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ISSN 1463-5771

Volume 13 Number 4 2006

Benchmarking
An International Journal

Benchmarking in total quality


management
Guest Editors: Professor Fiorenzo Franceschini
and Dr Maurizio Galetto

www.emeraldinsight.com

Benchmarking:

ISSN 1463-5771
Volume 13
Number 4
2006

An International Journal
Benchmarking in total quality management
Guest Editors
Professor Fiorenzo Franceschini and Dr Maurizio Galetto

Access this journal online __________________________ 391


Editorial advisory board ___________________________ 392
Guest editorial ____________________________________________ 393
A benchmarking implementation framework for
automotive manufacturing SMEs
Baba Md Deros, Shari Mohd Yusof and Azhari Md Salleh _____________

396

The use of multi-attribute utility theory to determine


the overall best-in-class performer in a benchmarking
study
Terry R. Collins, Manuel D. Rossetti, Heather L. Nachtmann and
James R. Oldham _______________________________________________

431

Role of human factors in TQM: a graph theoretic


approach
Sandeep Grover, V.P. Agrawal and I.A. Khan ________________________

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447

CONTENTS

CONTENTS
continued

Tourism services quality (TourServQual) in Egypt:


the viewpoints of external and internal customers
Mohammed I. Eraqi _____________________________________________

469

An empirically validated quality management


measurement instrument
Prakash J. Singh and Alan Smith __________________________________

493

A worldwide analysis of ISO 9000 standard diffusion:


considerations and future development
F. Franceschini, M. Galetto and P. Cecconi ___________________________

523

Book review_______________________________________ 542

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BIJ
13,4

392

Benchmarking: An International
Journal
Vol. 13 No. 4, 2006
p. 392
# Emerald Group Publishing Limited
1463-5771

EDITORIAL ADVISORY BOARD


David Bennett
Aston University, UK
Walter W.C. Chung
The Hong Kong Polytechnic University,
Hong Kong
Sylvia Codling
The Benchmarking Centre Ltd and
Oak Business Developers plc, UK
John F. Dalrymple
RMIT Business School, Melbourne, Australia
Tom Dolan
President, The Benchmarking Exchange,
USA Chairman, Benchmarking Committee,
ASQC, USA
James R. Evans
University of Cincinnati, USA
Barbara Flynn
Wake Forest University, USA
Shuichi Fukuda
Director, Global Learning Center, Tokyo
Metropolitan Institute of Technology, Japan
H. Peter Holzer
University of Economics, Vienna, Austria
Zahir Irani
Brunel University, Middlesex, UK

Gopal Kanji
Sheffield Hallam University, UK
Archie Lockamy III
Samford University, USA
Kambiz Maani
University of Auckland, New Zealand
Professor Rodney McAdam
University of Ulster, School of Business,
Organisation and Management, Belfast, UK
Christian Madu
Pace University, USA
Jaideep Motwani
Grand Valley State University, USA
Richard Schonberger
Schonberger & Associates, USA
Dean M. Schroeder
Valparaiso University, USA
Roger G. Schroeder
University of Minnesota, USA
Joel D. Wisner
University of Nevada at Las Vegas, USA
Dr Yahaya Y. Yusuf
Business School, University of Hull, UK

Guest editorial
Introduction to the special issue on benchmarking in total quality
management
A world that is changing faster and faster forces companies to reinvent themselves and
their capabilities. In this competitive environment total quality management (TQM)
tools support organizations in managing strategic quality and decision processes. This
is an era of break-through management, which demands creativity and new thinking.
The organization competitive advantage is based on the ability to generate and
support new ideas quickly and that hinges on the capability to create. Benchmarking
can become a tool to sustain this new TQM paradigm, providing a means to increase
an organizations competitive performance by a comparison with the best-in-class.
The challenge is driving the change and not being driven. That is why
benchmarking in TQM can become the helm to drive the change. Changes can be
voluntary or not; may be big or small, but in all cases changes ensure that tomorrow
will be different than today. It is not necessary to agree with change or not, as it will
happen anyway. The question is do you want to be in the drivers seat, or to be
passengers? . . . Can benchmarking methodologies be the reply?
This special issue of Benchmarking: An International Journal explores some of the
latest research on the frontiers of this field. It investigates how benchmarking can
provide approaches, methods and techniques for the next TQM challenges we are
going to face this century. The papers in this issue were selected based on their new
contributions to theory and/or methodology or significant substantive findings, as well
as their fit with the organization of the issue. Taken together, these articles provide a
valuable collective snapshot of interesting benchmarking progress in recent research.
The announcement for this special was framed in very broad terms. Both theoretical
and empirical papers, as well as rigorous case studies, were invited. Cross-functional
studies as well as best practices experiences were particularly encouraged. Suggested
topics for the special issue included:
.
quality, innovation and benchmarking in manufacturing and service
organizations;
.
theory building and new paradigms in TQM;
.
advanced methods for benchmarking in TQM;
.
measurement issues in benchmarking quality management;
.
benchmarking analysis and strategic quality management; and
.
surveying on TQM and benchmarking.
Papers that were submitted for the special issue were subjected to a normal
double-blind review process to assess the compatibility of the topic addressed by the
paper with the theme and focus of the special issue. Papers that did not pass the screen
were, at the authors discretion, forwarded to the editor of BIJ to be included in the
normal review process for the journal. Of ten papers submitted, six passed the review
process.

Guest editorial

393

Benchmarking: An International
Journal
Vol. 13 No. 4, 2006
pp. 393-395
q Emerald Group Publishing Limited
1463-5771

BIJ
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394

The first paper is A benchmarking implementation framework for automotive


manufacturing SMEs by Baba M. Deros, Shari M. Yusof and Azhari M. Salleh.
The authors analyze how intense market competition and increasing business
competitiveness have led many small and medium-sized enterprises (SMEs) to practice
benchmarking. The paper provides a conceptual framework for benchmarking
implementation in SMEs, taking into consideration the SMEs strengths, weaknesses
and characteristics. The conceptual framework was based on selection of the
appropriate key performance measures and benchmarking techniques.
The second paper by Terry R. Collins, Manuel D. Rossetti, Heather L. Nachtmann,
James R. Oldham is The use of multi-attribute utility theory to determine the overall
best-in-class performer in a benchmarking study. The authors investigate the
application of multi-attribute utility theory to aid in the decision-making process when
performing a benchmarking gap analysis. The analysis was performed to determine
industry best practices for six main critical warehouse metrics of picking and
inventory accuracy, storage speed, inventory and picking tolerance, and order cycle
time, within a public sector warehouse.
The third paper is Role of human factors in TQM a graph theoretic approach by
S. Grover, V.P. Agrawal, I.A. Khan. The authors focus their attention on human factors
in TQM organizations. The paper proposes a preliminary mathematical model of these
factors and their interactions using a graph theoretic approach. The methodology
supports the impact evaluation of these factors, providing a tool for a self-analysis and
comparison of organizations.
The fourth paper is Tourism services quality (TourServQual) in Egypt: the
viewpoints of external and internal customers by Mohammed I. Eraqi. This paper is
application oriented, and in it the author presents an analysis of tourism service quality
in Egypt. He analyzes the results of two surveys with the aim of identifying the level of
satisfaction of internal customers (employers) and external customers (tourists).
The paper addresses issues relating to the creative and innovative organization
behavior in TQM practices.
The fifth paper by Prakash J. Singh and Alan Smith is An empirically validated
quality management measurement instrument. This paper proposes an assembled
measurement instrument to overcome some quality measurement tool shortcomings.
The paper focuses issues relating to quality measurement instruments benchmarking.
The authors emphasize that the area of quality management is currently characterized
by three competing approaches: standards-based; prize-criteria; and, elemental. These
three approaches are analyzed to identify sets of key constructs and associated items.
The final paper A worldwide analysis of ISO 9000 standard diffusion:
considerations and future development is from Fiorenzo Franceschini, Maurizio
Galetto and Paolo Cecconi. This paper presents a deep investigation of ISO 9000
worldwide diffusion. In it the authors benchmarks ISO 9000 standards with TQM
strategies. The paper addresses issues relating to possible development directions for
quality system certification.
Preparation of this issue would be impossible without the help and support of our
colleagues. They have done considerable work deserving a special acknowledgement.
We would like to thank the authors of all submitted papers and the referees who found
time in their busy schedules to review the contributions.

It is our hope that the six papers in this issue will stimulate new, better, more
innovative and relevant benchmarking strategies, measurement and modeling. The
fields of benchmarking and TQM can greatly benefit from an infusion of new ideas,
methods and researches. Increased attention to these areas by management scientists
in academic institutions, industry and services will help their practice and establish it
as a valued core cross-disciplinary and global management discipline.
Fiorenzo Franceschini and Maurizio Galetto
Guest Editors

Guest editorial

395

The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1463-5771.htm

BIJ
13,4

A benchmarking implementation
framework for automotive
manufacturing SMEs

396

Baba Md Deros
Faculty of Engineering, Universiti Kebangsaan Malaysia, Malaysia

Shari Mohd Yusof


Faculty of Mechanical Engineering, Universiti Teknologi Malaysia, Malaysia, and

Azhari Md Salleh
Academic Director, Akademi Tentera Malaysia, Malaysia
Abstract
Purpose The purpose of this paper is to present a conceptual framework for benchmarking
implementation in small medium-sized enterprises (SMEs) taking into consideration their characteristics.
Design/methodology/approach The paper begins with the review on the definition of SME and
a comparison of the characteristics of SMEs and large organizations. It presents the need for a
framework and its relationship with benchmarking and TQM. This is followed by reviewing the
benchmarking implementation frameworks proposed by researchers and discusses these frameworks
based on their strengths and weaknesses from SMEs perspective. The frameworks were categorised
into two broad types based on the different writers background and the approach on how they view
the benchmarking implementation process.
Findings The paper suggested a conceptual framework for benchmarking implementation dedicated
to the automotive manufacturing SMEs. This framework guides them through from the start to end of the
benchmarking process. The framework was validated at six pilot case study companies, which gave useful
comments and suggestions regarding the usefulness and applicability within the SMEs context.
Research limitations/implications The conceptual framework is still in the development stage
and research is undertaken to include the pilot study companies suggestions and comments into the
final version of the framework.
Practical implications This guidance and framework provides a useful guide for companies to
adopt and adapt before embarking on their benchmarking journey.
Originality/value This paper fulfils an identified knowledge gap and offers practical help to SMEs
starting out a benchmarking implementation effort.
Keywords Benchmarking, Competitive strategy, Small to medium-sized enterprises,
Automotive industry, Malaysia
Paper type Research paper

Introduction
In most countries, small and medium enterprises (SMEs) dominate the industrial and
commercial infrastructure. SMEs play a very important role in national economies,
Benchmarking: An International
Journal
Vol. 13 No. 4, 2006
pp. 396-430
q Emerald Group Publishing Limited
1463-5771
DOI 10.1108/14635770610676272

The authors would like to thank the Ministry of Science Technology and Environment (MOSTE)
and Universiti Teknologi Malaysia for their support in providing the research grant for the
project entitle Development of an Integrated Quality Engineering Approach for Malaysian
Automotive Industry (IRPA 03-02-06-0060-EA254).

providing job opportunities, act as supplier of goods and services to large


organizations, and any lack of product quality could adversely affect the
competitive ability of the larger organizations (Rose, 2000; Greenan et al., 1997;
Ghobadian and Gallear, 1996; Parkin and Parkin, 1996; Storey, 1994). In manufacturing
sector, SMEs act as specialist suppliers of components, parts, and sub-assemblies to
larger companies because the items can be produced at a cheaper price than the large
companies could achieve in-house. For example, in Australia more than 50 per cent of
employment and 90 per cent of businesses are represented by SMEs (Husband and
Mandal, 1999); 92 per cent of all enterprises in Thailand in 1998 comprised of SMEs
and 28.9 per cent of them belongs to the manufacturing sector (Sevilla and
Soonthornthada, 2000); 75 per cent of manufacturing employment in Japan is in SMEs
(Ghobadian and Gallear, 1996); more than 90 per cent of manufacturing companies in
Malaysia are classified as SMEs (Shan, 2000; Malaysia, 1998; MITI, 1998; Kim and Suh,
1991). In the year 2000, the Malaysian SMEs contributed 82.6 per cent to the regional
income generation through external sales/import substitution; 40 per cent towards
gross domestic production (GDP) and represent 31.2 per cent of the total workforce in
the manufacturing sector (Hashim and Wafa, 2002; SMIDEC, 2002). In other words, if
economies are to prosper, then it is essential that SMEs become competitive to meet the
international and globalisation challenges and able to produce high quality outputs.
In a competitive market place, quality improvement tools and practices (such as
benchmarking) can help align organizations key business processes (such as delivery,
productivity, responsiveness to customer needs, etc.) to achieve higher customers
satisfaction, business competitiveness and bottom-line results (Cassell et al., 2001; Chin
et al., 2001; Brah et al., 2000; Drew, 1997; Elnathan and Kim, 1995). However,
benchmarking in SMEs has not received sufficient attention. For example, in a study
reported by Monkhouse (1995), about 59 per cent of SMEs claimed to have
benchmarking, nearly half of them (45 per cent) benchmarked their financial
performance, a quarter (25 per cent) have conducted in both financial and process
benchmarking, and about a third (30 per cent) performed internal benchmarking. This
low percentage may be due to the fact that benchmarking involves a lot of processes
and activities, which are complex. Without an appropriate and systematic framework,
it might be difficult to achieve the desired outcomes. Therefore, the authors believe that
a systematic framework needs to be developed first before embarking on
benchmarking to assists and ensure its successful implementation and adoption in
any organisation. In this paper, the authors briefly presents the pertinent points
concerning benchmarking frameworks so as to provide an overall perspective and
understanding of the main differences and similarities between all the frameworks
reviewed. Once that is achieved it can guide the way towards further development of a
benchmarking framework, which hopefully be suitable and useful for SMEs.
Definition for SMEs
At present, there seems to be no consensus on the definition for SMEs. Variations exist
between countries and industries. SMEs are defined by a number of factors and criteria
such as location, size, age, structure, organization, number of employees, sales volume or
worth of assets, ownership through innovation and technology (Rahman, 2001; Sevilla
and Soonthornthada, 2000; Husband and Mandal, 1999). Table I shows the definitions of
manufacturing SMEs in selected economies. Although, the definition and description

Benchmarking
implementation
framework
397

,500

Sales value , RM25 million


P40 million asset
, S$12 million fixed assets
, NT$40 million paid-up capital and , NT$120
million of total assets

100 million assets

Other measures

Sources: Anthony (1983), Hall (1995), SMIDEC (1998), SMI Business Directory (2002) and Sevilla and Soonthornthada (2000)

Manufacturing
Manufacturing

,100
,500
Usually , 100
,100
,300
,300
,150
,200

Number of employees

398

United States of America

Manufacturing
Manufacturing
Varies with industry

Australia
Canada
Peoples Republic of China
Indonesia
Japan
Korea
Malaysia
Philippines
Singapore
Taiwan
Manufacturing
Manufacturing
Manufacturing

Sector

Table I.
Summaries of main
definitions for SMES in
selected economies

Country

BIJ
13,4

varies, however, in practice, most researchers and authors used both the quantitative
and qualitative methods to define a SME. In terms of the quantitative criteria, the
number of employees is the most frequently used yardstick to determine the size of a
SME in several countries (Hashim and Wafa, 2002; Yusof, 2000; Anthony, 1983).
The authors have used a similar set of criteria as adopted by previous researchers in
benchmarking to define the SMEs and considers SMEs as those firms, which employ
less than 250 employees (McAdam and Kelly, 2002; Jeffcoate et al., 2002; Hinton et al.,
2000). The authors have adopted this definition for the SME so as to provide fair and
effective comparisons between this study and past studies on benchmarking in SMEs.
In this study, monetary value based definitions, such as the amount of turnover and
paid-up capital were not used because monetary value varies wildly from one country
to another.
Comparing the characteristics of SMEs and large organizations
Welsh and White (1981) suggested that a small company is not a little large business
because there are many differences between SMEs and large business organizations in
terms of structure, policy making procedures and utilization of resources to the extent
that the application of large business concepts directly to SMEs may not be
appropriate. In the USA, as highlighted by Baumack (1988), many large corporations in
the Fortune 500 list actually started by small business entrepreneurs with very limited
capital. Examples include Ford Motors, Hewlett-Packard and Microsoft to name a few.
The differences of SMEs can be divided into structure, systems and procedures, culture
and behaviour, human resources, and also market and customers. Table II gives a
summary of the SMEs characteristics, its strengths and weaknesses versus large
organizations.
SMEs are in a more advantageous position in terms of structure because it facilitates
faster communication line, quick decision-making process, faster implementation, short
decision-making chain, higher contribution as a source of ideas in their operations and
innovation, unified culture and very few interest groups (Kraipornsak, 2002). A majority
of SMEs have simple systems and procedures, which allows flexibility, immediate
feedback, better understanding and quicker response to customer needs than larger
organizations (Kraipornsak, 2002). This is further enhanced by the SMEs corporate
mind-set, which is conducive for new change initiatives, provided that the
owner/management has the commitment to, and leadership of the change process,
together with a sound knowledge of it. In addition, SMEs employees are given the
authority and responsibility in their own work areas that can create cohesion and
enhance common purposes amongst the workforce to ensure that a job is well done.
Innovative environment, early employees and union involvement in change initiatives
such as benchmarking will provide higher job satisfaction among its workers, who
support the improvement culture and ensure its success compared to large business
organizations. SMEs have fewer employees and everybody seems to know almost
everyone, thus promoting a better relationship between employees.
On the other hand, SMEs have a number major weaknesses, which can result in a
disadvantageous situation such as majority of SMEs do not have adequate financial
resources and lack of access to commercial lending (i.e. difficult to obtain loans)
(Hashim and Wafa, 2002; Kraipornsak, 2002). As a result, SMEs do not have adequate
budget for staff training, which can stifle improvement efforts. In terms of human

