TOTAL QUALITY MANAGEMENT AND SMALL BUSINESSES

Transcription

1 ABSTRACT TOTAL QUALITY MANAGEMENT AND SMALL BUSINESSES Joseph G. Ormsby, Stephen F. Austin State University Total Quality Management (TQM) for the past twenty years has revolutionized U.S. manufacturing, through a system based on continuous improvement, meeting customers' requirements, reducing rework, long-range thinking, increased employee involvement and teamwork, process redesign, competitive benchmarking, teambased problem-solving, constant measurement of results, and closer relationships with suppliers. (Ross, 1993) This article briefly reviews the effects of three behavioral influences: power, conflict, and cooperation and identifies related pitfalls that small businesses may expect when implementing TQM. INTRODUCTION The argument for organizations committing to a Total Quality Management (TQM) production philosophy is quite compelling. Among the more significant benefits that can result from a shift to TQM include improved understanding of customers' needs; improved customer satisfaction; improved internal communication; better problemsolving; greater employee commitment and motivation; stronger relationships with suppliers; fewer errors, and reduced waste (Juran, 1988; Schmidt and Finnigan, 1992; Spechler, 1991). Small businesses may decide to implement TQM under the assumption that advantages experienced by large organizations can also be achieved by them, just on a smaller scale. However, small businesses attempting to implement TQM may experience the following problems: significant costs of training, consumption of inordinate amounts of management time, increased paperwork, emphasis of process over results and failure to address the needs of small firms. (Powell, 1995, Naj, 1993; Fuchsberg, 1992 & 1993; Schaffer and Thomson, 1992). The relationships between Total Quality Management, power, conflict, and cooperation play a significant role in realizing the benefits from the TQM system for small businesses. The purpose of this article is to explain how these variables can affect the degree to which small businesses can successfully implement TQM. Additionally, the article will illustrate benefits and pitfalls that small businesses can expect through the implementation of the TQM production system. OVERVIEW OF TOTAL QUALITY MANAGEMENT There have been many studies identifying what composes TQM (GAO, 1991; Easton, 1993, Saraph, et.al., 1989; DDI, 1993, Mann and Kehoe (1994), Plimpton et. al., 1996; Black and Porter, 1996; and Shin, et.al., 1998; and, though these studies have produced

2 different results, there seems to be some common elements that are critical to TQM success. These elements include strong top management leadership and commitment, customer focus, employee involvement and empowerment, a focus on continuous improvement, supplier partnerships, and the recognition of quality as a strategic issue in business planning. (Shin, et.al, 1998) The use of SPC and statistical tools in various segments of the organization from product idea to product delivery has also been deemed essential to effective TQM implementation. However, an obvious flaw in TQM implementation in the United States is the focus on internal processes. Though internal elements are crucial for successful TQM implementation, focusing on these areas alone will not produce the end results that many organizations desire. (Harari, 1993) A crucial external area of TQM that most TQM implementations constantly overlook is supplier partnerships. In TQM implementation, the supplier relationships are radically changed, because much work is outsourced, often globally, with lightning-fast top-quality turnaround work. This necessitates supplier relationships that are nonadversarial and nonlegalistic. These relationships will necessitate the use of trust, honesty, inclusion, mutual support and candid expectations of both partners. (Harari, 1993) One way of viewing this supplier-manufacturer interface is considering the relationship between these two parties as simply an extension of the production system in the suppliers organization. Critical elements in this supplier-manufacturer relationship may include: 1) reduced order quantities, 2) frequent and reliable delivery schedules, 3) reduced and highly reliable lead times, and 4) consistently high quality levels for purchased materials. To successfully incorporate the elements of TQM, manufacturers must change the traditional relationship that tends to exist with suppliers. Manufacturers must 1) establish long-term relationships with suppliers, 2) provide good communication and sharing of information with suppliers, and 3) work to build mutual understanding, trust and cooperation into the relationship. All three of these involve the behavioral aspects of this business relationship. It is the purpose of this article to provide a distribution channel perspective of TQM. Because of the critical nature of supplier relationships in the implementation of TQM, the behavioral aspects of channel relationships and the extent to which they would most likely be influenced by TQM strategies will be emphasized. POWER, COOPERATION, AND CONFLICT IN A DISTRIBUTION CHANNEL Channel Power The successful implementation of the TQM philosophy is critically linked to the degree of cooperation of the distribution channel members (Harari, 1993). It is incumbent upon channel members to foster healthy long-term relationships (Harari, 1993). Therefore, behavioral issues such as power, cooperation, and conflict must be understood in trying to create a TQM environment in the distribution channel. Within the context of a distribution channel, power refers to the ability of a channel member to get another channel member to do what the latter member would not have

