Total of Indicators at Each Number of Evidence Number of evidences (%) Total of indicators % At least 75% At least 50% At least 25% Less than 25% No evidence Total

7 1196 THE ESSENTIAL FACTORS OF TQM PRINCIPLES IMPLEMENTATION Conclusions and Discussions This study describes the implementation of TQM principles based on EFQM Excellence Model in small industries in Indonesia. The results show that there are five categories based on evidences of implementation. The factors that have been implemented in small industries with evidence of at least 75%, and there are only 8.41% which includes consumer perceptions of products, services, and organizational relationships; additional measures were related to the satisfaction of the people organizational, and financial measures of performance. The factors that have been implemented in small industries with evidence of at least 50%, and there is a number of 44.86% which includes formulating strategies and plans based on relevant information, developing and reviewing those plans, managing information resources, managing resources and suppliers of raw materials, the focus on consumers, managing the quality system, managing the key processes, the perception of people toward the organization, community involvement, and size of the additional achievements of the organization. The factors that have been implemented in small industries with evidence of at least 25%, and there is a number of 31.78% which includes the implementation of the commitment to TQM culture, moving the in the organization, communicate and implement strategies and plans, renew and improve strategies and plans, ensuring the involvement and empowerment, managing financial resources, managing other resources, managing the processes of continuous, and additional measures were related to customer satisfaction. The factors that have been implemented in small industries with evidence of less than 25%, and there is a number of 7.48% which includes communicate and implement strategies and plans, developing and reviewing people management plans, the focus on consumers, managing the processes of continuous, and additional measures were related to customer satisfaction. Finally, 7.48% while the rest are the factors that have been implemented in small industries but in summary there is no evidence to support it, however, some companies individually show evidences of implementation. Improving quality in small industries can be done by implementing the principles of TQM. TQM implementation in small industries can help small industries to realize the goals of the organization. TQM implementation in small industrial organizations should be done through a process of adaptation, which is important because each organization is unique, therefore each organization will differ in implementing TQM. Organizational characteristics of small business are an important aspect that must be considered when designing implementation strategies, such as TQM, for the organization. Small industries can implement and achieve the successful implementation of TQM, as their business strategy by implementing TQM principles properly and correctly according to the unique characteristics of life organizations in order to reach the expected performance of the organization. This means that every organization is no exception even small industrial, they need to make adaptations in implementing the principles of TQM. Adaptation is the adjustment in the form of action in implementing the principles of TQM according to the unique characteristics of life in the industrial organization and the size of the organization, so that the principles of TQM can be implemented appropriately and correctly to achieve the goals and objectives of the organization.

8 THE ESSENTIAL FACTORS OF TQM PRINCIPLES IMPLEMENTATION 1197 References Armitage, A. M. D. (2002). The implementation and application of the business excellence model in SMEs. Managerial Auditing Journal, 17(1/2), Besterfield, D. H., Besterfield-Michna, C., Besterfield, G. H., & Besterfield-Sacre, M. (2003). Total Quality Management (3rd ed.). New Jersey: Pearson Education International. Bryar, P. (2000). The Australian business excellence framework: A framework for small horticultural enterprises. Centre for Management Quality Research. Chayanov, A. V. (1986). The theory of peasant economy (2nd ed.). D. Thorner, B. Kerblay, & R. E. F. Smith, (Eds.). Madison, W.I.: University of Wisconsin Press. Dalrymple, J. F. (1999). Quality management implementation: A cross-cultural study in European and Indian SME s. The Centre for Quality Management Research. Dalrymple, J. F. (2000). International business profile benchmarking for the SME sector Does it work? The Centre for Quality Management Research. Demirbag, M., Koh, S. C. L., Tatoglu, E., & Zaim, S. (2006). TQM and market orientation s impact on SMEs performance. Industrial Management & Data Systems, 106(8), Diermen, P. (1997). Small business in Indonesia. England: Ashgate Pub. Ltd. Ehresman, T. (1995). Small business success through TQM: Practical methods to improve your organization s performance. Milwaukee, W.I.: ASQ Quality Press. European Foundation for Quality Management (EFQM). (1997). SME scorebook. Brussels. European Foundation for Quality Management (EFQM). (1999). Assessing for excellence: A practical guide for self-assessment. Brussels. Field, J. M. (2001). Beyond design: Implementing effective production work teams. Quality Management Journal, 8(2), Foley, K. J. (2000). From quality management to organization excellence: Don t throw the baby out with the bath water. The Centre for Management Quality Research. Forsberg, K. (1995). The quality management principles. Retrieved from Foster, S. T. (2001). Managing quality: An integrative approach. New Jersey: Prentice Hall. Ghobadian, A., & Gallear, D. (1997). TQM and organization size. International Journal of Operations & Production Management, 17(2), Goetsch, D. L., & Davis, S. B. (2000). Quality management: Introduction to total quality management for production, processing, and service. New Jersey: Prentice Hall. Hewitt, S. (1997). Business excellence: Does it work for small companies? The TQM Magazine, 9(1), Ho, S. K. M. (1995). TQM: An integrated approach; implementing total quality through Japanese 5-S and ISO London: Kogan Page. Ho, S. K. M. (1999). Change for the better via ISO 9000 and TQM. Management Decision, 37(4), Jones, L. (2001). Factors related to employee perception of their leaders commitment to implement continuos quality. Quality Management Journal, 8(3), 1-3. Kelner, S. (1998). Managing the climate of a TQM organization. Center for Quality of Management Journal, 7(1), Kusumah, L. H. (2002). Faktor-faktor yang secara empiris menentukan tumbuh-kembangnya UKM (The empirical factors which determining growth and development of SMEs). Jurnal Koperasi Indonesia, 1, Kusumah, L. H. (2006). Study on interrelationship of total quality management (TQM) principles in small scale industries with the government strategy for small scale industry development/ in Indonesia: An evaluation model on TQM implementation in the small scale industry development strategy. Doctoral dissertation, Industrial Engineering and Management Institut Teknologi Bandung. Lee, T. H., & Gharajedaghi, J. (1998). Leadership in TQM: What does it mean? Center for Quality of Management Journal, 7(1), Lewis, W. G., Pun, K. F., & Lalla, T. R. M. (2007). The effect of ISO 9001 on TQM implementation in SME in Trinidad. West Indian Journal of Engineering, 30(1), Malik, S. A., Iqbal, M. Z., Shaukat, R., & Yong, J. (2010). TQM practices & organizational performance: Evidence from Pakistani SMEs. International Journal of Engineering & Technology IJET-IJENS, 10(4), Margareth. (2004). Comparison level implementation of total quality management (TQM) in between enterprises are