Benchmarking
implementation
framework
399

Culture and behaviour


Operations and behaviour of employees influence
by owners/managers ethos and outlook
Organic, not strong departmental/functional
mind-set, corporate mind-set
Unified/fluid culture
Result-oriented

Corporate mind-set is conducive for new change


initiatives
High staff loyalty and hard work to company
As a seed-bed from which large companies grow
As a group provides significant economic output
and savings in foreign exchange

Simple system encourage innovation, allows


flexibility and speed of response to customer
needs/demands
Act as training ground for new entrepreneurs and
workers

Faster communication line, quick


decision-making process, faster implementation
Short decision-making chain
High incidence of innovativeness and unified
culture
Very few interest groups
Breeding ground for new business ventures and
entrepreneurs

Structure
Flat with very few layers of management, top
management highly visible and close to the point
of delivery
Less delegation.
Division of activities limited and unclear
Low degree of specialisation
Flexible structure and information flows.
Strategic process incremental and heuristic

(continued)

Lack of managerial and technical expertise


Uncommitted or dictatorial owner/manager ethos
can damage new initiatives
Danger when loyalties and emotional ties are
place above competence and performance

Lack of proper system difficulty in ensuring


efficiency of work, and high variability in work
outcome
Lack of proper/effective time and cash flow
management
Gut feeling approach may result in wrong
decisions
Limited application of new technology
Inadequate infrastructure
Shortage of raw materials

Low specialisation may result in lack of expertise


in change initiatives
Need outside assistance
Owner controls everything and lacks delegation
can stifle growth
Lack of capital and credit facilities

Weaknesses

400

Systems and procedures


Activities and operations not governed by formal
rules and procedures
Low degree of standardisation and formalisation
People-dominated
Simple planning and control system
Incidences of gut feeling decisions are more
prevalent
Informal evaluation, control, and reporting
procedure
Flexible and adaptable processes

Strengths

Table II.
SMEs characteristics,
strengths and
weaknesses versus large
organisations

SMEs characteristics

BIJ
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Immediate feedback from customers


Able to respond quicker
Understand better customer needs.
Aid to large companies.
Stimulate market competition

High authority, commitment and responsibility


can creates cohesion and enhance common
purposes amongst the workforce to ensure job is
done
Innovative environment will support
improvement culture
Early union involvement needed to ensure
success
Fewer employees better relationship, knows
almost everyone
Provides employment opportunities

Strengths

Marketing constraints and knowledge


International marketing expensive, after sales
support not as extensive as large businesses
Easily suppressed and dictated by larger
multinationals (if they are customers), e.g.
product cost, etc.

Lack of financial support, e.g. no training budget,


ad hoc, and small-scale approach can stifle
improvement efforts
Improvement needs investment in human
resources
Shortage of skilled workers

Weaknesses

Sources: Chee (1987), Salleh and Fichtner (1991), Huxtable (1995), Ghobadian and Gallear (1996, 1997), Yusof and Aspinwall (2000a, 2000b) and Hashim
and Wafa (2002)

Market and customers


Span of activities narrow
Limited external contacts
Normally dependent on small customer based
close contact, easily accessible and many known
customers personally
Product and services mostly for local market, few
national or international

Human resources
High personal authority and commitment of the
owner
Few decision makers
Dominated by pioneers and entrepreneurs
Individual creativity encourages and high
incidence of innovativeness
Modest human capital, financial resources and
know-how
Individuals normally can see the results of their
endeavours
Low incidence of unionisation
Low degree of resistance to change
More generalists, some staff may cover more than
one department

SMEs characteristics

Benchmarking
implementation
framework
401

Table II.

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402

resources, SMEs are always faced with the shortage of skilled labour and they have to
compete with large companies for skilled workers (i.e. large companies able to offer
skilled workers better wages and working conditions) (Reed et al., 2001; Chee, 1987). In
addition, SMEs are also faced with frequent raw material shortages and have to pay
more, fluctuation in raw material price, unable to obtain credit terms, inadequate
inventory management and control of stock in raw materials and less bargaining
power compared to large companies (Kraipornsak, 2002; Chee, 1987). Majority of SMEs
entrepreneurs have low level of formal education and limited training in new
management principles and practices, which led to lack of managerial and technical
expertise (Hashim and Wafa, 2002; Chee, 1987).
Very often SMEs relied on one-person management, thus insufficient time and
attention is given to the various managerial functions (Hashim and Wafa, 2002). In
SMEs, the owner controls everything; poor management was attributed to the owners
lack of business experience, lack of management experience or know-how (Pickle and
Abrahamson, 1990; Baumack, 1988).
Furthermore, most SMEs lack of proper time management and cash flow
management system, which cause high variability in work outcome and difficulty to
ensure efficiency of work. Many important business decisions are often based on
gut-feeling and not on facts that may result in making wrong decisions. SMEs are also
faced with other problems such as lack of knowledge in marketing techniques, lack of
opportunities at both local and international levels, poor accessibility to the distribution
channels and market information, marketing constraints such as pricing, late payment
from customers, inability to provide quality product and lack of promotional strategies
(Kraipornsak, 2002). Very few SMEs owners prepare an adequate feasibility study of a
new enterprise and a sound marketing investigation (Meredith and Grant, 1982). In most
cases, marketing investigation by potential entrepreneurs tend to be low level and based
on general opinions rather than expert advice, lack of effective selling techniques and
market research (Hashim and Wafa, 2002).
As indicated by Kraipornsak (2002) and Chee (1987), a majority of SMEs rely on
outdated technology, labour intensive and traditional management practices. Some do
not trust new technology, while others are unable to afford it, which in many cases led
to inefficient, lack of information and inadequate in-house expertise (Hashim and Wafa,
2002). Thus, it is important to appreciate the differences that exist between SMEs and
large business organizations. In other words, it is crucial to try and understand SMEs
issues and characteristics before making any attempt to help them in implementing
TQM activities (such as benchmarking, 7 QC tools, SPC, quality assurance system,
etc.). It can be concluded that appropriate technology and efficient production system
plays an important role in explaining the comparative advantage and competitiveness
of the SMEs and large companies.
Defining a framework
In the past, many writers and authors have used the term framework without first
defining it appropriately. At present, there is no consensus on the definition of the
frameworks; some writers define it as a set of principles or ideas used as a basis for ones
judgement, decisions, while others portray the frameworks through diagrams, flowcharts,
and graphical or pictorial representations (Yusof, 2000). The Oxfords Advanced Learner
Dictionary of current English defines a framework as a structure giving shape and

support (Hornby, 1990). Meanwhile, Struebing and Klaus (1997) believed a sound
framework should define what the organisation does, what it is trying to do, how it is going
to do it and ensure that each step is done in the correct sequences. On the other hand,
Popper (1994) as quoted by Yusof (2000) defines a framework as a set of basic fundamental
principles, which can help to promote discussions and actions. In other words, a sound
framework can link-up between benchmarking concept and practical application because
it guides the organisation in adopting and implementing benchmarking activities in a
more systematic, comprehensive, controlled and timely manner.
Why need a framework?
The most frequent reason cited for change efforts (such as TQM, BPR, reengineering,
etc.) failure is wrong implementation approach. Aalbregtse et al. (1991), for example
cited the following reasons for having a framework to:
.
illustrate an overview and communicate a new vision to the organisation;
.
force management to address a substantial list of key issues which otherwise
might not be addressed;
.
give valuable insights into the organisations strengths and weaknesses, and its
overall strategic position in the market-place; and
.
support implementation and to improve the chance of success because it will
provide not only overview but also more detailed information describing the
content of each framework element and its relationship to other elements.
In the authors opinion, these reasons are also applicable and valid to the
benchmarking implementation, since benchmarking is one of the tools found in TQM.
In this paper, the authors have defined framework as a set of simplified theoretical
principles and practical guidelines to carryout benchmarking implementation and
adoption, which can enhance the chance of success that are easy to understand,
efficient and can be implemented at reasonable costs and time.
Framework design requirements
The SMEs characteristics, strengths and weaknesses against large organizations were
discussed in the preceding section. A question, which arises then, is how one can
characterise a good framework that really suits the SMEs. In general, the following
criteria can be considered as a guide in developing a good framework to suit the SMEs
characteristics (Yusof and Aspinwall, 2000a):
.
systematic and easily understood;
.
simple in structure;
.
having clear links between the elements or steps outlined;
.
general enough to suit different contexts;
.
represent a road map and a planning tools for implementation;
.
answers how to? and not what is?; and
.
implementable at reasonable cost and time.
Thus, it is important that these criteria are considered when developing a framework
for SMEs.

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404

Meanwhile, Medori and Steeple (2000) summarised the design requirements for
developing a framework that include the following steps. They are:
.
procedures for selecting and implementing measures;
.
ability to identify whether existing measurement system is up to date and
measuring critical issues (i.e. audit capability);
.
selected measures should be congruent with company strategy and have strong
relationship with the six core competitive priorities (i.e. quality, cost, flexibility,
time, delivery and future growth); and
.
facilitates rapid selection of measures from a data bank; and workbook approach
(i.e. step-by-step methodology).
Benchmarking frameworks relationship with benchmarking and TQM
The relationship of benchmarking framework with benchmarking and total quality
management (TQM) can be summarised and shown in Figure 1. By referring to
Figure 1, it can be seen that the benchmarking framework is at the heart of the
benchmarking process and thus plays a very important role in ensuring the success of
benchmarking process. This in-turn, can lead to the success of the overall TQM
program.
Generally, companies need to first know their strengths and weaknesses before
embarking on adopting the benchmarking tool to improve their productivity, product
quality, process efficiency, services, etc. This leads to improvement in their overall
business performance and competitiveness. Without a suitable benchmarking
framework that provides the steps and guides what actions to be taken, which is
easy to use, the SMEs have to face many difficulties and problems in conducting
benchmarking to investigate and identify their strengths and weaknesses compared to
their competitors.
Review on previous benchmarking implementation frameworks
In this paper, the authors present some relevant benchmarking framework studies
reviewed, which represent the various frameworks developed and proposed by various
academics, researchers, consultants and experts in the field. It would be impractical to
cover all the available frameworks, however, as far as possible the authors would
TQM

Benchmarking framework

Figure 1.
Benchmarking
frameworks relationship
with benchmarking and
TQM

Benchmarking
Benchmarking

present the ones, which form the representative samples of the most common, relevant
and widely published. The various frameworks reviewed were categorised into two
broad types namely, consultant/expert and academic/research based on the author or
researcher background and in accordance to the approach how they view
benchmarking implementation process. For example, the approach taken by
consultant/expert towards benchmarking implementation is more practical
orientated (i.e. hands-on); meanwhile the academic/researcher look at it from
theoretical and conceptual aspect.
Consultant and expert based framework
In general, consultant based frameworks were derived from personal opinion and
judgement through practical experience in providing consultancy service to
organisations embarking on a benchmarking project.
Crow (1999) developed a generic framework for benchmarking best practices to
improve product development process that follows Deming PDCA cycle into five major
dimensions, which includes strategy, organization, process, design optimisation, and
technology. As shown in Table III, the five major dimensions are further subdivided into
28 best practices categories. He had used the product development best practices to
investigate competitive dimensions (such as time-to-market, low development cost, low
cost producer, high value product, innovation and product performance, quality,
reliability, ease of use, serviceability, and agility) associated with product development.
The framework provides a detailed example to conduct the evaluation process; it
described the strategic levers associated with each of the competitive dimensions or
strategies; it shows how to perform the product performance summary, strategic
alignment analysis, gap analysis for identifying implementation actions and priorities;
it enable the organization to develop an action plan for improving the product
development process. In addition, it can also be used to identify strengths and
weaknesses relative to a common framework in product development process.
However, it can be argued that the framework is very complex, categorise best
practices into 28 categories with more than 270 best practices and can only be used in
the product development process (i.e. not a generic framework) thus the framework is
not applicable in other areas of the business.
Meanwhile, Spendolini (1992) prescribed a generic five stages benchmarking model,
which is simple and incorporates essential elements in the benchmarking process. The
five stages benchmarking process begins with determining what to benchmark,
forming a benchmarking team, identifying benchmarking partners, collecting and
analysing benchmarking information, and finally, taking the appropriate action (i.e.
following the Deming PDCA cycle) as shown in Figure 2. In addition, Spendolini (1992)
proposed four general guidelines to conduct benchmarking process successfully, such
as: follow a simple, logical sequence of activity; give heavy emphasis on planning and
organization; use customer focused benchmarking; and make it a standardised process
for the whole organization. The model provides a structure, framework and common
language for planning and execution of benchmarking investigation. It is very flexible
where anyone (for example the benchmarking team) who wants to use the framework
can modify the process to suit their needs and requirement; it provides a new bench
marker with basic process map and set of benchmarking dos and do nots; and
specialists had validated it.

Benchmarking
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framework
405

Product data
Design automation
Simulation & analysis
Computer aided
manufacturing
Support technology
Knowledge organization
Design for
manufacturability
Product cost management
Robust design
Integrated test design &
program
Design for operation &
support

Process management
Process improvement
Understanding the customer
Requirements & specifications
management
Development process integration
Supplier/subcontractor integration
Transition to production
Configuration management
Design assurance
Project & resource management

Management
leadership
Early involvement
Product development
teams
Organizational
environment

Business & product strategy


Product planning &
management
Technology management

Source: Crow (1999)

Technology

Design optimisation

Process

Table III.
Product development
best practices framework
Organization

406

Strategy

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Benchmarking
implementation
framework
I
Determine
what to
benchmark

V
Take
Action

IV
Collect
& analyze
benchmarking
information

The
Benchmarking
Process

407

II
Form a
benchmarking
team

III
Identity
benchmark
partners

Source: Spendolini (1992)

However, it can be argued that the model has a few weaknesses because it only
represent the steps to be taken in implementing benchmarking in specific business
process and had not given a general outline of the overall benchmarking concept.
The Malaysian Benchmarking Service, NPC (1999) developed a generic approach for
benchmarking studies process following the Deming PDCA cycle. The benchmarking
study can be divided into three phases as shown in Figure 3. Each phase describe the
benchmarking processes conducted and their respected benefits. The first phase
provides awareness, understanding of key issues, establish key questions, learn the
methodology, review own process, and in-depth discussions for the benchmarking
study. In the second phase, the benchmarking activities carried out are preparing for site
visit, site visit, data collection, recommendations for improvement and share findings.
The benchmarking processes performed in third phase are planning, implementing best
practices, monitoring the result, standardisation and finally daily control of best
practices implementation. Adaptation and improvement resulting from the best
practices identified throughout the study only occur after the company had adopted and
implemented the recommendations from the benchmarking study.
The model provides for gap identification process that facilitates comparison of
apples to apples identify how improvement can be made, focuses on learning and
best practices transfer and maximise improvements achieved from benchmarking
implementation. The NPC (1999) approach to benchmarking process seems to be simple,
systematic and can be applicable to any benchmarking projects in any organizations.
Jenin (2000) had empirically tested this benchmarking approach in performing
functional benchmarking to manage customer complaints in a large government

Figure 2.
The five-stage
benchmarking model

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Phase 1

Phase 2

5.0 Site Visit


Preparation

Start

408
1.0 Agree on
Benchmarking Topic

Phase 3

9.0 Planning for Adopting


Best Practices

10.0 Implementation of
Best Practices

6.0 Data Collection:


Site Visit

11. Monitoring the Result


2.0 Finalise on Scope:
Measures and Definition

3.0 Data Collection:


Survey

7.0 Recommend
Improvement?

12. Standardisation

2nd site visit


(only if necessary)