3 done otherwise (El-Ansary & Sterm, 1972). Seven bases of power available to a "channel captain" or "channel leader" include: reward, coercion, legitimacy identification expertise, information, and countervailing power. Reward power is the perceived ability of one channel member to distribute rewards to another based on desired performance. Coercion is the opposite of reward, stemming from the perceived ability of a channel member to impose punishment on others who do not conform to performance expectations. Legitimate power exists when a channel member is perceived to have the right to influence another channel member who accepts that influence. Identificaton (or referent) power results from the desire of one channel member to be identified with another. Expert power exists when a channel member is perceived to possess special knowledge or expertise. Informational power is possessed when a channel member has the ability to provide information not previously available to the other channel members. A basis of power somewhat different from the other six is countervailing power. It allows weaker members of a channel of distribution to equalize or check the power of larger channel members. Countervailing power may take the form of product differentiation, product mix expansion, product substitutability with other products, and the size and number of channel intermediaries. Countervailing power can play a key role in acceptance of TQM as will be seen in a later section of this paper. These seven sources of power form the basis for channel leadership. When a channel leader uses one of these types of power to influence distribution channel members, one of two outcomes will result: cooperation or conflict. Cooperation Cooperation is the process of jointly striving with another toward a goal. Cooperation has been viewed as the opposite of conflict and a contributing factor to improved performance. It is positively related to noncoercive sources of power. A possible downside of cooperation is that it may be dysfunctional in nature after a certain point. That is, a threshold level of cooperation must exist before performance is positively affected. But cooperation too far beyond that threshold level may prove detrimental to the participants, as this cooperation approaches mutual dependence. Conflict To enhance channel performance, it is best for a channel leader to foster an atmosphere of cooperation. This is achieved in TQM through joint problem solving and teamwork between suppliers, manufacturers and customers (Dean and Bowen, 1994). Unfortunately, disagreements may arise in any cooperative relationship, which could represent an initial form of conflict between channel members. Conflict is a situation in which one channel member perceives another channel member as engaging in behavior that is preventing or impeding the overall channel from achieving its goals. This conflict leads to stress and tension.

4 Responses to conflict include bargaining between channel members, litigation, joint goalsetting, membership exchange, arbitration, and even political action to resolve intense conflict. These responses may alleviate or intensify the level of conflict. The interdependence of power, cooperation, and conflict is important to the understanding of the interactions during the implementation of TQM. The adoption of a TQM system may lead to the assertion of power in order to gain compliance from channel members. However, this use of power may result in cooperation or conflict. The next two sections will briefly describe how the constructs of power, cooperation, and conflict can be used to successfully implement a TQM type of production strategy. EFFECT OF POWER ON TQM IMPLEMENTATION Behavioral Issues Faced by Channel Leaders In building TQM relationships with suppliers, manufacturers must contend with the behavioral issue of power. All channel members maintain a certain degree of power because of mutual dependence. However, distribution of power is not equal and channel members possessing power advantages may assume a position of leadership. Firm assume the leadership role so that they can intentionally influence decisions and behaviors of other businesses. For the purposes of this article, the "channel leader" (or "channel captain") is defined as the business that can stipulate policies to other businesses within the channel, thus exercising direct control over some or all of their decisions and activities. In many cases this channel leader is the manufacturer. Implementing TQM in a channel must be initiated by the channel leader because of that business's ability to exercise various forms of power in swaying other businesses' conformance to TQM. Examples of this situation can be found at General Motors and Hewlett-Packard. Small business suppliers would not refuse the corporation's request to adopt TQM because refusal could spell economic ruin if the corporation refused to do business with the supplier. Conversely, a small business's attempt at implementing TQM within a channel would have limited chances of success if the channel leader opposed this system. The channel leader must properly exercise its power to minimize the amount of conflict that may arise within the channel, as will be demonstrated in the following paragraphs. A TQM system will significantly change the traditional relationship that has existed with suppliers. The channel leader and its suppliers must maintain open channels of communication and sharing of information. This relationship will provide an opportunity for the channel leader to exercise expert and informational power that has been gained through the implementation of TQM in the channel leader's organization. Exercise of these two forms of power can greatly diminish the fears and anxiety of channel members in adopting TQM.

