Enhancing performance of SMEs through TQM

by: Sandra Rangai Balang & Voon Boo Ho

Small and medium enterprises (SMEs) in Malaysia represent an important segment of the economy because of their contribution to the nation’s gross domestic product, employment and larger companies (e.g. MNCs). The government provides assistance to SMEs so for both domestic as well as export  arkets. The government also helps SMEs increase productivity through the use of modern technology and management thus increasing the SMEs’ competitiveness in today’s market.

Nevertheless, it is imperative that the SMEs manage themselves well for sustainable performance. In fact, many research projects have shown the strategic benefits of quality management programs. Researchers have also confirmed that Total Quality Management (TQM) practices do significantly contribute to greater market share and return on investments, lower manufacturing costs, improved productivity and strategic performance. Therefore, it is suggested that local SMEs should practice TQM because it is a key strategy for maintaining competitive advantage. This is necessary because most enterprises concentrate on certain aspects of management only (e.g., finance, product and human resource management). It is believed that having a high-quality marketing management and others are essential too.

A survey research was recently conducted to identify the relationship between quality management and organisational performance (OP) with the existence of market orientation (MO) among SMEs in Sarawak. For the purpose of this stud, the quality management was assessed using the elements of TQM. The research focused on the quality management practices among small and medium enterprises in Sarawak, all of which are registered under the Small and Medium Enterprises

Development Corporation Sarawak and Sarawak Manufacturers’ Association. Based on theoretical considerations, a theoretical framework was proposed linking TQM and MO constructs to the OP. This empirical research was carried out also to determine the relationship between TQM and OP with MO as the moderator.

Out of the 400 questionnaires posted via ordinary mail, 70 questionnaires were returned after one follow-up. From this amount, seven questionnaires had to be excluded due to the large number of unanswered items which rendered further analysis impossible. The overall response rate was 16% percent, which was considered satisfactory for subsequent analysis. Hence, 63 usable questionnaires were analysed accordingly. Most of the participating enterprises are in service sector and a majority of them are owned by non-bumiputeras. Most of the respondents are from small sized company, a majority of them having been in operation less than 5 years. Furthermore, many of them are non-ISO certified company operating in urban areas. The attitudinal measures (TQM, MO and OP) used in this study showed encouraging evidence of reliability and validity.

The findings of this study indicated that the overall perceived level of quality management practices among the surveyed enterprises was averaged at 3.81 (out of 5). This indicates that the companies concerned are just about neither agree nor disagree to agree on the various statements on practicing quality management. This shows that they are practicing quality management but at a moderate level and most probably still at the awareness and/or early stages.

From the seven dimensions of TQM, namely corporate planning, role of top management leadership, customer focus, human resource focus, process focus, quality focus and information analysis, the result of the study suggest that the local SMEs practiced more on customer focus compared to the other dimensions. Correspondingly, the results show that the SMEs agreed that they are practicing market orientation. The overall means of MO is slightly higher than TQM (i.e., 3.89).

This study also reveals that, there is a significant difference in between the ISO-certified and non-ISO SMEs. The ISO-certified SMEs have greater performance. Besides this, the size of the SMEs seems to be factor affecting their performance. The medium-sized firms have better performance than small-sized firms. In addition, the exploratory research findings indicate that:

  1. There is a positive relationship between TQM implementation and OP:
  2. There is a positive relationship between Mo and OP;
  3. There is a positive relationship between MO and TQM implementation;
  4. The influence of TQM on OP is greater than the influence of Mo on OP
  5. The presence of TQM strengthens the relationship between MO and OP

This survey-based exploration has, to a certain extent, defended the importance of TQM for enhancing the performance of SMEs. Nevertheless, future empirical investigation should be performed, using more representative samples. Besides, the effect of industry type on organisational performance should also be studied. As this research pertains to the use of subjective measures of performance with regard to TQM and MO practices, objective measures can be used to validate the relationships currently tested.

In conclusion, quality management is essential for business organisations and the scope has to be more comprehensive in line with the TQM approach. The SMEs can be more independent and competitive if they are well managed to face the stiff competition locally or abroad. The exploratory study indicates that SMEs should consider TQM as a facilitating management tool for improving their performance. Most importantly, it reminds SMEs that the quality of their management and/or marketing practices matters.