Yes

4.0 Share Strengths

13. Daily Control

8.0 Share Findings


14. Continue Existing
Project?
Yes

Figure 3.
NPC approach for
benchmarking study

No
New Area

Source: NPC (1999)

agency involved in the service sector and not in the SMEs for its applicability and
usability. However, it can be argued this benchmarking framework only described the
specific steps on how to perform the benchmarking implementation process but it did
not provide the overall roadmap and guidelines for companies to follow before
embarking on the benchmarking effort.
Academic and research based framework
On the other hand, academics and researchers mainly through their own research,
knowledge and experience in benchmarking developed the academic based frameworks.
Lee (2002) developed a generic model for assessing, implementing and sustaining
business excellence through structured approach in implementing best practices in
TQM (such as in operations, quality, customer satisfaction, and, etc.) found in the
Singapore Quality Award. The model consists of four major elements. They are core
values, goals, approaches and deployment and business excellence. It starts by
identifying a set of core values and its goals, and followed by a systematic
implementation of initiatives based on the PDCA cycle. The model provides a guiding
structure for organizations to systematically implement an effective TQM program
that targets a specific purpose. In the authors opinion, this model could also be use
effectively for implementing benchmarking because benchmarking has a very close
relationship with the TQM program. The model provides a systematic structure to
identify core values; easily adapted, proposed a list of best practices for each core value

at each stage of the benchmarking effort and it is generic for all applications. The
framework for excellence model seems to be simple and generic in terms of
applications but it has been designed and tested only in large organizations from past
Singapore Quality Award winners, meanwhile its applicability and usability in SMEs
is still unknown and yet to be empirically proven.
Fong et al. (2001) proposed a generic analytical framework, which is simple, systematic
and consists of both hard and soft measures for benchmarking the value management
process consisting of four basic steps. It starts by identifying the critical success factors
(CSFs), followed by determining the factors to be benchmarked, then establishing the
quantifiable performance metrics, and finally comparing the results and selecting the
practice with the best result for benchmarking. In addition, they investigated and
identified the CSFs for the value management process; objective measures (i.e. hard
analysis e.g. time, cost, and quality, etc); subjective measures (i.e. soft analysis e.g.
facilitator skills, teamwork, creativity, customers satisfaction, etc.); and benchmarking
results that reflect actual situation. On the other hand, the frameworks practicality,
applicability and usability in SMEs are yet to be validated empirically.
Davies and Kochhar (2000) developed a framework for selecting practices based on
relationship between practices and performance; and dependency relationships
between practices, which improves operational performance in manufacturing
planning and control function. The framework is divided into six steps starting
from identification of the need to improve the operational performance system;
identification of best practices for the areas of performance to be improved; prioritise
practices based on impact on specific measure of performance; assess the predecessor
practices for the practice to be implemented; implement desired practices; and results
improvement in operational performance. In addition, they proposed a structured
approach in identifying, selecting and transferring best practices; prioritise practices
based on dependency of relationships between practices and impact on performance;
predecessor practices sequence of implementation to gain maximum benefits; and
adverse effects of practices adoption on other measures of performance. Figure 4 shows

Benchmarking
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framework
409

2. Closed liason with


other departments

6. Clear responsibilities
of the supplier and buyer

7. Procedure for
carrying out supplier audits

Source: Davies and Kochhar (2000)

3. Supplier
development
programs used

Figure 4.
Predecessor practices to
the practice supplier
development programs
used

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410

an example of predecessor practices to the practice supplier development programs


used for the area of purchasing.
In this case, the supplier development programs used is dependent on the
predecessor practices such as: close liaison with other departments; clear responsibilities
of the supplier and buyer; and procedure for carrying out supplier audits. They believed
the framework could provide information to operational managers to focus and link best
practices on objectives to be achieved, consider adverse effects of implementing
practices on related performance measures, analyse necessary predecessors which are
required to make a practice effective, adopt best practices which are linked to objectives
and build on existing competencies and practices, minimise fire-fighting and avoid
panaceas. In addition, the framework has been validated empirically through case
studies, industrial experts, interviews and questionnaires.
Medori and Steeple (2000) developed a framework for enhancing operational
performance in all areas of the manufacturing function. The framework is based
around two separate but linked documents. The first document is a workbook which
consist of a framework structure of six-stage plan as shown in Figure 5. Meanwhile, the
second document consisted of checklist containing a list of performance measures
that are segregated by six competitive priorities (i.e. quality, cost, flexibility, time,
delivery and future growth). This second document contains mainly non-financial
measures, with full descriptions and methods of calculation for each measure. They
investigated the assessment of existing performance measurement system; establish
and adopt appropriate financial (such as profit, market share, cost, etc.) and
non-financial performance measures (such as quality, flexibility, time, delivery and
growth, etc.) for competitiveness.
Their frameworks can aid in setting-up a new performance measure if a company does
not have one, identifying obsolete measures (false alarms), identifying and selecting core
non-financial measures not being measured (gaps); able to identify the route to implement
any selected measures; has audit capability which can aid in examining a companys
existing measurement system. This framework has been tested empirically for its
applicability and usability. However, Medori and Steeple (2000), themselves believed the
framework has two weaknesses, such as: in stage 1, it is difficult to relate company success
factors for manufacturing strategy, which was based on four competitive priorities (i.e.
cost, quality, delivery and people) with performance measurement grids six competitive
priorities (i.e. quality, cost, flexibility, time, delivery and future growth) in stage 2.

Stage 1.
Company
Success
Factors

Figure 5.
Diagram illustrating
framework structure

Stage 2
Performance
Measurement
Grid

Stage 3.
Selection
Of
Measures

Stage 6. Periodic Maintenance

Source: Medori and Steeple (2000)

Stage 4
Audit

Stage 5.
Implementation
of
Measures

Secondly, the checklist, which is a critical part of the framework may be outdated in time
and hence measures may need to be updated.
Voss et al. (1994) developed and tested a benchmarking framework based on
interaction between product and process innovation in the area of technology
management. The framework can be summarised into a generic six steps procedures.
They are:
(1) identify business processes to be benchmarked;
(2) use a top-down approach to develop an overall framework of the processes to
be benchmarked;
(3) use a bottom-up approach, based on literature and knowledge of best practice
to identify sub-processes and characteristics of best practice;
(4) develop metrics for each process;
(5) develop tools, self-assessment scorecards and benchmarking frameworks; and
(6) test the frameworks and tools for usability and usefulness.
They believed the framework could assist in developing new manufacturing and
business processes, assuring effective implementation of new process technology and
also improving continuously the production processes. The framework is robust
and generic, designed to support the assessing and benchmarking team, provides a
common focus, direction and designed to force companies management to ask relevant
questions during benchmarking and self-assessment process.
Zairi (1994) developed a generic step-by-step framework and classified the
benchmarking study process into two stages. The stages are:
(1) focus on internal comparison to increase effectiveness; and
(2) focus on external comparison to increase competitiveness.
The first stage is about controlling and managing all internal processes effectively by
adopting and adapting to a culture of never ending improvement through Demings
cycle of Plan-Do-Check-Act (PDCA) (Figure 6). Internal comparison can lead to
improved performance through reduced variability with the workforce. During the
first stage, best practices from high performers (i.e. department or areas) in the
organization are identified and shared with others to enable them to improve and
raise their overall level of performance.
The second stage is the conversion of internal standards of effectiveness into
external competitiveness through benchmarking effort (Figure 7). Internal
benchmarking need low resources requirement (i.e. financial, human, time), easy to
get cooperation from the workforce and able to prepare the organization for external
benchmarking. In addition, it recognises the importance of organisational culture
(i.e. committed to measurement and improvement) and also provides the problem
solving tools and techniques on how to conduct benchmarking process.
In the preceding paragraphs, the authors have described some previous
benchmarking implementation frameworks studies that are thought to be significant
and relevant to this research. At this point, the authors would like to caution readers
that these frameworks would not form a definitive list of all the currently available

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DO
Understand internal
process

Control and
manage process

PLAN

412
7
1
Set internal
standards

Effectiveness

Evaluating current
performance
2

3
5

Identifying
process limitation/
Opportunities
for improvement

Measure and
evaluate
ACT

Figure 6.
Benchmarking stage 1
effectiveness

Improve
processes

CHECK

Select
process
sultable for
benchmarking

DO

Source: Zairi (1994)

Apply
benchmarking
to all
processes

PLAN
Repeat experience
with same/
new partners
on regular basis

16

15

9
Competitiveness

Compare
standards

ACT

Figure 7.
Benchmarking stage 2
competitiveness

Source: Zairi (1994)

10

14
13
Change
relevant practices
for improving
performance

Identity
suitable
partners

12

Agree on
measurement
strategy

11

Understand
why difference
in performance

Compare
standards

CHECK

benchmarking frameworks. However, the authors felt that those described are
sufficient to highlight the major issues in benchmarking framework studies.
Discussions on previous frameworks
All the frameworks described have been summarised according to certain important
issues as shown in Table IV.
Most of the frameworks have been developed and tested in various industries and
organisations such as electronics, healthcare, automotive, aerospace, components
manufacturers,, etc. which are large in size, except those frameworks developed by
Medori and Steeple (2000) and Voss et al. (1994), which were also tested in SMEs for
their applicability and usability.
Medori and Steeple (2000) frameworks was tested only in operational area of the
manufacturing function in the automotive parts and components manufacturing
industry. Meanwhile, Voss et al. (1994) frameworks was tested in industries, which are
not related to the automotive sector. The other four frameworks reviewed such as Fong
et al. (2001), Crow (1999), Zairi (1994) and Spendolini (1992) were still in the
hypothetical stage because they did not indicate the research methodology used and
business size in testing the validity and applicability of their frameworks empirically
by using actual field data.
The nine previous benchmarking frameworks reviewed had various numbers of
steps, ranging from four to sixteen steps to perform the benchmarking activities or
processes. Although, these benchmarking frameworks have different number of steps,
one major similarity between the frameworks is that they can be condense into four
major elements of the Deming PDCA cycle. This is in line with the findings by previous
authors on benchmarking methodologies such as APQC (2001), NPC (2001), Sarkis
(2001) and Ahmed and Rafiq (1998). In this context, PDCA means planning what to do,
doing what has been planned, checking results or effects of what has been done and
finally acting upon those results, in terms of standardisation, further improvement or
feedback.
Although the various authors had used different terms, however, they actually
represent the same meaning for each element (Yusof, 2000). For example, the terms
determine what to benchmark, establish goals for core values, identify needs carry the
same activity in the planning stage. The activities, elements, ideas in the frameworks
were analysed and categorised into PDCA format and shown in Table V. The PDCA
format is effective because this general approach allows for incorporation of change
characteristics.
Some of the frameworks, such as Crows (1999) and Davies and Kochhar (2000) are
too complex and complicated in nature for SMEs to apply. For example, Crow (1999)
developed a complicated framework that can only be used for benchmarking best
practices to improve product development process. It is complicated because its five
major benchmarking dimensions is further subdivided into 28 best practices categories
and comprise of more than 270 best practices. Davies and Kochhar (2000) developed a
framework that could only be used for selecting practices based on dependency
relationships between practices and performance. Fongs (2001) analytical framework
could only be used for benchmarking value management process. Medori and Steeple
(2000) themselves believed that their framework has two critical weaknesses; first, it is
difficult to relate the company success factors for manufacturing strategy with

Benchmarking
implementation
framework
413

Medori and Steeple


(2000)

Davies and Kochhar


(2000)

Fong et al. (2001)

To develop a generic model


that can be use to assess the
organizations quality related
performance in operations,
quality, and customer
satisfaction
To develop a generic
analytical framework for
benchmarking the value
management process
To develop a framework for
selecting practices which will
improve operational
performance in manufacturing
planning and control function
To develop a framework for
enhancing operational
performance in all areas of the
manufacturing function

Lee (2002)

Table IV.
Comparison to similar
framework studies for
SMES and large
organizations
Objective

Medium
large

Multiple case studies


Step
approach
6 stage
plan

Automotive parts and


components
manufacturers

Large
Multiple case studies
A focus group
Mail survey

Automotive and aerospace Step


approach
parts components
3 phases
manufacturers
Six steps

(continued)

Use Deming
PDCA cycle

Use Deming
PDCA cycle

Not
Use Deming
indicated PDCA cycle

Not indicated

Step
approach
Four steps

Applicable in all industry


or organization

Use Deming
PDCA cycle

Business
size
Similarities

Large
Multiple case studies by
using in-depth, face-to-face
interviews

Framework
structure
Research methodology

Electronics and healthcare Step


industry, and government approach
4 phases
institution

Industry

414

Author/researcher

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Use Deming
PDCA cycle

Use Deming
PDCA cycle

Large

Small
Medium
Large

Not
Use Deming
indicated PDCA cycle
Not
Use Deming
indicated PDCA cycle

Case study

Multiple case studies

Not indicated

Not indicated

Step
approach
3 phases
14 steps
Step
approach
3 phases
6 steps

To develop a generic
benchmarking model that
provides a framework for a
successful benchmarking
process

Step
approach
2 phases
16 steps
Applicable to all industries Step
and organizations
approach
5 phases

Spendolini (1992)

Zairi (1994)

Voss et al. (1994)

Not
Use Deming
indicated PDCA cycle

Business
size
Similarities

Not indicated

Framework
structure
Research methodology

Applicable to all industries Step


and organizations
approach
4 steps

Applicable to all
organizations but tested
only in a government
agency involved in the
service sector
Petrochemicals, electrical
To develop and test
benchmarking/self-assessment fittings, system integrator,
fibres, chemicals, adhesive
frameworks/tools in process
and paper industries
technology innovation and
management
To develop a generic model for Applicable to all types of
conducting benchmarking
industries and
organizations

To develop a generic
framework for benchmarking
best practices to improve
product development process
To develop a generic model to
perform benchmarking
process

Crow (1999)

Industry

Malaysian
benchmarking service,
NPC (1999)

Objective

Author/researcher

Benchmarking
implementation
framework
415

Table IV.

Table V.
Similarities of framework
using PDCA elements
Step
approach
3 phases
14 steps
Step
approach
5 stages
Step
approach
4 phases
Step
approach
Four steps
Step
approach
3 phases
Six steps
Step
approach
6 stage
plan

Malaysian
benchmarking service,
NPC (1999)

Lee (2002)

Medori and Steeple


(2000)

Davies and Kochhar


(2000)

Fong et al. (2001)

Spendolini (1992)

Step
approach

Crow (1999)

Conduct gap analysis &


improvement plan

Assess strengths &


weaknesses

Selection of measures
using checklist

Match mission and


strategy with success
factors based on
competitive priorities

(continued)

Regularly audit and


Implementation of
examine existing measures measures identified as
gaps

Implement practices to
Prioritise practices based Assess predecessor
on impact on performance practices for the practice to improve operational
performance
be implemented

Identify need and best


practices

Compare results and select


practice with best result

Continuous improvement

Determine which CSFs are Measure performance to


to be benchmarked
indicate level of success

Monitor implementation
effectiveness

Identify CSFs

Establish goals for core


values

Form a benchmarking
team
Identify benchmark
partners
Select and implement best
practices to achieve goals

Collect and analyse


Take action
benchmarking information

Understand what best


practices to be adopted
(what is possible)

Determine what to
benchmark

Action

Check

Recommend improvement Implement best practices


Standardised
Monitoring
Daily control
implementation results

Doing

Determine CSFs for


strategic directions (whats
needed) such as
time-to-market, etc.
Agree on topic and scope Site visit and collect data
Planning for adapting best Share strengths and
findings
practices

Framework Planning
structure

416

Author/researcher

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Step
approach
2 phases
16 steps

Step
approach
3 phases
6 steps

Voss et al. (1994)

Identify business
processes to be
benchmarked

Select process to
benchmark
Identify suitable partners
Agree on measurement
strategy

Framework Planning
structure

Zairi (1994)

Author/researcher
Measure and evaluate

Understand process
Evaluate current
performance
Identify process
limitations/ opportunities
for improvement

Action

Set and compare standards


Improve process
performance by changing
relevance practices
Control and manage
process
Repeat experience with
same/new partners on
regular basis
Apply benchmarking to all
processes
Test frameworks and tools
Use top-down to develop Develop metrics, tools,
self-assessment scorecards for usability and
overall framework and
usefulness
and benchmarking
bottom-up approach to
identify sub-processes and frameworks for each
process
characteristics of best
practice

Check

Doing

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performance measurement; second, the checklist, which a critical part of the framework
may be outdated with time and thus need to be constantly updated. Meanwhile, the
frameworks developed by Spendolini (1992), NPC (1999), Lee (2002) and Zairi (1994)
describe the steps on how to perform benchmarking for specific business process. In
short, these frameworks only provide the steps to perform benchmarking but did not
describe the overall outline or road map and guidelines for SMEs to follow before
embarking on the benchmarking activities. In addition, majority of the frameworks
requires many people to execute the various tasks of implementing benchmarking
initiatives such as establish close and long term relationships with suppliers, supplier
audits and collection of data on supplier capabilities, process improvement,
understanding the customer, and, etc. again resembling a large company situation
and not the SMEs.
To suit the SMEs context, the implementation framework developed for them
should be simple to understand and followed. As had been discussed in the preceding
section, SMEs are constrained by resources (such as financial, technological, human
and time), so implementing benchmarking initiatives based on these complicated
frameworks can be ridiculous and disastrous. In addition, besides being complex, some
of the framework assumed that certain systems are already in place before embarking
on benchmarking implementation and adoption. For example, Crow (1999), NPC (1999),
Fong et al. (2001), Davies and Kochhar (2000) and Medori and Steeple (2000), suggested
that TQM systems are already in place. This may not be true of all SMEs but could be
true of large organizations because SMEs may not have similar systems as large
organizations. Self-assessment and TQM practices, which are pre-requisites
to benchmarking adoption, must be implemented first, since they form the
foundation of a successful benchmarking process.
From the literature it can be seen that benchmarking framework, suitable and
relevant for SMEs to adopt is found to be lacking. The literature review had also shown
that there is no framework dedicated for the SMEs. Manufacturing SMEs are faced
with four major problems if they wish to benchmark, which includes:
(1) no generally accepted instrument for benchmarking of manufacturing
practices;
(2) no tools available to support benchmarking (such as a framework,
self-assessment tool, etc.);
(3) not enough resources to collect the necessary data for benchmarking; and
(4) no adequate databases of manufacturing practices for companies to benchmark
themselves against (Sarkis, 2001; Haksever, 1996; Voss et al., 1994).
This represents a gap in the current research at developing benchmarking framework
for SMEs. Therefore, there is a need for further research in developing a benchmarking
framework for SMEs to fill the gap, to compliment and to enrich the existing literature
on benchmarking frameworks.
The authors will propose a new benchmarking framework for the SMEs which
hopefully be suitable, effective, suits their characteristics and help them in their effort
to become more effective and competitive at national, regional and international
markets. The authors believe without a suitable framework and guidelines many

SMEs shall be struggling in their efforts towards achieving more efficient and
competitive performance.
A framework for benchmarking implementation in automotive
manufacturing SMEs
In this section, the authors proposed a conceptual framework, which represent the
authors initial idea and based on the shortcomings of previous frameworks studies
found in the literature. It will be used to guide and aid in the process of developing an
implementation framework believed to be suitable for benchmarking implementation
in SMEs. The literature review showed that most of the frameworks were too
prescriptive or too complicated in nature, provide the steps to be taken (i.e.
tool-oriented) for benchmarking implementation in specific functional area such as
manufacturing, innovation and technology management, product development,
customer satisfaction, etc. rather than being a general outline for benchmarking
implementation on wholesale basis and developed based on large company structure,
thus not suitable for SMEs. The criteria that one needs to consider when developing a
framework that suit the SMEs characteristics had been explained in the preceding
section.

