Volume 10 • Number 1
Examining the Association Between Quality and Productivity
Performance in a Service Organization
by Constantine Kontoghiorghes, Oakland University
The main purpose of this study is to examine the compatibility
of productivity and quality management practices in a service
organization. The results of this study highlight the close
association between quality and productivity performance
and suggest that investments in quality should indeed result
in productivity gains. The quality management variables
that were found to be the strongest predictors of productivity
performance were those pertaining to consistent delivery
of work output in a complete fashion, internal process satisfaction,
quality measurement at every step of the process, emphasis
on doing things right the first time, organizational focus
on process improvement, and employee involvement in the
Key words: cost-effective production, quality performance,
timely production, work output
Quality gurus such as W. Edwards Deming, Philip Crosby, and
J. M. Juran have long advocated the positive relationship
between productivity and quality performance. Demings
assertion is that as quality improves, costs decrease because
of less rework, fewer mistakes, and fewer delays (Deming 1986).
Although widely accepted, Demings philosophy has its
skeptics. In fact, many organizations pursue quality and productivity
management practices in an independent fashion. The traditional
view is that higher quality levels result in increased production
costs, higher prices, and, therefore, reduced productivity
Organizations that continually produce quality products are
typically the companies that have integrated and implemented
total quality management (TQM) strategies and practices. According
to Olian and Rynes (1991, 445), TQM is a systemic approach
to the practice of management, requiring changes in organizational
processes, strategic priorities, individual beliefs, individual
attitudes, and individual behaviors. Grant, Shani, and
Krishnan (1994) state, TQM is a challenge to conventional
management techniques and to the theories that underlie them.
They further explain, TQM comprises a group of ideas
and techniques for enhancing competitive performance by improving
the quality of products and processes. Harvey and Brown
(2001, 366) define TQM as an organizational strategy
of commitment to improving customer satisfaction by developing
procedures to carefully manage output quality. TQM involves
moving toward organizational excellence by integrating the
desires of the individuals for growth and development with
organizational goals. TQM is a philosophy and a set of guiding
principles for continuous improvement. Teamwork and empowerment
of individuals are an integral part of TQM.
Some key characteristics of TQM are:
- TQM is organizationwide and visibly supported by the CEO
and other top managers.
- There is a primary emphasis on the external customer.
- Organizational members treat each other as valued customers
across functional lines as well as within units.
- TQM is ingrained as a value into the corporate culture.
- There is an emphasis on participative management practices,
teams, and teamwork, as well as continuous training.
- Partnership with customers and suppliers is encouraged.
- There is an emphasis on measurement using both statistical
quality and statistical process control techniques, as well
as making fact-based decisions.
- There is an emphasis on continuous improvement and doing
things right the first time.
- There is a continuous search for sources of defects with
the goal of eliminating them entirely.
- There is an emphasis on competitive benchmarking.
- No single formula works for everyone. Each organization
is unique and hence off-the-shelf programs tend not to work.
- Quality is seen as a means of gaining a competitive advantage
(Dervitsiotis 1998; French and Bell 1999; Harvey and Brown
2001; Lawler and Mohrman 1998; Lindsay and Petrick 1997).
In all, the main objective of TQM interventions is to develop
organizations that create value through greater satisfaction
of all relevant stakeholders. Through well-structured
processes, TQM aims to create an environment that encourages
people to grow as individuals and learn to bring about both
small but continuous (Kaizen) and drastic or breakthrough
improvements (Dervitsiotis 1998, 112).
According to Grant, Shani, and Krishnan (1994, 30), Quality
is a form of perfection that has intrinsic value; a quality
product is a work of art in the sense that it embodies the
human quest for perfection. Spencer (1994), on the other
hand, defines quality as the satisfying or delighting of the
customer. Quality is also multidimensional. Quality in manufacturing
products can be described in terms of the following dimensions
(Lindsay and Petrick 1997):
- Performancea products operating characteristics,
features, reliability, and so on
- Conformancethe extent to which physical and performance
characteristics of a product match pre-established standards
- Serviceabilitythe extent to which one has the ability
to repair a product quickly and easily
- Perceived quality
Service quality, although not as easily quantified and measured
as product quality, can be defined in terms of the following
- Timehow much time a customer must wait
- Timelinessthe extent to which a service will be
performed when promised
- Completenessthe extent to which all items in the
order are included
- Courtesythe extent to which front-line employees
greet each customer cheerfully and politely
- Consistencythe extent to which services are delivered
in the same fashion for every customer, and every time for
the same customer
- Accessibility and conveniencethe extent to which
service is easy to obtain
- Accuracythe extent to which the service is performed
right the first time
- Responsivenessthe extent to which service personnel
react quickly and resolve unexpected problems (Lindsay and
Given the large number of quality dimensions, Mohanty (1998,
754) states that What is necessary is to select those
dimensions which primarily meet the customer requirements
and deploy them throughout, as the customer wants them translated
to a product or a service through market research, product
design, process design, manufacturing and delivery.
Like quality, productivity can also be defined in terms of
different dimensions. For instance, productivity measures
can be expressed in the form of partial factor (ratio of net
output to one input), total factor (ratio of net output to
the sum of labor and capital inputs), or total productivity
(ratio of gross output to all inputs) (Pritchard et al. 1988;
Sumanth 1981a; 1981b). Mohanty (1998) defined productivity
in terms of saleable, quality product or service output per
unit of input.
A closer look at the definitions of quality and productivity
reveals that both constructs do indeed share similar characteristics.
For instance, they both focus on inputs and outputs. The main
difference is that the focus of the productivity definitions
is efficiency (or as many outputs as possible for a given
unit of inputs), while for quality the main focus is service
or output quality and customer satisfaction. The question
is, are the two approaches compatible? As Deming (1986) put
it, Folklore has it in America that quality and production
are incompatible: that you cannot have both. A plant manager
will tell you that it is either or. In his experience, if
he pushes quality, he falls behind in production. If he pushes
production, his quality suffers. The perceived conflict
between productivity and quality in the service industry is
compounded even further by the fact that service quality and
output are harder to quantify and measure. According to Mohanty
(1998, 759), however, It is productivity (value addition)
and quality (value enhancement) that determine competitiveness.
To remain competitive, organizations need to integrate and
synergize both productivity and quality. Despite the
need to integrate and synthesize the quality and productivity
approaches, little empirical research has been conducted to
examine the commonality between the two (Mohanty 1998).
The full text of this article may be found in the print journal.
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