January 2003
Volume 10 • Number 1

Contents

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 decision-making process.

Key words: cost-effective production, quality performance, timely production, work output

INTRODUCTION

Quality gurus such as W. Edwards Deming, Philip Crosby, and J. M. Juran have long advocated the positive relationship between productivity and quality performance. Deming’s assertion is that as quality improves, costs decrease because of less rework, fewer mistakes, and fewer delays (Deming 1986). Although widely accepted, Deming’s 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 (Mohanty 1998).

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:

1. TQM is organizationwide and visibly supported by the CEO and other top managers.
2. There is a primary emphasis on the external customer.
3. Organizational members treat each other as valued customers across functional lines as well as within units.
4. TQM is ingrained as a value into the corporate culture.
5. There is an emphasis on participative management practices, teams, and teamwork, as well as continuous training.
6. Partnership with customers and suppliers is encouraged.
7. There is an emphasis on measurement using both statistical quality and statistical process control techniques, as well as making fact-based decisions.
8. There is an emphasis on continuous improvement and doing things right the first time.
9. There is a continuous search for sources of defects with the goal of eliminating them entirely.
10. There is an emphasis on competitive benchmarking.
11. No single formula works for everyone. Each organization is unique and hence off-the-shelf programs tend not to work.
12. 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):

• Performance—a product’s operating characteristics, features, reliability, and so on
• Conformance—the extent to which physical and performance characteristics of a product match pre-established standards
• Durability
• Serviceability—the extent to which one has the ability to repair a product quickly and easily
• Aesthetics
• Perceived quality

Service quality, although not as easily quantified and measured as product quality, can be defined in terms of the following dimensions:

• Time—how much time a customer must wait
• Timeliness—the extent to which a service will be performed when promised
• Completeness—the extent to which all items in the order are included
• Courtesy—the extent to which front-line employees greet each customer cheerfully and politely
• Consistency—the extent to which services are delivered in the same fashion for every customer, and every time for the same customer
• Accessibility and convenience—the extent to which service is easy to obtain
• Accuracy—the extent to which the service is performed right the first time
• Responsiveness—the extent to which service personnel react quickly and resolve unexpected problems (Lindsay and Petrick 1997).

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).

 

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