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Prerequisite key elements for benchmarking implementation


Firstly, the most important element that is vital for successful benchmarking
implementation in SMEs is the existence of positive top management leadership,
attitude, vision and mission towards business competitiveness and their commitment
towards providing resources (i.e. financial, human, technical and time) in performing
benchmarking activities (Figure 8). It is suggested that top management should set-up

TOP MANAGEMENT
VISION FOR
BUSINESS
COMPETITIVENESS
(Company Level)

Provide

Identify & Select


Performance Measures

Goals
Critical Success Factors
Top management leadership
Resources Management
& Business Results
Systems & Processes
Creativity & Innovation
Human Resource Management
Policy & Strategic Planning
Customer Satisfaction
Employee Satisfaction
Organizational Culture
Work Environment

Higher Customer Satisfaction


(i.e. Time, Quality,Service).
Better Financial Performance
(i.e. Profitability, Growth, ROI).
Efficient Business Processes
(i.e. Time, Productivity, Cost)
Competitiveness
Innovative & Committed
Human Resources

Key Performance Measures


Hard Measures
(e.g.WIP Levels, Lead-Time,
Delivery-Time, Rejects (%),
Rework (%), Product Quality,
Reliability & Cycle Time,
Skill Level, etc.)
Soft Measures
Management Commitment
(e.g. quality improvement),
Customer Satisfactions,
Team Work, Employee
(e.g. Involvement, Reward,
Suggestion System, etc.)

PLAN

ACT

General Methodology
Planning
Analysis
Integration
Action

Tool & Technique


Self-Assessment; Internal;
External; Best Practices
Benchmarking
Identify/Select
Tool & Technique

CHECK

DO

Figure 8.
Proposed conceptual
framework for
benchmarking
implementation in SMEs

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a benchmarking unit or task force at the company level. The four major roles of the
benchmarking unit are to:
(1) assists top management in making benchmarking policy decisions;
(2) identify and select key business performance measures to be benchmarked from
a spectrum of performance measures depending upon the objectives, priority set
by the company;
(3) decides on the benchmarking techniques to be adopted; and
(4) to review all the activities with respect to the benchmarking effort.
In terms membership, the unit must comprise of representatives from the managerial,
supervisory and operator level from the majority of business functions in the company
(such as manufacturing, quality, engineering, finance, and sales). In other words, the
unit must include a cross section of employees, so that everybody could contribute
their share to the companys effort of becoming more efficient, profitable and
competitive. Subsequently, the companys top management should empower this unit
with the appropriate authority and responsibility; and also provide the CSFs that shall
act as enablers in achieving the benchmarking objectives.
The crucial role of the benchmarking unit is to assist the companys top management
in formulating short (e.g. 1 year) and long term (e.g. 3 years) benchmarking strategies
and translate them into action plans, monitor their implementation progress, provide
follow up actions to ensure the benchmarking efforts achieved its previously set goals. In
short, the top management and benchmarking unit should ensure the company adopt
and practice the continuous business process improvement philosophy in every aspect
of their daily operations.
The next major role of the top management and benchmarking unit is to
communicate the companys benchmarking vision, mission and the required changes
in working culture to all levels of the organisation. It is important to get employees
involvement at the early stages of the benchmarking effort to ensure they understand
and receptive, why the company needs to perform the benchmarking process. In
addition, the companys top management should encourage the employees to be
involved by giving their comments and suggestions with respect to the benchmarking
effort plans. In short, effective two-ways communications link should be in-place before
embarking on the benchmarking effort. As discussed in the preceding section, SMEs
has a corporate mind-set that top management or owner act as the role model for any
change initiative, employees tend to copy, emulate, or imitate their actions and
behaviours. Therefore, it is important that top management or owner portrays the
positive thinking towards continuous business process improvement and also
towards achieving higher quality products and services at competitive price through
their actions and behaviour to give employees the right and consistent message.
Finally, in order to carry out the action plans, the top management and
benchmarking unit must first assess the level and amount of resources (i.e. financial,
human, technical and time) available for the benchmarking effort within the
organisation. In other words, there must be enough funds, human resources, time and
technical tools available for conducting the benchmarking effort and ensure its success.
In addition, employees must be coaxed and not forced in performing the benchmarking
activities because the success of the first few benchmarking projects could determine

the sustainability of benchmarking effort in the long run. In short, the main purpose of
conducting a benchmarking effort is to produce, offer and deliver high quality products
and services at competitive prices that are able to satisfy or exceeds customer
expectations, which in turn will bring profit to the company.
Critical success factors
Having established the prerequisite key elements, vision and mission for business
competitiveness, the companys top management must then establish the CSFs that
can lead towards successful benchmarking implementation. These CSFs (Figure 8)
represents a range of enablers which, when put into practice will enhance the chance
for successful benchmarking implementation and adoption in the organization. The list
of CSFs presented is not meant to be a definitive of all CSFs available but just to
highlight the ones, which are commonly used. Additional CSFs should be added into
the list and used whenever it is necessary and appropriate. With regards to the SMEs
characteristics and constraints, it is important to ensure that the CSFs be implemented
gradually and progressively in stages according to the companys needs and available
resources. In other words, the benchmarking adoption and implementation should
eventually lead to improvement in the business process performance measures
(i.e. hard and soft measures), which in turn will enhanced the companys overall
business competitiveness.
Key performance measures
The first group of key performance measures (KPMs) commonly gathered in
benchmarking studies, which comes under the hard or tangible measures includes
work-in-progress (WIP) levels, lead-time, delivery-time, reject (per cent), rework
(per cent), product quality, product reliability, process cycle time, employees skill level,
and, etc. However, the authors would like to highlight and recognise that these
hard measures are the ends or the objectives of the benchmarking effort. The
tangible KPMs targets or goals could be achieved through conducting and
implementing change effort such as TQM, business process redesign or reengineering
(BPR), quality function deployment (QFD), self-assessment, benchmarking, etc. In
practice, the application, adoption and implementation of these hard or tangible
measures shall depend upon the company needs and their applicability in the SMEs
environment. The main objectives for monitoring these hard or tangible measures are
towards continuously improving the business process performance and efficiency,
products quality, and also in the companys overall management systems.
For example, high WIP levels may indicate large amount of the companys money is
sitting on the shop floor, if not properly monitored and controlled may lead to cash flow
problems. Meanwhile, high reject levels would show that the companys
manufacturing or production processes are not performing very well and thus
resulted in a lot of wasted resources. Therefore, the use and application of the hard
measures in the company for monitoring business performance must be geared
towards continuous product and service quality improvement, reduced costs and also
100 per cent on-time delivery.
The second group of KPMs can be termed as soft or intangible measures. They
are more difficult to quantify in terms of numbers, dollars and cents. However, they
play very important role in ensuring the success of benchmarking initiatives. In short,

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these intangible or soft performance measures act as enablers in changing or


transforming the organisations overall perception, practice and culture towards
continuous business survival and competitiveness in the market place. In other words,
these intangible measures are the ends or results of the human resources quality
improvement initiatives, which are targeted towards changing the companys
management and employees mind-set. The main purpose of measuring these
soft measures while implementing the benchmarking effort is to find out whether
the companys management and employees are motivated and receptive towards the
change efforts that are taking place. The soft measures may include management
commitment towards quality improvement, improvement in customers satisfaction for
both internal and external customers, existence and practice of team working,
employees involvement, rewards and suggestion schemes, etc.
Employees satisfaction can be achieved not only through employees caring
practices but also through activities such as family medical facilities, employees
health and safety insurance policy, etc. In most cases, companies really work hard to
satisfy their external customers, however, it has been noticed that very little is done
towards satisfying their internal customers (i.e. employees). To survive and be
competitive in the market place, companies need to satisfy both their internal and
external customers because only satisfied internal customers can bring satisfaction to
the external customers. Furthermore, sustaining the benchmarking effort is possible if
only the employees are satisfied and motivated, thus soft measures initiatives must go
hand-in-hand with the hard measures. For example, employees will be confused and
frustrated if they were told to perform the benchmarking effort without the appropriate
and adequate training relating to the process.
Initially, the benchmarking initiatives should concentrate on the companys
business process weaknesses in which improvement would result in improved
performance. In SMEs, the hard measures such as machine down-time reduction,
machine set-up time, scrap rate, rework, machine repair and material wastages are
some of the main areas on which to focus in the early part of the benchmarking effort.
This is important that tangible results are seen early in the implementation process, if
not, the SMEs will shy away from practising the benchmarking effort and blame for its
lip-service of promoting more efficient processes and higher quality products.
Self-assessment and benchmarking techniques
The four basic groups of business process improvement techniques for conducting
the benchmarking process are self-assessment, internal, external and best practice
benchmarking. Self-assessment is a very important process prior to conducting
benchmarking because it provides the company with the critical baseline data on its
current business process performance status. In addition, the baseline data could be
used as a reference for comparing the companys future business processes
performance and competitiveness whether they are improving or otherwise.
Having conducted the self-assessment exercise during the early stages of the
benchmarking implementation process, the company can then proceed to conduct the
internal benchmarking. Internal benchmarking can be use as a training ground for
understanding and implementing benchmarking because it could provide a
sound-learning base for building-up confidence on the benchmarking technique.
In other words, the company must fully understand its own business processes first

before comparing them with others. Once, this is achieved and when it is no longer
possible to improve against internal performance, the company can then progress to
conduct external benchmarking. In general, external benchmarking is more difficult to
perform as compared to internal benchmarking, however it can discover new
innovations and produce significant returns. External benchmarking partners may
come from other companies within the same industry or any other industries that share
similar business processes. Eventually there comes a point when it is no longer
possible to improve against external partners using similar business processes, the
company could then proceeds to perform the best practice benchmarking against
external partners regardless of business processes, industry sector or location. In this
case, the most important factor is the process being benchmarked. Best practice
benchmarking is more difficult to perform when compared internal and external
benchmarking, however it could bring breakthrough innovation and significant
business process improvement.

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General benchmarking methodology


Having selected the KPMs to be benchmarked and the benchmarking technique to be
adopted, there must be a systematic approach for implementing the benchmarking
initiatives. In other words, the general methodology describes the guidelines or process
map on how to implement or conduct the actual benchmarking process. To ensure it is
done systematically the selected processes to be benchmarked need to go through a
series of process steps. The steps to be taken represent a generic approach towards the
implementation and adoption of the various benchmarking techniques (i.e. internal
benchmarking, external benchmarking, and best practice benchmarking). A general
benchmarking methodology shown in Figure 9 provides an aid towards better
understanding of the benchmarking process. In addition, a simplified example will be
used to further illustrate the implementation process for the internal benchmarking
technique.
Referring to Figure 9, the first step of the benchmarking process is planning. It is
designed to develop the plan for conducting the benchmarking investigation. It will
form the basis for the entire benchmarking investigation; therefore, every effort should
be made to conduct this step as thoroughly as possible. During this step the company
need to decide and select the processes it wants to benchmark, analyse the processes in

1. Planning

4. Action

2. Analysis

3. Integration

Figure 9.
General benchmarking
methodology

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detail, calculate the processes metrics and define their performance gaps, identify
comparative best practice partners, determine data collection method and collect data.
The person who is responsible for drafting the benchmarking implementation plan
should have a certain level of knowledge, experience and technical know-how in
benchmarking concepts, its practical implementation and application. For example,
one should understand what internal benchmarking means, where to implement it,
how to implement it; what are their associated CSFs; are they quantifiable, measurable
and auditable; is it easy to obtain the data; which specific data to collect; is the data
integrity reliable; is the resulting CSFs measures can be easily calculated; who should
be trained; what preparatory work that should be carried out; how to interpret the data;
and, etc. All these questions need to be addressed in the early part of the benchmarking
process. In short, proper planning requires a detailed study to prevent a lot of problems
that might crop-up later on during the benchmarking implementation process.
Having established the detailed plan, the company can then proceed to the analysis
step. In this step, the data collected in the benchmarking study is analysed thoroughly
to find out and provide a basis for comparison. The key questions to be answered in
this step are: what is the performance of the best practice partners; what is our
performance compared to them; why they are better; what can we learn from them; and
how can we apply the lessons to our company. In other words, this step involves
analysing the benchmarking data to determine current performance gap project
future performance levels, identify and understand the practices which contributes to
the best practice partners strengths.
The objective of the third step is to develop goals and integrate them into the
benchmarked process so that significant performance improvements are made. The key
questions to be answered in this step are: has top management accepted the
benchmarking teams findings; based on the findings do the company need to modify
its benchmarking goals; and also have the goals been clearly communicated to all the
relevant parties. In step four, develop the action plans needed to achieve the goals
decided upon in step three. The key questions that need to addressed in this step are:
will the plans allow the achievement of the stated goals; how will benchmarking
progress be tracked and what is the schedule for recalibration of the benchmarks. In
short, this step involves the implementation of the necessary actions, monitor their
progress and finally recalibrate benchmarks.
Benchmarking goals
In general, the benchmarking goals could be in the form of higher customer satisfaction
(i.e. product quality, on-time delivery, lower costs, etc.); better financial performance
(i.e. profitability, growth, return on investments, return on assets, etc.); efficient
business processes (i.e. cycle time, cost, productivity, etc.); competitiveness (i.e. product
cost, product selling price, etc.); and innovative and committed human resources
(i.e. employees satisfaction, effectiveness, safety, health, absenteeism, etc.). These
benchmarking goals may differ from one company to the other and depends on the
company objectives in performing the benchmarking effort.
Validation of the conceptual framework for benchmarking
The proposed conceptual framework for benchmarking implementation was validated
and tested in SMEs. In this section, the authors discuss the general and specific

comments, criticisms and suggestions made by the pilot case study companies
respondents concerning the frameworks strengths and weaknesses. All the six pilot
case study companies gave very positive comments on the proposed conceptual
framework. Their comments are: it is feasible, easily understood and can be
implemented with ease, a comprehensive approach that covers all the major aspects of
the benchmarking implementation and it provides a straight forward guide, which
could simplify the benchmarking process even to someone who is new to the
benchmarking concept. In short, the framework could be used as a base for conducting
the benchmarking process even to beginners. Apart from that, most of them agreed the
framework is a sensible approach towards conducting benchmarking initiatives in
SMEs particularly that involves in the manufacturing sector. In addition, with some
modifications the framework can be made applicable to other types of industries. Most
of them highlighted the top managements roles and responsibilities in the key areas of
the framework should be in-place first before embarking on the actual benchmarking
implementation effort in achieving the vision towards business competitiveness.
For example, developing benchmarking strategies, policies, vision and mission for
competitiveness should form an integral part of the business planning in an
organisation.
All of them agreed that top management must not only give their full commitment
in providing sufficient resources but they must also be committed to implement the
recommendations made by the benchmarking team. Meanwhile, five of the pilot study
companies agreed that the frameworks overall structure is sensible and suitable
approach for SMEs to adopt while implementing benchmarking effort. In addition, four
of them perceived the framework as practical, realistic and uncomplicated, which can
easily be used in real working environment. Other positive comments raised by at least
one of the pilot study company are the framework could give a clear and effective way
of presenting the overall benchmarking concept; and it is a simple approach for
incorporating benchmarking effort into a SME.
The pilot study companies also provide a few suggestions and constructive
criticisms that could further enhance the frameworks applicability and usability in
SMEs. They are:
.
The vision and goal section should also include competitiveness advantages in
the area of product quality, cost and delivery (i.e. QCD).
.
It is difficult to evaluate costs incurred against the improvement achieved
especially the soft measures in benchmarking implementation.
.
A target to be achieved should also be included in the general methodology
section while conducting the review step because a target will drive the
company to practice continuous improvement.
.
Add continuous improvement and equipment utilisation in the KPMs section
because idle equipment and machineries did not produce any output. A high
equipment utilisation indicates the company is maximising the usage of its
available facilities, meanwhile, a low utilisation values indicates the machinery
and equipment are under utilise.
.
Human resource development and training should be focussed on educating the
employees to improve their usage and practices of positive work cultures.