5 An additional relationship that will exist in a TQM channel is a reduced number of suppliers servicing an organization. Selection of suppliers to service an organization is an exercise of the channel leader's reward and identification power. Additionally, the channel leader's exclusion of a supplier can be interpreted as an exercise of its coercive power. The excluded supplier is being coerced into conforming to the channel leader's expectations for TQM suppliers. If the supplier conforms to the channel leader's expectations, it may be added, at a later time, to a list of acceptable suppliers. After supplier selection, the channel leader has additional opportunities to exercise expert and informational power through programs and seminars that can be conducted in the supplier's organization concerning informational requirements for efficient operation of the TQM system. This is an excellent opportunity for suppliers to present problems experienced in implementing TQM, thus improving communication channels. This joint problem solving should create a commitment among channel members to make the TQM system a success. Supplier selection immediately creates countervailing power through long-term contracts negotiated with the channel leader. The proper exercise of these various forms of power by the channel leader can minimize the conflict experienced during the implementation of TQM; however it may not completely eliminate conflict. Behavioral Issues Faced by a Small Manufacturer Now consider implementation of TQM by a small manufacturer that is not the channel leader. Small businesses can successfully implement TQM with success ( Shea and Gobeli, 1995). However, problems arise when the small manufacturer undertakes incorporation of the TQM system with its suppliers in an effort to achieve the full spectrum of TQM benefits. Because of its small size and lack of financial clout, the small manufacturer may have insufficient power to force suppliers' compliance to a TQM environment. This is especially the case if the small manufacturer uses large suppliers, and if the amount of supplier business represented by the small manufacturer is small. Exclusion of the supplier from the manufacturers' list of acceptable suppliers may not economically hurt the supplier. Total Quality Management advocates may counter that the small manufacturer could use small suppliers. However, this may not be a realistic alternative. Small suppliers may not be able to produce the desired quality of materials with consistent due dates and delivery schedules that a Total Quality Management environment dictates. Consequently, large suppliers may be the only companies that make the manufacturers' acceptable suppliers' list. Additionally, the reward and identification power that a small business may be able to exercise will be minimal. Large suppliers' rewards will not be great, because the amount of business that the small manufacturer would represent is small. A large supplier normally has sufficient name recognition within its channel of distribution. Consequently the amount of identification power provided by the small business would be unnecessary.

6 Small businesses may also be very limited in the amount of human and monetary capital that can be used in exercising expert and informational power with its suppliers. Small businesses implementing TQM will also find difficulty in managing channel conflict and cooperation as the next section of this article will demonstrate. FOSTERING CHANNEL COOPERATION FOR A SMALL BUSINESS Minimizing Channel Conflict The amount of conflict within a distribution channel after implementing a TQM system is dependent upon at least five factors. A small business can affect each of these in helping to foster a cooperative channel environment. Channel members' predisposition toward TQM. This factor involves perceptions of whether TQM is a viable method of manufacturing or purchasing. The predisposition may be positive, negative, or indifferent. This factor's influence will be a function of the degree to which open communications exist within the channel. To implement a TQM system, the use of expert and informational power by a small business can help build better communication networks. This can change other channel members' predisposition toward the functional benefit of TQM. Goals of channel members. Generally speaking, the greater the similarity between two channel members, the more likely cooperation will result. If channel members agree that the implementation of TQM is an important goal of the channel, then a greater degree of cooperation, along with a lesser degree of conflict is likely to occur. As the small business and other channel members are increasingly viewed as "partners," channel relations will be stronger. Perception of reality by channel members. The closer the perceptions of reality in implementing TQM, the more likely it is that cooperation will occur in the channel. Again, education of channel members is instrumental in demonstrating that TQM can be a crucial and realistic means of achieving organizational and channel goals. Ability of channel members to implement TQM Channel members may not have the financial resources or the technical capacity to implement the system even if they are positively predisposed toward TQM. This factor can be minimized through the ability of the small business channel leader to render at least some type of valuable technical assistance and, in some instances, even capital resources to channel members. Countervailing power. If a channel member maintains a significant amount of countervailing power, it can exert an opposing influence upon the attempts by the channel leader to implement TQM. In this situation there must be negotiations between the channel leader and channel members concerning the implementation of TQM. If an agreement cannot be reached, the implementation may prove dysfunctional to the channel and result in suboptimal performance of the TQM system.

