Quality Management in Large vs Small Firms

Abstract

An Empirical Investigation In the 1980s, the Japanese successfully produced high quality products at relatively low cost, thus capturing a large share of the global market in critical industries such as automotive and electronics. This led to a change in the way western manufacturing firms managed their operations. Analysis of the quality of Japanese firms revealed that a holistic approach to quality such as Total Quality Management (TQM) was instrumental in yielding high quality at a low cost (Ebrahimpour 1985; Garvin 1984). The early success achieved by major U.S. companies such as Ford and Motorola with TQM implementation and the inception of the Malcolm Baldrige National Quality Award (MBNQA) led to a formal recognition of the TQM philosophy. As a result, over the past few years the number of both large and small firms embarking upon formal TQM implementation has grown significantly (Durity 1991). However, many firms launching TQM are failing in their efforts (Fuchsberg 1992; Senge 1993). Many of the disappointments are attributed to the failure to recognize that success with TQM depends on organizational context, including the firm's size, the nature of its products, and industry characteristics (Cole 1993). Hence, empirical investigations of the effectiveness of TQM in various environments are urgently needed (Report of the Quality Leadership Steering Committee 1992; NSF Grant Proposal Guidelines 1994). A few comparative studies that assess only specific issues such as the use of statistical process control (SPC) tools and employee involvement have been reported in the TQM literature (Ebrahimpour 1988; Ebrahimpour and Lee 1988; Modarress and Ansari 1989; Ebrahimpour and Withers 1992; Schroeder et al. 1992). Also, the studies usually compare implementation of specific quality management elements in traditional (non-TQM) and TQM firms. As such, the existing TQM literature does not provide a detailed comparison of the quality strategies implemented in large and small firms. A review of the relative strengths and weaknesses of small firms reveals that the TQM principles such as employee participation and flexibility could, in fact, be more successfully applied in small firms than in large ones (Manoochehri 1988; Sonfield 1984). For example, small businesses tend to encourage innovation and can supply products at lower cost due to low overhead (Sironopolis 1994). On the other hand, researchers argue that small firms lack clout with suppliers and lack sufficient capital (Newmann 1988; Finch 1986). They also lack professional managerial expertise, which accounts for about 90 percent of small business failures (Sironopolis 1994). These are critical aspects for implementing TQM. For example, lack of clout with suppliers could impact a firm's ability to dictate the quality of incoming material. Also, lack of capital may limit a small firm from investing in high quality processes. Furthermore, knowledgeable and committed management is essential for successfully implementing TQM (Garvin 1986). Human resource management priorities and the practices of small firms also differ from those of large firms (Deshpande and Golhar 1994). Small business owners and managers tend to view human resource management strategies as being less important than finance, marketing, and planning (McEvoy 1984). Furthermore, small business managers do not perceive incentives to be critical to improving productivity (Amba-Rao and Pendse 1985). These findings may lead one to believe that the experiences of small firms with TQM implementation may differ widely from large firms. Thus, the size of an organization could perhaps influence the effectiveness of various quality management practices (Cole 1993). Despite the known differences, published research on quality management treats small and large firms as the same. The Baldrige Award uses the same criteria to evaluate quality management effectiveness in both large and small firms (Baldrige Award Guidelines 1994). …