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A dedicated coordinator is strongly required to ensure the benchmarking


implementation program successfulness.
Most SMEs are always constrained by limited availability of resources
(i.e. financial, technical, human and time), therefore this aspect should be taken
into account during benchmarking effort implementation.

In addition, majority of pilot study respondents agrees with the authors that the
different types of benchmarking techniques and initiatives may be implemented
according to the needs of the company and also depends on the resources availability
and not applied wholesale.
Discussions and conclusions
The implementation of benchmarking is not, and has not been an easy task for many
organisations. Majority of the frameworks proposed by previous researchers and
consultants tend to be prescriptive in nature and seems to provide the steps to be
taken to implement benchmarking in specific area of the business process such as the
operational performance in manufacturing function, value management process,
innovation and technology management, evaluating the organizations quality related
performance in operations and customer satisfaction, product development process,
rather than being a road map or general outline for implementing benchmarking as a
whole.
An insight has been gained into the strengths, weaknesses, similarities and
differences that exist between the frameworks reviewed by classifying them into two
major types (i.e. consultant/expert and academic/research based). The
consultants/experts benchmarking implementation frameworks were actually
founded based on practical experience. Meanwhile, academic/research frameworks
were based on conceptual and theoretical background. The literature review showed
that both these types of frameworks suffer from similar weaknesses such as being
complicated and prescriptive in nature. Furthermore, most of the frameworks found in
the literature were not specifically developed for the SMEs sector and thus were not
suitable for SMEs. Even if they appear to be suitable, they still suffer from certain
problems such as being complicated and prescriptive, which need addressing. In
addition, as has been shown from the review, the frameworks developed to date have
been dominated by large company approaches. The problem highlighted, indicate that
current benchmarking implementation framework still suffer from many weaknesses
that need improvements and are far from suitable for SMEs to apply. SMEs are
different in terms of their structures, processes, resources and culture, which need to
be taken into account when developing a framework that fits them. Therefore, the
weaknesses of the currently available frameworks, which have been highlighted in the
review, need to be considered when developing an implementation framework to suit
the SMEs needs and environment. In other words, the literature review has provided
the authors with a lot of information on the shortcomings of currently available
benchmarking frameworks. However, on the positive side, these shortcomings from
previous benchmarking frameworks could be use as a baseline in formulating the
conceptual benchmarking implementation framework for SMEs. The authors believes,
what is important in any change effort or initiative, such as benchmarking, is the
ability to do it right the first time.

In summary, the literature review had also shown that there is still lack of
benchmarking framework that was dedicated specifically to the SMEs in the
manufacturing sector. Thus, a new benchmarking implementation framework is
needed to fill the gap in the existing literature and to help the SMEs in their effort to
become more effective, productive and improve their competitiveness level in national,
regional and international markets through benchmarking implementation and
adoption.
The concepts within the proposed framework have been developed to be simple in
nature and structure, not prescriptive, provide a systematic approach, present a
general outline for benchmarking implementation on wholesale basis and encompass
most of the pertinent issues with regards to benchmarking implementation. The
framework does not suggest that all the concepts should be taken wholesale at-one-go,
but rather one-at-a-time according to a companys needs and available resources.
Due to their limited resources, SMEs actually need to start the benchmarking and
improvement initiatives in tangible measures (such as reject per cent, rework per
cent, WIP levels, lead-time, etc.) rather than intangible measures, which are difficult
to quantify in the form of numbers or percentages. This is important because positive
results at the early stages of the benchmarking implementation would provide future
motivation and thrust in the benchmarking technique, which in turn, help to sustain
the use of benchmarking practice in improving business and management processes.
The use and implementation of hard and soft KPMs for benchmarking purposes must
be geared towards continuous business processes performance improvement in the
organisation. Past experienced showed that sustainable benchmarking efforts require
motivated employees, thus soft performance measures must go hand-in-hand with
the hard performance measures. Above all, relevant training must be provided first
before embarking on the benchmarking process to ensure its successful
implementation and adoption.
The conceptual benchmarking implementation framework was empirically tested
and validated at six pilot study SMEs in the automotive manufacturing sector. Future
research is underway to include the pilot study companies suggestions and comments
into the final version of the framework. Having done that the framework will then be
widely deployed in SMEs in the automotive manufacturing sector. Finally, the authors
hope the framework would be of benefit to the SMEs in their pursuit towards
enhancing their business competitiveness and excellence.
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Corresponding author
Shari Mohd Yusof can be contacted at: shari@fkm.utm.my

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The use of multi-attribute utility


theory to determine the overall
best-in-class performer in a
benchmarking study

Use of
multi-attribute
utility theory
431

Terry R. Collins
Department of Industrial Engineering, Texas Tech University, Lubbock,
Texas, USA

Manuel D. Rossetti and Heather L. Nachtmann


Department of Industrial Engineering, University of Arkansas, Fayetteville,
Arkansas, USA, and

James R. Oldham
Whirlpool, Inc., Fort Smith, Arkansas, USA
Abstract
Purpose To investigate the application of multi-attribute utility theory (MAUT) to aid in the
decision-making process when performing benchmarking gap analysis.
Design/methodology/approach MAUT is selected to identify the overall best-in-class (BIC)
performer for performance metrics involving inventory record accuracy within a public sector
warehouse. A traditional benchmarking analysis is conducted on 14 industry warehouse participants
to determine industry best practices for the four critical warehouse metrics of picking and inventory
accuracy, storage speed, and order cycle time. Inventory and picking tolerances are also investigated
in the study. A gap analysis is performed on the critical metrics and the absolute BIC is used to
measure performance gaps for each metric. The gap analysis results are then compared to the MAUT
utility values, and a sensitivity analysis is performed to compare the two methods.
Findings The results indicate that an approach based on MAUT is advantageous in its ability to
consider all critical metrics in a benchmarking study. The MAUT approach allows the assignment of
priorities and analyzes the subjectivity for these decisions, and provides a framework to identify one
performer as best across all critical metrics.
Research limitations/implications This research study uses the additive utility theory (AUT)
which is only one of multiple decision theory techniques.
Practical implications A new approach to determine the best performer in a benchmarking study.
Originality/value Traditional benchmarking studies use gap analysis to identify a BIC performer
over a single critical metric. This research integrates a mathematically driven decision analysis
technique to determine the overall best performer over multiple critical metrics.
Keywords Benchmarking, Performance measures, Utility theory, Sensitivity analysis, Gap analysis,
Best practice
Paper type Research paper

Introduction
For decades, practitioners in the public and private sector have adopted the
benchmarking approach as a useful tool for performance and quality assessments.
Landmark benchmarking studies have been performed and the results widely

Benchmarking: An International
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Vol. 13 No. 4, 2006
pp. 431-446
q Emerald Group Publishing Limited
1463-5771
DOI 10.1108/14635770610676281

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publicized over the years (Camp, 1989; Kolarik, 1995; McNamee, 1994; Yasin, 2002).
Benchmarking has many benefits to the organization; however, the data analysis
aspect of the process is an area in need of further refinement. For example, how can it
be proven that the best practices realized are actually the best? How can the relevance
of best practices be assessed by an organization? And finally, what is the best method
for determining the best practices?
A recent study discovered difficulties in determining the best-in-class (BIC)
performer because of dissimilar reporting statistics and varying analysis techniques
(Roider, 2000). Another study finds that the adopting best practices are related to
resource constraints, size of organization, and the comparability of data (Hinton et.al.,
2000). Classic benchmarking analysis tools of flow charts, matrix analysis, spider
charts, and Z-charts have no structured means to evaluate the data, characterize and
measure performance gaps, and project future performance levels (Barr and Seiford,
1996). Therefore, a benchmarking group must identify a correct data analysis tool to
use.
This research utilizes and validates the decision-based analysis tool of
multi-attribute utility theory (MAUT) for the benchmarking gap analysis process.
This analytical approach provides a robust mathematical method to determine an
overall best performer for a selected best practice. MAUT is a relevant addition to the
benchmarking process for this method carefully evaluates the trade-off issues
associated with the risks and benefits of considering multiple criteria at the same time.
A warehouse benchmarking study in the public sector is used as a case study to
compare the mathematical decision method of MAUT against traditional
benchmarking practices. The case study first presents the traditional process
benchmarking approach, which focuses on sampling other warehouses across multiple
industries to identify BIC performance metrics for warehouse management. Next, a gap
analysis is performed to compare general industry results to the public sectors current
operating procedures to identify opportunities for adaptation. The results of the gap
analysis identify the BIC performer. The gap analysis results are compared with the
MAUT technique to evaluate the applicability and fit of MAUT as a more quantitative
decision making approach for benchmarking. Utility values and relative weights
are assigned using the benchmarking data. Finally, sensitivity analysis is performed to
determine the outcome effects of varying the relative weight values.
Multi-attribute utility theory
MAUT provides a comprehensive set of quantitative and qualitative approaches to
justify a decision between alternatives (Canada and Sullivan, 1989), such as identifying
the BIC performer in a benchmarking study. A specific type of multi-attribute decision
theory MADT, called MAUT, is evaluated for its applicability to benchmarking
analysis. Utility theory takes into account a range of the consequences of a particular
decision and the risks of this decision, just as probability theory does for uncertainty.
MAUT is selected as a viable method for improving benchmarking analysis due to its
relative ease of both formation and computation. The MAUT approach enables the
decision maker to incorporate preference and value trade-offs for each metric and
measure the relative importance of each (Keeney and Raiffa, 1993). While other MAUT
studies have been performed, there still exists a need for documented applications of
this type of analysis (Walls, 1995). Bordley (2001) describes the use of MAUT to

perform gap analysis for service research. The resulting gap analysis discounts the
gap between performance and expectations, providing more empirical inferences than
conventional gap analysis (Bordley, 2001). It is expected that applying MAUT to
benchmarking will yield the same benefits.
Multi-attribute utility theory
The basic goal of MAUT is to substitute information with an arbitrary measure called
utiles so that the information can be compared. The utile values range from a low of
0 to a high of 1, with intermediate values decided upon by the decision maker. The
identified critical metrics are plotted on a graph from 0 (worst case) to 1 (best case).
Then, a utility curve is plotted to model the subjective value of each outcome
(Daellenbach, 1994).
The end result of MAUT is simply to maximize the combined utility value (Keeney
and Raiffa, 1993). Each metric is assigned a utile value and is combined with other utile
values to assess an aggregate utility value according to set mathematical procedures.
These procedures are explained in detail in the next paragraph. MAUT allows the
decision maker to develop reasonable preference criteria, determine which assumptions
are most appropriate, and assess the resulting utility functions (Lindey, 1985).
For this research, additive utility theory (AUT) is chosen for the following two
reasons:
(1) AUT provides a more practical methodology due to easier computational
analysis.
(2) AUT is easier to understand and explain to decision makers.
AUT allows the benchmarking party to assign priorities to certain metrics and allows
stratification of all critical metrics. Also, AUT can be applied using common spreadsheet
software, which is readily available in most business settings. No components of the
formulation require complex iterative solutions. This analysis method uses subjectivity
in formulating the relative weight factors (ki), which therefore requires sensitivity
analysis to be conducted to ensure the robustness of the assessment.
For i alternatives with j attributes, the additive utility model is expressed:
U xi

n
X

kj*uj xij

j1
n
X

kj 1:0

j1

where: kj is a relative weight factor of the jth attribute, uj(xij) is the utility of the
outcome xij for the jth attribute, All attributes are independent of each other.
Sensitivity analysis and additive utility theory
AUT requires personal subjectivity. Because of this, extensive and thorough
sensitivity analysis is necessary for justifying the end objective scores. The purpose of
this analysis is to determine how sensitive the outcome is to changes in the variable
values. This step is crucial because small changes in assigned values could produce

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very different results. Sensitivity analysis identifies these small changes and allows the
decision maker to decide if the values need to be adjusted. Also, sensitivity analysis
can identify user bias and help the decision maker to re-evaluate the original criteria
used (Daellenbach, 1994).
A least squares method of sensitivity analysis for AUT was developed by Barron
and Schmidt (1988). For known single attribute value functions uj(xij), this method
computes, for two independent alternatives, new kj (noted as wj in the equation) values
required to make the total utility value of alternative xi exceed the total utility value of
alternative xb by an amount D whose value is decided upon by the researcher. The least
squares method is expressed as:
minimize:
n
X

wj 2 kj 2

wj aj D

j1

subject to:
n
X
j1
n
X

wj 1

j1

wj $ 0

aj uj xij 2 uj xbj

xb is the BIC performer discovered for initial relative weights bj; i j. (Barron and
Schmidt, 1988)
After the wj values are found, sensitivity analysis can be performed. For example, if
attribute A is deemed twice as important as attribute B, all wj values violating this can
be ruled out. Also, varying levels of D in the above formulation allows sensitivity
analysis for the implied relationship between alternatives i and b, and the
corresponding effect on all other alternatives (Barron and Schmidt, 1988).
In essence, a formal MAUT analysis forces the benchmarking party to clearly define
its priorities and measure the attractiveness of a discovered best practice. This is
especially crucial in benchmarking studies, as the effects of the study are far-reaching
throughout the organization (Forger, 1998). As benchmarking studies continue to
become more complex, traditional benchmarking tools do not apply to new research
(Ammons, 1999), and the need for more powerful benchmarking techniques increases.
Research methodology and procedures
The research methodology is broken down into a two-stage process. First, existing case
study data will be presented from the warehouse benchmarking study. Next, a MAUT
comparison will be conducted using the gap analysis results of the benchmarking
study. In each stage of the research process there are several steps or procedures. Steps
1-4 are related to the case study, while the remaining steps are procedures for the
MAUT comparison.

Case study application:


(1) identify the goals and objectives for the benchmarking study;
(2) select critical benchmarking metrics using multiple criteria;
(3) perform a gap analysis on the benchmarking metrics; and
(4) define gap analysis recommendations from the benchmarking study.
Comparison between MAUT and traditional benchmarking process:
(5) assign utility values to the critical metrics;
(6) calculate and assign the relative weights for the selected benchmarking metrics;
(7) perform a sensitivity analysis on the utility values; and
(8) analyze the results of the comparison.
Case study application
To evaluate the use of MAUT as a decision-making tool for benchmarking, a case
study is presented using data from a warehouse study. The warehouse study used
benchmarking to investigate warehouse best practices in the public and private
sectors. The case study provides information on the goals of the benchmarking study
and how the critical benchmarking metrics are selected based on benchmarking best
practices for the study. The traditional gap analysis approach and recommendations
are presented to identify the benchmarking best practices.
Benchmarking goals. The benchmarking study compared a warehouses inventory
integrity procedure to that of their competition. In other words, what are the acceptable
levels of performance for selected best practices used in the inventorying process. The
purpose of the study is to provide recommendations for improving record accuracy,
identifying policies for physical inventories, and methods to sustain inventory
integrity. The areas of particular interest for the sponsoring warehouse are as follows:
.
How does industry set tolerance levels for inventory accuracy reporting? That is,
how much of an error in reported inventory levels is acceptable for recording
inventory performance? The objective is to identify best practices for setting
inventory accuracy tolerance levels.
.
How does industry handle errors during a picking operation? That is, when an
order is being filled, what actions are taken if an error is discovered during this
process?
.
Does industry perform cycle counting or 100 percent wall-to-wall inventories?
That is, does the warehouse ever conduct regular interval counts on particular
items or check every single item in the entire warehouse? How often does this
occur, and what methods are employed to achieve this?
.
What is the highest inventory and picking accuracy rates that can be expected?
That is, assuming best practices are implemented, what are the predicted
accuracy targets?
Identification of critical metrics. The identification of the critical metrics is essential to
successful benchmarking. If the improper metrics are chosen, the end result may be
useless. Proper tracking of the selected performance metrics can identify best practices
in the benchmarking study. In this study, warehouse square footage, number of
employees, dollar value of material handling equipment, and types of items handled