7 These five factors contribute to the determination of the degree to which there will be conflict/cooperation within the channel of distribution. Consequently, a small business contemplating participation in a TQM structure must take into account the bases of power of the channel leader and the degree to which countervailing power exists, the willingness of the channel structure to commit to the TQM philosophy, and the ability of the channel leader to implement this type of system. Likewise, small businesses attempting to implement TQM in a distribution channel may find a great deal of conflict and an uncooperative atmosphere. A small businesses' lack of channel power and financial resources will hinder its ability to foster open channels of communication and provide technical assistance to distribution channel members; consequently channel member acceptance of TQM will not be easy. Encouraging Cooperation It is obvious from the discussion of channel power that the small firm has fewer bases from which to exert power. Despite this concern, small businesses are successfully implementing TQM. It is also important to point out that in 1981, 76 percent of Japanese businesses were small by U.S. standards (less than 100 employees) and 91 percent had less than 500 employees (Sonfield, 1984). The predominance of small businesses did not deter the widespread implementation of TQM production and delivery in Japan. However, before one can generalize the applicability of TQM to small businesses, the marketing channel in which the small business operates must be examined. If the channel is dominated by small businesses, as in Japan's case, then channel leaders would be able to influence other small business members to implement TQM. If large firms dominate the channel, the behavioral issues described in this article will be that much more significant for small businesses. The participation of small businesses in a TQM system can provide many of the benefits afforded larger counterparts. These benefits include: 1) a system based on continuous improvement, 2) meeting customers' requirements, 3) reducing rework, 4) long-range thinking, 5) increased employee involvement and teamwork, 6) process redesign, 7) competitive benchmarking, 8) team-based problem-solving, 9) constant measurement of results, and 10) closer relationships with suppliers. (Ross, 1993) Because of the potential benefits, small businesses should consider TQM as a method for enhancing their efficiency. However, the participation in a TQM system should be approached with caution and planning. A major consideration should be the degree of power held by the channel leader and the willingness of that member to foster cooperation rather than conflict among members of the channel. The key element for successful implementation by small manufacturers is preparation and planning. Shea and Gobeli found some common features of TQM implementation in small businesses: 1) Top people in the organization initiated the adoption of TQM and their involvement was key in implementation; 2) Small businesses may find that a private consultant will definitely aid in implementation, 3) Quality management concepts were implemented throughout the organization; 4) It took time for small businesses to implement TQM, 5)

8 A companies ability to search for and identify new ideas, and 6) the formation of teams was fundamental. CONCLUSION Many small businesses today are compelled to compete globally. But the global marketplace is driven by a new business principal: the producer with the highest quality tends to be the one with the lowest costs (Kobu & Greenwood, 1991). In such a business environment, TQM methods are needed more than ever by small businesses attempting to compete with large corporations. However, recent evidence suggests that TQM is being abandoned by organizations because: 1) It is too time consuming and cumbersome; 2) Lack of focus on external processes; 3) a focus on minimum standards; 4) and delegation of quality to "experts" rather than real people of the organization. (Harari, 1993). This article has attempted to demonstrate how successful implementation of TQM in a marketing channel is dependent upon the channel leader's possession of and prudent exercise of different bases of power. Small businesses considering membership in a TQM channel structure, or trying to implement a TQM system in a marketing channel, should evaluate the channel from the standpoint of power bases and the degree of cooperation and conflict in the channel. Successful implementation of TQM will ultimately make the marketing channel more competitive in national and international markets. The resulting increased sales will subsequently benefit all members - especially the small business members - of that marketing channel. REFERENCES El-Ansary, A. I. & Stern, L. W. (1972). Power Measurement in the Distribution Channel. Journal of Marketing Research (February), Black, S. A. & Porter, L. J. (1996). Identification of the Critical Factors of TQM. Decision Sciences, 27, Dean, James W., Jr. & Bowen, David E. (1994). Management Theory and Total Quality: Improving Research and Practice Through Theory Development. Academy of Management Review, 19, Development Dimensions International, Quality & Productivity Management Association and Industry Week (1993). TQM: Forging Ahead or Falling Behind? Pittsburgh: Development Dimensions International, Inc. Easton, G. S. (1993). The 1993 State of U.S. Total Quality Management: A Baldrige Examiner's Perspective. California Management Review, 35 (3), Finch, B. (1986). Japanese Management Techniques in Small Manufacturing Companies: A Strategy for Implementation. Production and Inventory Management Journal, (3d Qtr.),

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