9 1198 THE ESSENTIAL FACTORS OF TQM PRINCIPLES IMPLEMENTATION implementing the ISO 9000 associated with quality management performance. Thesis, Industrial Engineering and Management Program Institut Teknologi Bandung. Nwankwo, S. (2000). Quality assurance in small business organisations: Myths and realities. International Journal of Quality & Reliability Management, 7(1), Rahman, S. (2001). A comparative study of TQM practice and organisational performance of SMEs with and without ISO 9000 certification. International Journal of Quality & Reliability Management, 18(1), Raja, M. W., Bodla, M. A., & Malik, S. A. (2011). Evaluating the effect of total quality management practices on business performance: A study of manufacturing firms of Pakistan. International Journal of Business and Social Science, 2(9), 110. Romano, P. (2000). ISO 9000: What is its impact on performance? Quality Management Journal, 7(3), Russell, R. S., & Taylor III, B. W. (2000). Operations management. Multimedia Version (3rd ed.). New Jersey: Prentice Hall. Salaheldin, I. S. (2003). The implementation of TQM strategy in Egypt: A field-force analysis. The TQM Magazine, 15(4), Shiba, S. (1998). Leadership and breakthrough. Center for Quality of Management Journal, 7(2), Siropolis, N. (1997). Small business management (6th ed.). Boston, M.A.: Houghton Mifflin. Spitzer, R. D. (1993). Valuing TQM through rigorous financial analysis. Quality Progress, 26(7), Struebing, L., & Klaus, L. A. (1997). Small business thinking big. Quality Progress, 30, Sukmono, T. (2005). Quality performance measurement in TQM implementation based on the ISO 9000 version 2000 in SBU merpati maintenance facility. Thesis, Industrial Engineering Institut Teknologi Sepuluh November. Sun, H. (2001). Comparing quality management practices in the manufacturing and service industries: Learning opportunities. Quality Management Journal, 8(2), Sun, H., & Cheng, T. (2002). Comparing reasons, practices and effects of ISO 9000 certification and TQM implementation in Norwegian SMEs and large firms. International Small Business Journal, 20(4), Tejaningrum, N. A. (2003). Model of the process-outcome-impact in measuring the success of QCC in Indonesia. Doctoral Dissertation, Industrial Engineering and Management Institute Teknologi Bandung. Williams, N. (1997). ISO 9000 as a route to TQM in small to medium-sized enterprises: Snake or ladder? The TQM Magazine, 9(1), Yam, R. C. M., Pun, K. F., Chin, K. S., & Gill, R. (2000). Transforming quality management practices: Applying the Hong Kong/China experiences. Quality Management Journal, 7(3), Yusof, S. M., & Aspinwall, E. (2000). A conceptual framework for TQM implementation for SMEs. The TQM Magazine, 12(1), Zhao, F. (2000). Inter-Organizational excellence: A TQM approach. The Centre for Quality Management Research. Zhao, F., & Bryar, P. (2000). Integrating knowledge management and total quality: A complementary process. The Centre for Quality Management Research.

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