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were reported. In addition, specific warehouse accuracy indicators such as inspection


and order accuracy are sampled. The sponsoring warehouses identified the following
critical performance metrics for the case study (Frazelle and Hackman, 1994):
.
Picking accuracy is defined as the number of correct picks performed divided by
the total number of pick performed. That is, what percentage of the time is the
picker able to select both the correct stock keeping unit (SKU) and the correct
quantity?
.
Inventory accuracy is defined as the number of items found in its correct location
and quantity when conducting an inventory. That is, what percentage of the time
is the location on the shelf identical to the inventory record?
.
Storage time is defined as the time required placing new stock to a specific
location in the warehouse. That is, how long does it take to move material from
the loading dock to its stocking location?
.
Order cycle time is defined as the time required to complete an order once picking
begins. That is, how long does it take to ship an order once the picking process
began?
Gap analysis and recommendations. A narrative style of gap analysis is used as
described by Keehley et al. (1997). This method consists of three parts: statement of the
question, identification of the gap in the procedures, and recommendations for closing
the gap. In the gap analysis section, the rationale behind each question and the critical
metric used for the analysis is described. The methodology was successful in
developing recommendations for the specific areas of interest.
Based on the gap analysis, answers are provided to the original four key questions
posed at the initiation of the study were obtained as follows:
(1) How does industry set tolerance levels for inventory accuracy reporting?
(2) The BIC performer for inventory accuracy does not use tolerance levels for
reporting purposes.
(3) How does industry handle errors during a picking operation?
(4) The BIC performer for picking accuracy checked nearby locations and triggered
an inventory to be taken. Also, a second party is sent to re-check the error.
(5) Does industry perform cycle counting or 100 percent wall-to-wall inventories?
(6) The BIC performer for inventory accuracy used control group and
activity-based cycle counting. The use of 100 percent wall-to-wall inventories
and its effect on inventory integrity is inconclusive.
(7) What is the highest inventory and picking accuracy rates that can be expected?
(8) The absolute BIC performers achieved a reported 99.999 percent inventory
accuracy and 99.9 percent picking accuracy. This level is achieved by using
cycle counting, radio frequency identification (RFID) for picking and storing
operations, and a computer system that monitored all warehouse policies.
MAUT comparison
Assigning utility values. To assign utility values, a judgment must be made on what
performance level is assigned its associated utility. The research team worked closely

with experts associated with the study to assign the utility values. It should be noted
that most benchmarking studies would deal with several groups by varying utility
values for each metric. This research is not directly concerned with combining group
utility values, but primarily examines the difference utility assignment has on the
identification of the BIC for this data set. For case studies regarding group utility
values, see Eyrich (1991) and Korpela and Tuominen (1996).
Tables I and II show the utility assignments used for picking and inventory
accuracy utility assignments. To allow all pertinent data to be evaluated, the lower
bounds of the utility curve had to be set. The lowest possible performance for both
picking and inventory accuracy, 0.0 percent, is assigned a 0 utility value so that any
possible picking or inventory accuracy can be represent by a utility value. This allows
all responses for a particular question to receive a utility value for each metric
regardless of other responses. However, the same method does not work for storage
and order cycle time lower bound assignments. After multiple discussions, it was
determined that any times equal to 120 hours or more should be assigned a 0 utility
value. This lower bound is chosen for its application in the sponsoring organizations
own warehouse procedures. Cycle times above 120 hours are unsuitable for this
operation. For inventory and picking tolerances, it was determined that any tolerance
level of 5 percent or more should be given a utility value of 0. This limit is chosen due to
the fact that a decrease in 5 percent of actual accuracy severely affected BIC
identification and the validity of the best practices identified.
After calculating the lower bounds, the upper bounds are calculated. The theoretical
BIC is designated as a 100 percent level for picking and inventory accuracies and 0 time
units for storage and order cycle times. Although these values are virtually unattainable,
they provide an upper bound for these metrics. Also, inventory and picking tolerances
set at 0 percent are considered BIC. Therefore, inventory and picking accuracies are not
assumed under any tolerance and are interpreted as absolutes. To assign intermediate
utility values, judgment on the relative difficulty of increasing accuracy or decreasing

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Level
Level
Level

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Level
Level
Level
Level
Level

1
2
3
4
5

1
2
3
4
5

Picking accuracy ( percent)

Utility value

100
99.9
99.5
99.0
95.0
0.00

1.00
0.80
0.60
0.40
0.20
0.00

Inventory accuracy (percent)

Utility value

100
99.5
99.0
98.0
95.0
0.00

1.00
0.80
0.60
0.40
0.20
0.00

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Table I.
Picking accuracy utility
assignment

Table II.
Inventory accuracy
utility assignment

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Table III.
Storage time utility
assignment

Table IV.
Order cycle time utility
assignment

time must be determined. For example, an increase from 90 to 95 percent may be easier to
achieve than an increase from 99 to 99.5 percent. A close breakdown of each basic metric
will identify which levels of performance mark an increase in capacity and thus a higher
utility value. To create the utility curves, the performance criteria for picking and
inventory accuracies are analyzed first. It is determined that accuracy values increase
rapidly from 95 to 100 percent, with increases in this range doubling every 1/2 percent.
The graph becomes asymptotic (relative to 1 utile value) as the accuracy approaches
100 percent. It should be noted that the configurations around the extreme values for
these curves is debatable. The utility values as they approach the highest level could
suggest less utility gain. For example, if someone received a donation of $100, then
received another $100, their utility value would be favorable. However, if someone
received a donation of $100,000, then $100 more, their utility value would not be as
favorable as in the first condition. This scenario existed in the utility curves for accuracy
levels and cycle times. The expected utility gain in these curves continues to be high,
even as inventory accuracy increases from 99.99 to 100.00 percent. However, the
formulated curve represented the preliminary reasoning that examined how difficult
change above a certain level became.
Next, the sponsoring organization and research team analyzed the utility
assignments for storage and order cycle times. The utility assignments used for
storage and order cycle times are presented in Tables III and IV. It is decided that any
times less than one complete day (24 hours) or less would determine the bounds from a
utile value of 0.2. This is chosen to allow time ranging from 8 to 5 hours to have a
marked improvement in utility assignment. This line would again break at 2 hours,
allowing even more value to be assigned to shorter cycle times.
Finally, the utility assignments to use for the tolerance levels used in reporting
accuracies are analyzed. Tables V and VI show the resulting utility assignments used for
inventory and picking tolerances. As stated earlier, the lower bound for tolerance limits
is assigned as 5 percent. It is decided to construct the utility curve as a linear relationship

Top
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Level
Level
Level
Level

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Level
Level
Level
Level

1
2
3
4
5

1
2
3
4
5

Storage time (in hours)

Utility value

0
2
5
8
24
120

1.00
0.80
0.60
0.40
0.20
0.00

Order cycle time (in hours)

Utility value

0
2
5
8
24
120

1.00
0.80
0.60
0.40
0.20
0.00

between the best possible (0 percent) and worst possible (5 percent). This decision is
made to allow an equal penalty to be assigned as inventory tolerance increased.
The utility curve could now be plotted and all associated utility values for each
response can be calculated. Because the methods for fitting curves to the utility
assignments are most commonly done by hand, it is decided to use a linear relationship
between each pair of data points to set intermediate utility values. Also, this linear
relationship allows the easiest interpolation of intermediate metric values.
Calculation of relative weights. To evaluate the total utility for each warehouse, all
six metrics must be compared. However, one metric may be favorable over others due
to the design of the survey and from the responses acquired. The following list outlines
the reasoning for choosing a relative ranking scale:
.
Which metrics are more important: picking accuracy, inventory accuracy,
storage time, or order cycle time? How does inventory and picking tolerances
relate to these metrics?
.
Why is one metric more important and how much more important (in terms of kj
values)?

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The selected relative weights can deal with these problems and help justify the
identification of the BIC across all metrics, which adds robustness to the results.
The relative weights are used in calculating the total utility for each participant. The
sponsoring organization and the research team discussed the priorities of the current
warehouse policies. It is deemed that the benchmarking best practice metrics should be
arranged in the following order of importance:
.
picking accuracy;
.
inventory accuracy;
.
storage time; and
.
order cycle time.

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Level
Level
Level

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Level
Level
Level

1
2
3
4
5

1
2
3
4
5

Inventory tolerance (percent)

Utility value

0.0
1.0
2.0
3.0
4.0
5.0

1
0.8
0.6
0.4
0.2
0

Picking tolerance (percent)

Utility value

0.0
1.0
2.0
3.0
4.0
5.0

1
0.8
0.6
0.4
0.2
0

Table V.
Inventory tolerance
utility assignment

Table VI.
Picking tolerance utility
assignment

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Inventory and picking tolerances are not considered warehouse performance metrics,
but this study wanted to investigate the relationship between the four metrics mentioned
above and the inventory and picking tolerances which are set by management.
From this original examination, it is determined that picking and inventory
accuracy rates identified BIC more than storage and order cycle times and tolerance
values. Therefore, the following relative weight assignments are formulated. Table VII
shows the initial relative weights assigned to this data.
Sensitivity analysis. A sensitivity analysis is then performed to justify the relative
weights, which are ultimately affecting the identification of the BIC performers. With
the initial utility value for each participant calculated, sensitivity analysis is conducted
for each relative weight used in this calculation. Each weight factor is altered to
identify the critical weights that will change the identity of the BIC performers. This
step is crucial in the analysis of each weight factor to ensure a top performer is not
eliminated or created by marginal changes in each relative weight.
To perform sensitivity, the least squares method described by Barron and Schmidt
(1988) in equations 6-9 is used. The BIC participant (xb) is identified and used for the
associated calculation. A pair-wise comparison is then made to each participant to calculate
the associated kj values necessary to have equivalent total utility values (D 0). Then, the
cumulative utility values for all participants are calculated to discover if BIC identification
has changed. Once tested for sensitivity and justified weight factors are found, the best
overall performer is identified and recommendations are gathered from this respondent.
Data analysis of MAUT results. After sensitivity analysis, the participant with the
highest combined utility value is identified. Then, their associated responses are analyzed.
The specific operating procedures for the entire warehouse accuracy process are evaluated
and recorded. Gap analysis is performed from this data to the home processes to develop
recommendations for improvements. Once this gap analysis is complete, the
recommendations realized through MAUT are compared to the previous analysis.
Comparison of results. Using the previously obtained data, a pair-wise comparison
is made to identify the different suggestions made for each question. A comparison is
made between what suggestions the original study provided compared to the
suggestions provided by MAUT. For each question, a pair-wise comparison is made to
identify the different suggestions realized for the four critical questions posed during
the previous research:
(1) How does industry set tolerance levels for inventory accuracy reporting?
(2) How does industry handle errors during a picking operation?
(3) Does industry perform cycle counting or 100 percent wall-to-wall inventories?
(4) What is the typical inventory and picking accuracy rate that can be expected?
Metric

Table VII.
Relative weight
assignment

Picking accuracy
Inventory accuracy
Storage time
Order cycle time
Inventory tolerance
Picking tolerance

Symbol

Relative weight

kp
ki
ks
ko
kit
kpt

0.45
0.35
0.10
0.05
0.025
0.025

It is anticipated that the suggestions identified through MAUT are similar for some
questions, while others may be very different.
However, the careful consideration of applying MAUT is to add robustness to the
decision criteria that identified these critical metrics. The purpose of this analysis is to
examine the additional information MAUT provided for this data set.

Use of
multi-attribute
utility theory

Discussion of results
Case study data
After completing the questionnaires, the 14 participants responses to the basic
warehouse metrics are recorded. Table VIII shows the raw data recorded for these
fourteen warehouses. With the data recorded, a quick comparison is warranted to
ensure the previously formulated utility assignments are valid for this data set. Picking
accuracy ranged from a low of 85.000 percent to a high of 99.999 percent. Inventory
accuracy ranged from a low of 82.000 percent to a high of 99.900 percent. Storage speed
ranged from just under one hour up to 48 hours. Order cycle time ranged from
10 minutes up to 120 hours. Inventory accuracy tolerances ranged from 0.0 to
5.0 percent; the majority of warehouses did not use inventory tolerances for calculating
accuracy. Picking tolerances ranged from 0.0 to 5.0 percent; again, the majority of
warehouses did not use picking tolerances for calculating accuracy.
From the original assignments presented in the methodology section, the research
team felt the original utility assignments would work for this data set. The original
ranges allowed both extremes of each metric to be evaluated using MAUT. The next
step is to convert each warehouse metric into its new utility value and evaluate the data
using the relative weight factors.

441

Utility values and relative weights


Utility curves for each metric are used to calculate the proper utility assignment for
each metric. Then, the value is mapped to the curve to assign the utility value to each
performance metric. After the utility values are assigned, the relative weights are
multiplied by each of the corresponding metrics to arrive at a total additive utility
Warehouse
ID
1
2
3
4
5
6
7
8
9
10
11
12
13
14

Picking
accuracy

Inventory
accuracy

Storage
speed

Order
cycle time

Inventory
tolerance

Picking
tolerance

0.991
0.994
0.990
0.999
0.981
0.900
0.995
0.996
0.950
0.990
0.998
0.997
0.980
0.850

0.973
0.924
0.970
0.980
0.982
0.820
0.950
0.999
0.850
0.985
0.976
0.997
0.970
0.900

10.417
21.600
3.000
48.000
24.000
3.000
24.000
1.500
8.000
6.000
35.280
8.000
4.000
1.000

8.283
26.400
1.000
0.167
0.100
0.133
120.000
3.000
1.670
0.083
24.000
6.000
4.000
0.500

0.050
0.000
0.010
0.000
0.000
0.030
0.000
0.000
0.100
0.000
0.046
0.000
0.000
0.000

0.050
0.000
0.000
0.000
0.000
0.010
0.000
0.000
0.010
0.000
0.046
0.000
0.000
0.000

Table VIII.
Raw data

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value. The combined utility values are derived from equation 1. Table IX shows the
results of the initial utility value assignments for these data and the relative ranking of
each warehouses combined utility.
From this analysis, Warehouse 8 has the highest additive utility value of 0.807.
Warehouse 9 has the lowest additive utility of 0.254. The next step is to use sensitivity
analysis to check if slight variations in relative weight factors would affect the
identification of BIC status.
Sensitivity analysis
Sensitivity analysis is performed according to the method presented by Barron and
Schmidt (1988). This method calculated the required change in relative weight factors
to make a particular warehouses additive utility value equal to the original BIC
additive utility value using the least squares principle. The utility data are re-evaluated
using the new relative weight factors to produce the corresponding additive utility for
all participants. Table X shows the results of the sensitivity analysis, the relative
weights calculated, and the corresponding warehouse deemed BIC for this set of
relative weights. The BIC column for each warehouse ID denotes the particular
warehouse that is identified as BIC under the calculated wj values.
This sensitivity allowed the calculation of new relative weights and evaluation of
these new values. The sensitivity analysis proved that marginal changes in the original
relative weights would not alter the identification of BIC. Also, one warehouse is
unable to converge to a solution, as all metrics are below that of the BIC performer.
That is, the least squares procedure will not converge with this series; the BIC would
always have a higher utility for any and all relative weights greater than or equal to
zero.
Finally, five warehouses calculated a least squares solution of 0.50 and 0.50
for inventory and picking tolerances, respectively. The result of this sensitivity
analysis produced multiple BIC rankings, as most warehouses did not use tolerances.

Table IX.
Calculated utility values
and relative ranking

Warehouse ID

kp
0.450
upick

ki
0.350
uinv

ks
0.100
ustore

ko
0.050
uoct

kit
0.025
uit

kpt
0.025
upt

Utility value

Relative ranking

1
2
3
4
5
6
7
8
9
10
11
12
13
14

0.440
0.576
0.400
0.800
0.357
0.189
0.600
0.650
0.200
0.400
0.750
0.700
0.350
0.179

0.351
0.195
0.333
0.400
0.441
0.173
0.200
0.978
0.179
0.500
0.373
0.880
0.333
0.189

0.370
0.230
0.733
0.150
0.200
0.733
0.200
0.850
0.400
0.533
0.177
0.400
0.667
0.900

0.396
0.195
0.900
0.983
0.990
0.987
0.000
0.733
0.833
0.992
0.200
0.533
0.667
0.950

0.000
1.000
0.800
1.000
1.000
0.400
1.000
1.000
0.000
1.000
0.080
1.000
1.000
1.000

0.000
1.000
1.000
1.000
1.000
0.800
1.000
1.000
0.800
1.000
0.080
1.000
1.000
1.000

0.378
0.410
0.460
0.614
0.434
0.298
0.410
0.807
0.254
0.508
0.500
0.740
0.424
0.334

11
9
6
3
7
13
10
1
14
4
5
2
8
12

1
2
3
4
5
6
7
8
9
10
11
12
13
14

0.000
0.244
0.527
0.318
0.215
0.000
0.450
0.099
0.333
0.858
0.561
0.000
0.176

0.000
0.000
0.204
0.011
0.000
0.000
0.350
0.000
0.032
0.142
0.285
0.000
0.000

0.000
0.088
0.000
0.000
0.208
0.000
0.100
0.000
0.000
0.000
0.000
0.000
0.243

No solution
0.000
0.449
0.157
0.386
0.527
0.000
0.050
0.750
0.380
0.000
0.000
0.000
0.326

0.500
0.037
0.056
0.143
0.000
0.500
0.025
0.000
0.128
0.000
0.077
0.500
0.128

0.500
0.182
0.056
0.143
0.050
0.500
0.025
0.152
0.128
0.000
0.077
0.500
0.128

N/A
Multiple
4
4
4
8
Multiple
8
4
4
8
8
Multiple
13

However, it was noted that these five warehouses all had metric values that are less
than that of the BIC performer. Therefore, convergence is dependent only on the
tolerance levels used, eliminating all other metrics. Therefore, the sensitivity analysis
provided adequate proof that marginal changes in relative weights would not change
the identification of the best overall performer.
Comparison between methodologies
Both analysis types revealed the best performers did not use tolerance levels. This
implied accuracy levels are accurate as given and no allowances were used to
calculate accuracy levels. For errors that occurred during picking, the process of
flagging the error by the actual picker and filling a partial order and shipping
remaining items later or per the customers instructions is identified. The analysis
did not identify whether or not nearby locations are checked for reconciliation of
the error. Both analysis techniques revealed that a second party is sent to re-check
for the error. For cycle counting, the MAUT analysis identified random sample
cycle counting and not conducting 100 percent wall-to-wall inventories. In contrast,
the traditional benchmarking analysis identified different types of cycle counting,
and 100 percent wall-to-wall inventories are conducted. Table XI shows the gap
analysis for the four key questions posed in the original study.
Conclusions and implications for use in the benchmarking process
This research followed a comprehensive application of MAUT and sensitivity analysis
to a benchmarking study. This analysis differed from the classis benchmarking
approach where recommendations are made based on traditional benchmarking tools.
Comparing the suggestions of each method showed some similarities as well as some
differences. However, because of the various benchmarking methods existing today, a
careful consideration should be taken to determine if MAUT is useful for a particular
study.
Advantages of using MAUT
MAUT proves to be effective in establishing priorities of several critical metrics and
provides a method to compare these metrics across several participants. The most

Use of
multi-attribute
utility theory
443

Table X.
Sensitivity analysis
results

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Question

How does industry set tolerance No tolerance used


levels for inventory accuracy
reporting?
How does industry handle errors Check nearby locations, triggers
during a picking operation?
item inventory; second party
sent to re-check error
Does industry perform cycle
counting or 100 percent
wall-to-wall inventories?

Table XI.
Gap analysis for original
question set

Old analysis

What is the typical inventory


and picking accuracy rates that
can be expected?

Utility theory analysis


No tolerance used

Triggers item inventory, part of


order is filled and remaining
items are shipped later; second
party sent to re-check error, error
flagged by picker
Uses random sample cycle
Uses control group and
counting; 100 percent
activity-based cycle counting;
conduct 100 percent wall-to-wall wall-to-wall inventories not
performed
inventories annually
99.999, 99.900 percent
99.946, 99.600 percent

powerful advantage to using MAUT for this research is its ability to consider all
critical metrics and define a best overall performer for these data. Also, MAUT allows
the comparison of different types of data to be directly compared. For example,
accuracy percentages and cycle times are converted into identical units, making
comparison easier. In addition, the use of MAUT allows further investigation of the
data gathered and provides a different look at the best practices discovered. The data
used in classical benchmarking methodologies is easily re-used for the MAUT
analysis, providing even more information. Finally, MAUT provides a framework to
identify one performer as best across all critical metrics. Because the questions
sampled are affected by multiple metrics, this fact became critical for best practice
identification.
Contributions
In this research, the application of MAUT is analyzed for its applicability to
benchmarking analysis. This research is successful in proving the following points for
this comparative study:
.
MAUT provides stratification of all critical metrics chosen and allows for direct
comparison between them.
.
MAUT allows the research team to assign priorities and analyze the subjectivity
of these decisions.
.
MAUT provides a mathematical method for comparing trade-offs and
identifying BIC.
.
MAUT adds robustness to the decision criteria and is suspected to increase
robustness as the amount of critical data increased.
A formal MAUT application to benchmarking is recommended for any party who
requires a method to compare several metrics simultaneously. The MAUT model
works best for small benchmarking efforts where the research team can clearly define

priorities within the study. Also, the tests for sensitivity allow the benchmarking party
to evaluate its choices for weight factors and to adjust them if necessary. It should be
noted that the MAUT method finds a best overall performer for all critical metrics,
rather than a best-in-class performer for each critical metric. Therefore, the proper
method to employ depends on the end result desired. This research used the same data
set for both analysis methods. MAUT could be used in addition to the previous
methodology to gain even more insight on the information. Through the initial
investigation of MAUT on benchmarking, some suggestions for future research were
formulated at the conclusion of the study.
References
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Jossey-Bass Publications, San Francisco, CA.
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Tradeoffs, Wiley, New York, NY.
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New York, NY.
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Lindey, D.V. (1985), Making Decisions, Wiley, New York, NY.
McNamee, D. (1994), Reinventing the Audit: Frameworks for Change, Mc2 Management
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Rodier, M.M. (2000), A quest for best practices, IIE Solutions, Vol. 32 No. 2, pp. 36-9.
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Corresponding author
Terry R. Collins can be contacted at: terry.collins@coe.ttu.edu

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Role of human factors in TQM:


a graph theoretic approach

Role of human
factors in TQM

Sandeep Grover
Department of Mechanical Engineering, YMCA Institute of Engineering,
Faridabad, India

447

V.P. Agrawal
Department of Mechanical Engineering, Indian Institute of Technology Delhi,
New Delhi, India, and

I.A. Khan
Department of Mechanical Engineering, Faculty of Engineering and
Technology, Jamia Millia Islamia, New Delhi, India
Abstract
Purpose To represent the effect of human factors in total quality management (TQM)
environment in terms of a single numerical index by considering their inheritances and interactions.
Design/methodology/approach Various human factors affecting the TQM culture in an
organization are identified and discussed for the sub factors affecting them. These factors are
interacting with each other and their overall effect helps an organization in attaining TQM enabled
needs. The paper attempts to represent the overall effect of human factors quantitatively by
developing a mathematical model using graph theoretic approach. In this approach, interaction among
identified human factors is represented through digraph, matrix model and a multinomial.
Findings The extent of human aspects present in an organization, conducive to TQM culture is
represented in terms of the human index. It provides an insight into the human factors at system and
subsystem level. The developed procedure may be useful for self-analysis and comparison among
organizations.
Research limitations/implications Since, human behaviour is difficult to predict, so are the
human factors. The paper considers general factors, which may vary depending on type of
organization, size of organization and geographical location. There is a scope of research in factor
specific organizations.
Practical implications It provides a useful methodology for organizations to assess human
aspects and improve upon therein. Procedure for stepwise application of methodology is given with
example that may help an industry to implement it.
Originality/value The paper attempts to quantify the intangibles through systematic approach
and is of value to industries to improve upon their work environment.
Keywords Total quality management, Employee behaviour, Graph theory
Paper type Research paper

Introduction and literature review


Total quality management (TQM) has received worldwide acceptability and
recognition. The core values of TQM, integrating all the interacting components in
an organization, are applicable to any size of organization large or small, any type of
organization manufacturing or service, private or public. However, preparation for
realizing the fruits of TQM is challenging, since it is a multifaceted and complex
phenomenon involving every facility and every individual at all levels.

Benchmarking: An International
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Vol. 13 No. 4, 2006
pp. 447-468
q Emerald Group Publishing Limited
1463-5771
DOI 10.1108/14635770610676290

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Dr Deming and Dr Juran were the pioneers in the field of TQM, who gave valuable
guidelines on quality systems. Since, then, TQM has been revisited and revitalized by
various authors. Extensive literature available on TQM reveals the various facets of
TQM covered by various authors and researchers across the globe. Sila and
Ebrahimpour (2003) analyse and compare various TQM factors and their impact on
various performance measures across countries. Mehra et al. (2001) conducted a
literature survey on TQM and identified 45 elements that affect TQM implementation.
Apart from these various studies (Tamini, 1995; Ahire et al., 1996; Dalu and Deshmukh,
2002) refer to factors affecting TQM.
Literature on TQM advocates the influence of human factors more as compared to
other factors on implementation of TQM and business performance.
Saad and Siha (2000) feel the visible (or tangible) variables such as technology,
structure and strategy have a relatively small impact on TQM effectiveness compared
with largely hidden and intangible variables such as values, attitudes and perception.
These factors have also been classified as hard and soft elements or hardware and
software determinants. Improvement in the soft elements is important since there is
adequate research proving that business performance is more heavily influenced by
these elements of TQM. (Gotzamani and Tsiotras, 2001).
An important key issue for any productivity improvement program is management
of people (Gunasekaran et al., 2000).
Lakhe and Mohanty (1994) presented a conceptual model to judge the effectiveness
of TQM in an organization. The importance of human factors is also depicted in the
variables affecting TQM effectiveness.
Badiru (1990) identifies the utilization of human resources as most important while
applying the concept of triple C communication, cooperation and coordination to
TQM. Brenda Weeks et al. (1995) identify seven critical organizational characteristics
that must be assessed to judge an organizations readiness to implement a successful
TQM programme. Most of the factors relate to human behaviour.
Taveira et al. (2003) examined hypotheses regarding influence of TQM on work
environment and concluded that most TQM elements were significantly related to
work environment scales viz. supervisor support, task orientation, task clarity and
innovation. Testa et al. (2003) did regression analysis to suggest national and
organizational cultural congruence has positive effect on job satisfaction. Specific
dimensions of human factors have been covered by various other studies (Legge, 1995;
Taylor, 1997; Axelsson et al., 1999). However, the authors have not come across any
literature on mathematical modeling of different human aspects in TQM leading to
single numerical index.
The interdependencies and overall impact of human aspects on TQM is discussed in
this paper using a mathematical model by applying graph theoretic approach.
Graph theoretic approach is a systematic and logical approach that has been applied
in various disciplines to make and analyse systems (Gandhi and Agrawal, 1996).
The procedure of quantification looks at human aspects in TQM from a different
angle and as an improvement over present practiced procedure of studying them. The
main advantage is that it not only takes into account the amount of human behavioural
factors but also their interdependencies. This is desirable in the present case as the
human aspects have interactive complexity leading to TQM environment in an
organization.

The extent of human aspects present in an organization, conductive to TQM culture


are represented in terms of a numerical index the human index in this paper.
Identification of human factors in TQM
Ones willingness to work for organizational goals is as important as ability. Ability is
dependent on qualification, knowledge and experience whereas willingness is often a
function of behavioural dynamics. Human behaviour is subject to change and difficult
to predict, so is his attitude to work. It is the internal environment of an organization
that can create a work culture to fulfill organizations goals. Human factors help in
catering to the needs of such environment. Human factors refer to those aspects which
can affect the behaviour to work for conducive TQM environment. Further in this
paper, human behavioural factors are referred as behavioural factors. These aspects
are identified based on exhaustive literature survey and discussion with academicians
and practitioners. These factors are epitomized in Figure 1. With a view to develop a
mathematical model for quantification, these are discussed in brief.

Role of human
factors in TQM

449

Top management involvement


No discussion on TQM is complete without the reference of top management
involvement. Before TQM implementation, it is necessary to decide the vision, mission,
goals, values, ethics and attitude for the organization to follow. A sound foundation for
B1

B2

TOP MANAGEMENT
INVOLVEMENT

B3

WORK
CULTURE

Resource
Allocation

MOTIVATION
Individual belief
Quality of
Work life

Leadership

Satisfaction
Perception

Commitment

Management
Style

Education

Positive
Thinking

Desired
Human
Aspects.

Communication
Team Work
Responsibility

Economic
Condition

INNOVATION

Job
Security

Leadership

Discipline

Urge to learn

B6

Empowerment

Managerial values

Skill

Training

Remuneration

Trust

Awareness

ATTITUDE
CHANGE

B5

COORDINATION

B4

Figure 1.
Cause and effect
diagram human aspects
in TQM

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initiating TQM activities is to be laid by top management. It must understand,


recognize and willing to inculcate the quality management principles. It must develop
overall TQM framework by formulating policies and converting those policies into
action by providing needed resources. Managements commitment to excellence sends
signals down up to the shop floor and can inspire the whole organization. Since,
everyones involvement is prerequisite for TQM, management must exercise
leadership abilities to influence the behaviour of other. It is the appropriate
leadership style that can manage human resources effectively. Top management
involvement should thus be demonstrated by the actions that are needed and not just
by words and declarations of quality policy.
Work culture
Work culture in an organization, which is also referred as climate, atmosphere or
internal environment, is another critical element of TQM culture. It is summation of
habits, attitude and behaviour of members of organization. It may vary from one
organization to another and different in different countries.
Readiness of an organization to adopt TQM requires a change in mindset of people
to overcome inertia. Quality consciousness and involvement of employee are to be
ensured by the policies of management. Once top management accepts the need and
responsibility for organizational change, intended goals can be realized.
Motivation
Motivation is changing behaviour of employee towards work from negative to positive.
Since, workforce is regarded as valuable asset, to maintain and develop it becomes
important. Morale, which is a group motivation concept, often is an automatic outcome
of managements supporting and stimulating attitude towards employees needs. Basic
factors in Maslows need hierarchy theory are appropriate in any environment and
TQM culture in no exception to it. Slogans, posters and lectures can do a little if the
basic remuneration to an employee is not able to fulfill his basic needs. Similarly good
working conditions, job security, a fair and free work environment provide job
satisfaction to an employee. Absence of these may also act as demotivator and can
further be assigned as an important reason for TQM failure. Since, behaviour is a
complex phenomenon and motives cannot be determined accurately, organization
must continuously improve quality of work life by empowerment, job rotation, job
enrichment, rewards and recognition. A feeling of self-organization is to be inculcated
by management by involving employees at all levels in decision-making. A motivated
group of employees always achieves the results expected from quality circle.
Co-ordination
Although individual effort is recognized, coordinated effort of group is emphasized in
TQM. Lack of coordination may lead to wastage of resources. Management must
evolve a mechanism to coordinate activities. Factors affecting coordination include:
discipline, teamwork, communication and mutual trust.
Moreover, with production system involving multidisciplinary approach, group
approach has become the requirement to solve production related problems. TQM
culture requires people to prefer organizational interests to self-interest and a team can
provide synergic effect to individual efforts.

Attitude change
This behavioural aspect refers to change in way of thinking of an employee about
organizational aspects. TQM is a way of thinking broadly about stakeholders. It is
bringing in the positive attitude towards work. Changing attitude is considered as more
difficult and time taking as compared to ones knowledge. Attitude change is highly
affected by personals traits education, background and age group. If change is
perceived by an employee as threat to position and a signal of danger then it requires
through knowledge, awareness and benefits to be known to an employee. Sometimes
giving more responsibility to an employee in the process of change may click. It is the
culture that can change the attitude and vice-versa.
Innovation
Developing a new and better way of doing existing work enables TQM culture. It is
search for creativity through research and development applied by knowledge
updating and skill improvement through training and continuing education. Apart
from individual factors, innovation is to be encouraged by openness of management.
Rewarded and recognized innovative ideas boost other employees to experiment.
The economic condition of an organization has also influence on innovative culture in
an organization. Innovation helps in fulfilling organizations quest for continuous and
breakthrough improvement.
To achieve the desired organizational goals through TQM environment, it is
necessary to understand, analyse and evaluate the contribution critical human
factors and sub factors for improving competitiveness, work culture and profitability.
This is achieved through quantification of effect and interdependency among these
factors discussed in next section.
Development of graph theoretic model
Graph theoretic and matrix model consists of digraph representation, matrix
representation and permanent representation. Digraph representation is useful for
visual analysis. Matrix model is useful for computer processing. Permanent multinomial
function characterizes abstract TQM environment uniquely. Permanent value of
multinomial represents the effect of human factors on environment uniquely by a single
number/index, which is useful for comparison, ranking and optimum selection. The
systematic application of graph theoretic methodology is discussed further in this paper.
Behavioural digraph
A Behavioural digraph is prepared to represent the behavioural factors of the TQM
environment in terms of nodes and edges. Let nodes represent behavioural factors and
edges represent their interactions. It represents TQM environment behavioural
measure of characteristics or factors (Bis) through its nodes and dependence of factors
(bijs) through its edges. Bi indicates the inheritance of factors and bij indicates degree of
dependence of jth factor on ith factor. In the digraph bij is represented as a directed
edge from node i to node j. The digraph permits to show the proposed behavioural
factors and interactions between factors. In particular six factors identified form the
behavioural digraph. The six behavioural factors top management involvement (B1),
work culture (B2), motivation (B3), coordination (B4), attitude change (B5) and
innovation (B6) and interactions amongst them are shown in Figure 2.

Role of human
factors in TQM

451

BIJ
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B1

B4
B2

452

B3

Figure 2.
Behavioural digraph

B5

B6

A brief reasoning of interactions (i.e. edges shown in the digraph) is given below.
Involvement of management through commitment, resource allocation and providing
leadership influences other factors. Thus, directed edges from node 1 to all other nodes.
However, work culture and motivated workforce may also force the involvement of
management to some extent. Thus, a directed edge from node 2 and node 3 to node
1.The extent to which one factor is dependent on other may vary from one organization
to another.
Work culture (B2) is dependent on management, motivation of employee, attitude of
employee and innovation. Thus, a directed edge from node 1, 3, 5, and 6 to node 2.
However, there is no directed edge from node 4 to node 2 as it is the coordination that
will result from proper work culture (thus node from 2 to 4). Similarly work culture
may motivate and employee will be encouraged to innovate (node from 2 to 3 and 6).
Similarly other factors can be visualized from the digraph (Figure 2).
Behavioural matrix
Since, digraph is a visual representation, it helps in analysis to a limited extent only.
To establish an expression for behavioural effect, the digraph is represented in matrix
form, which is convenient in computer processing also.
Let us consider a general case of n factors leading to n th order symmetric (0,1) matrix
A [bij]. The value bij represents the interaction of i th factor with the j th factor:
bij 1
0

if factor i is connected to factor j;


otherwise

Generally bij# bji as behavioural effect is directional and bii 0 as factor is not
interacting with itself. Behavioural matrix is square and non-symmetric and is
analogous to adjacency matrix in graph theory (Narsingh, 2000). The behavioural
matrix representing the digraph shown in Figure 2 is written as:

6
61
6
61
A 6
6
60
6
6
60
4
0

Role of human
factors in TQM

Factor
3

7
17
7
17
7
7
07
7
7
17
5
0

1
2
3

4
5
6

Off diagonal elements with value 0 or 1 represent the interdependency of behavioural


factors. The diagonal elements are 0 since effect of behavioural factors is not taken into
consideration. To consider this, another matrix, behavioural characteristic matrix is defined.
Behavioural characteristic matrix (CM-B)
The characteristic matrix already used in mathematics is used to characterize
behavioural factors affecting TQM environment. Considering I as an identity matrix
and B as the variable representing behavioural factors, behavioural characteristic
matrix is written as C [BI 2 A]
1
2
3
4
5
6
Factor
3
2
1
B 21 21 21 21 21
7
6
2
6 21 B 21 21 0 21 7
7
6
6 21 21 B 21 21 21 7
3
7
C 6
2
7
6
7
6 0
4
0 21 B 21 0 7
6
7
6
6 0 21 21 21 B 21 7
5
5
4
6
0 21 0
0
0
B
In the above matrix the value of all diagonal elements is same, i.e. behavioural factors
have been assigned same value which is not true practically, since all behavioural
factors have different values (effects) depending on various parameters affecting them.
Moreover, interdependencies have been assigned value depending on it is there or not.
To consider the effect of behavioural factors and their interdependencies, another
matrix, behavioural variable characteristic matrix (VCM) is considered.
Behavioural variable characteristic matrix (VCM-B)
It is proposed to characterize the TQM environment by various behavioural factors
and their effects through VCM. For this let us consider digraph in Figure 2 for defining
VCM-B. Consider a matrix D with off-diagonal elements bijs representing interactions
between behavioural factors, i.e. instead of 1 (as in matrix 1). Consider another matrix
E with diagonal elements Bi, i 1, 2, . . .6, where Bi represent behavioural effect of
various factor, i.e. instead of B only (as in matrix 2). Considering matrices D and E, the
VCM-B is written as H [E 2 D]

453

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454

1
2 B
1
6 2b
6 21
6
6 2b
31
H 6
6
6 0
6
6
6 0
4
0

2b12

2b13

2b14

2b15

B2

2b23

2b24

2b32

B3

2b34

2b35

2b43

B4

2b45

2b52

2b53

2b54

B5

2b62

6
2b16 3
2b26 7
7
7
2b36 7
7
7
0 7
7
7
2b56 7
5
B6

Factor
1
2
3

4
5
6

The matrix provides a powerful tool through its determinant called variable
characteristic behavioural multinomial (VCBM). This is a characteristic of the system
and represents the behavioural effect of the system consisting of behavioural effect of
factors and their interactions.
Determinant of matrix equation (3), i.e. VCBM carries positive and negative signs
with some of its co-efficient. Hence, complete information on behavioural effect will not
be obtained as some will be lost due to addition and subtraction of numerical values
of diagonal and off diagonal elements (i.e. Bis and bijs). Thus, the determinant of
VCM behavioural, i.e. matrix equation (3) does not provide complete information
concerning behavioural effect. For this, another matrix, behavioural variable
permanent matrix (VPM-B) is introduced.
Behavioural variable permanent matrix
Overall behavioural effect is maximum when the behavioural effect of all the factors is
maximum. Since, total quantitative information is not obtained in VCM-B, VPM-B
is defined for the system in general (assuming interactions among all factors) as
B E D
1
2
3
4
5
6
Factor
3
2B b
b13 b14 b15 b16
1
1
12
7
6b
2
6 21 B2 b23 b24 b25 b26 7
7
6
7
6b
b32 B3 b34 b35 b36 7
3
31
4
B 6
7
6
6 b41 b42 b43 B4 b45 b46 7
4
7
6
7
6
6 b51 b52 b53 b54 B5 b56 7
5
5
4
b61 b62 b63 b64 b65 B6
6
Where E and D have meaning as in matrix equation (3).
The permanent of matrix equation (4) is multinomial and is called variable
permanent behavioural function (VPF-B), also known as permanent of B (per B).
This permanent function is a standard matrix function and is used and defined in
combinatorial mathematics. This is evaluated by standard procedures and is same as
determinant of VCM but with all signs positive. The permanent for matrix equation (4)
in general form is written as:

VPF 2 B per B P Bi

XXXXXX
bij bji Bk Bl Bm Bn

i1

Role of human
factors in TQM

XXXXXX
bij bjk bki bik bkj bji Bl Bm Bn

20
4@

XXXXXX
i

XXXXXX
i

455

bij bji bkl blk Bm Bn

13

bij bjk bkl bli bil blk bkj bji Bm Bn A 5

2
XXXXXX
4
bij bji bkl blm bmk bkm bml blk Bn
i

XXXXXX
i

bij bjk bkl blm bmi bim bml blk bkj bji Bn 5

2
XXXXXX
4
bij bji bkl blm bmn bnk bkn bnm bml blk
i

XXXXXX
i

XXXXXX
XXXXXX
i

bij bjk bki blm bmn bnl


bij bji bkl blk bmn bnm
3
bij bjk bkl blm bmn bni bin bnm bml blk bkj bji 5

The permanent function defined above, i.e. equation (5) is the complete expression for
behavioural effect as it considers presence of all attributes and their interdependencies.
A close look at multinomial, i.e. equation (5) reveals presence of behavioural effect in
a systematic manner. The expression contains terms arranged in n 1 grouping. Here
n 6, therefore seven grouping are there.
The first grouping contains only one term and is a set of behavioural effect of six
factors, i.e. B1B2. . .B6.
In general second grouping is absent in absence of self-loops.
The third grouping contains set of two behavioural factor interdependence, i.e. bijbji
and measure remaining n 2 2 (i.e. 4 here) behavioural factors.
Each term of fourth grouping represents a set of three behavioural factor
interdependence bijbjkbki or its pair bikbkjbji and measure of remaining n 2 3 (i.e. 3 here)
behavioural factors.
The terms of fifth grouping are arranged in two subgroups. The first sub-grouping
is a set of two, 2 behavioural factor interdependence, i.e. bijbji and bklblk and measure
of remaining n 2 4 (i.e. 2 here) behavioural factors.

BIJ
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456

The second sub-grouping is a set of four behavioural factor interdependence,


i.e. bijbjkbklbli or its pair bilblkbkjbji and measure of remaining n 2 4 (i.e. 2 here) behavioural
factors.
The terms of sixth grouping are also arranged in two subgroups. The first sub
grouping is a set of 2 behavioural factor interdependence, i.e. bijbji, a set of 3
behavioural factor interdependence, i.e. bklblmbmk or its pair bkmbmlblk and measure of
remaining n 2 5 (i.e. 1 here) behavioural factor.
The second sub-grouping is a set of five behavioural factor interdependence, i.e.
bijbjkbklblmbmi or its pair bimbmlblkbkjbji and measure of remaining n 2 5 (i.e. 1 here)
behavioural factor.
Similarly seventh grouping analyses sub-grouping in terms of a set of two and
four behavioural factor interdependence, 2 three behavioural factor interdependence,
3 two behavioural factor interdependence and six behavioural factor interdependence.

Quantification of Bis and bijs


Quantification of human factors (i.e. Bis) is carried out on the lines of per B (equation (5)).
Each factor is identified as a subsystem and graph theoretic approach is applied in each
subsystem. Behavioural subsystem permanent characteristic matrix (similar to
equation (5)) is evaluated for permanent function considering various factors affecting
the subsystem. The various factors affecting subsystems are identified in Figure 1. The
dependencies of factors at subsystem level are visualized through digraphs. These
digraphs lead to the inheritance of factors at system level through matrix and measures.
The corresponding variable permanent matrices are then derived for each subsystem
(ss) and permanent function of each VPM (ss) is evaluated. The permanent functions of
these matrices (similar to equation (5)) will lead to inheritance of behavioural factors.
Thus, graph theoretic approach may be applied at every level.
In order to avoid complexity, suitable scale may be used to assign value at
subsystem level or sub subsystem. If all the factors are not equally important to an
organization, suitable weights may be assigned. Table I suggests assignment of
numerical values to factors.
To get the complete value of multinomial (equation (5)), the off diagonal elements in
VPM-B (equation (4)) are to be assigned numerical values. As already discussed, these
off diagonal elements represent interdependencies among human factors in TQM.
However, this dependence among factors at system level (or subsystem level) cannot be

Table I.
Quantification of human
factors

S.No

Qualitative measure of human factor

1
2
3
4
5
6
7
8
9

Exceptionally low
Very low
Low
Below average
Average
Above average
High
Very high
Exceptionally high

Assigned value of human factor


1
2
3
4
5
6
7
8
9

measured directly and values can be assigned only after proper interpretation through
a team of experts. It is suggested to use Table II for value of interdependencies.
Human index
Human aspects in an organization, which help it to create TQM culture, are a function
of inheritance of behavioural factors and their interdependencies. Quantification of
human factors, i.e. exact amount of human aspects present (conducive to TQM
environment) is very difficult to calculate under actual interactive conditions.
All possible combination of factors in equation (5) represent different states of human
behaviour. Variable permanent function (equation (5)), which thus represents
structural complexity, effect of characteristics and their interdependence, is a useful
tool for developing an index for human aspects. This is the permanent of VPM-B,
which is given by equation (5). Thus, human index is given by
H* Permanent

value

of

Role of human
factors in TQM

457

VPM 2 B:

The numerical values of various factors and dependencies required for H * can be
determined using the procedure already explained. The features of human index are
highlighted below:
.
This index is a means to evaluate the content of human factors needed for an
environment in an organization conducive to TQM.
.
Human aspects in an organization are represented by single numerical value.
A higher value of index is an indicator of more conducive environment to TQM.
.
The value may be used for self-analysis of an organization and by this procedure
the permanent value can be increased by varying (increasing in particular) the
human factors identified.
Methodology
The graph theoretic approach helps to model TQM environment in terms of inheritance
of factors and their interdependencies. The methodology discussed earlier helps to
focus the role of human behaviour in TQM environment and is presented in terms of
salient steps.
(1) Identify various factors that effect behaviour of human being in an environment
conducive to TQM culture.
(2) Identify the sub factors affecting human factors in step (1).
(3) Develop sub factor digraph considering attributes affecting each sub factor.
The nodes in the digraph represent attributes identified in each sub factor. The
interaction among attributes is represented by edges.
S.No

Qualitative measure of interdependencies

Bij

1
2
3
4
5

Very strong
Strong
Medium
Weak
Very weak

5
4
3
2
1

Table II.
Quantification of human
factor interdependencies

BIJ
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458

(4) Develop sub factor matrix. This will be of size M M, with diagonal elements
representing attributes and the off diagonal elements representing interactions
among them (equation (4)).
(5) At the sub subsystem level use Tables I and II. This will provide numerical
values for inheritance of attributes and their interactions.
(6) Find the value of permanent function for sub factor (equation (5)).
(7) Repeat steps (3)-(6 )for each sub factor.
(8) Develop behavioural factor digraph and behavioural matrix at system level as
explained in steps (3) and (4).
(9) At system level, the permanent value of each sub factor (obtained in step (7))
provides inheritance of TQM environment of each factor (i.e. diagonal elements
in equation (4)). The quantitative value of interactions among factors (i.e. off
diagonal elements in equation (4)) are obtained from Table II through proper
interpretation by experts. This will form behavioural matrix at system level
similar to equation (4).
(10) Find the value of permanent function for the system (equation (5)). This is the
value of the human index.
Based on the above-discussed methodology, the organization can evaluate the extent of
human behaviour involvement/presence in TQM environment.

Example
For demonstration the proposed methodology, an organization is taken as an
example. It is proposed to find the value of human index. For determining the
index we require numerical values of all human factors and their interdependencies,
i.e. all values in Behavioural variable permanent matrix (equation (4)). The value of
diagonal elements in the VPM-B, i.e. the value of behavioural factors B1,B2. . .B6
are evaluated by applying graph theoretic methodology. Step by step
methodology discussed in previous section is used to evaluate human index in
this example.
(1) Step 1. The various factors affecting behaviour of human being for TQM
environment are identified in Figure 1.
(2) Step 2. The sub factors affecting the human factors are discussed earlier in this
paper and are listed in Table III.
(3) Step 3. The dependencies of factors at subsystem level are visualized through
digraphs shown in Figures 3 8. Superscript denotes the subsystem and
subscript indicates the factors affecting the subsystem. As explained the nodes
in the digraph represent attributes identified in each sub factor. The interaction
among attributes is represented by edges.
(4) Step 4. Variable permanent matrix for digraph for each subsystem is
written.At subsystem level, variable permanent matrix for digraph for
subsystem 1 (Figure 3) in general form is considered. Similar to equation (4),
VPM-B1 is given by

Motivation

Coordination
Attitude
change
Innovation

4
5

Top mgmt.
involvement
Work culture

S.No Aspects

Commitment, Resource allocation, leadership,


management style
Individual belief, Quality of work life,
satisfaction perception, managerial values,
economic aspect
Remuneration, quality of work life, leadership,
recognition and reward system, empowerment,
job enrichment, job security
Discipline, teamwork, communication, trust
Education, awareness, responsibility, positive
approach
Skill, Training and continuing education, Urge
to learn, Economic condition of organization

Factors

1, 3
1
1, 5

1
2

Strong
(bij 4)

3, 5

Very strong (bij 5)

Degree of influence of
behavioural aspect j on i

5
3, 4

Medium
(bij 3)

2, 3

Weak
(bij 2)

Very weak
(bij 1)

Role of human
factors in TQM

459

Table III.
Interdependency of
human aspects in TQM
environment

BIJ
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B12

B11
B13

460
Figure 3.
Digraph for subsystem 1

B14

B22

B21

Figure 4.
Digraph for subsystem 2

B23

B25

B24

1
2

Bss1

B11
6 1
6b
21
6
6
6 b1
6 31
4
b141

b112

b113

b114

B12

b123

b124

b132

B13

b142

b143

Factor
3

7
7
7
7
1 7
b34 7
5
B14

1
2

3
4

Similar to equation (6) variable permanent matrix for each subsystem are
written.

Role of human
factors in TQM

B33

B32

461

B34
B31

B35

B37

Figure 5.
Digraph for subsystem 3

B3

B42

B43

B41

Figure 6.
Digraph for subsystem 4

B44

B52

B51

B53

B54

Figure 7.
Digraph for subsystem 5

BIJ
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B62

462
B61

B63

Figure 8.
Digraph for subsystem 6

B64

(5) Step 5. At the sub subsystem level Tables I and II are used to determine
numerical values for inheritance of attributes and their interactions. The
variable permanent matrices for different subsystems (based on their digraphs)
are written through equations (7.1)-(7.6). For subsystem 1, the values taken from
Table I are B11 7; B12 5; B13 6; B14 5: The values taken from Table II are
b112 4; b113 3; b114 4; b121 3; b123 3; b124 2; b134 4; b142 2:
Substituting these values in equation (6), VPM-B1 is given as
1

7
6
6
VPM B1 6 3
6
60
4
0

Sub factor
3

7
27
7
7
47
5
5

7:1

3
4

In similar way, variable permanent matrices for other subsystems are


written as
1
2

6
63
6
VPM B2 6
60
6
6
60
4
0

2
5

3
0

4
0

5
0

Sub factor
3

07
7
7
07
7
7
07
5
5

1
2
3
4
5

7:2

6
60
6
60
6
VPM B3 6
60
6
6
60
6
6
60
4
4

1
2

8
6
VPM B4 6
60
6
60
4
0

1
2

7
37
7
07
7
7
07
7
7
07
7
7
07
5
7

2
3
4

7:3

5
6
7

1
2

7:4

3
4

Sub factor
3

7
07
7
7
07
5
6

Sub factor
3

8
6
VPM B6 6
64
6
62
4
0

4
7
27
7
7
37
5
6

6
6
VPM B5 6
60
6
60
4
2

Role of human
factors in TQM

Sub factor

1
2

7:5

3
4

Sub factor
3

7
07
7
7
07
5
5

1
2

7:6

3
4

(6) Step 6. The permanent of matrix (6) Per Bss1, which will lead to inheritance of
behavioural factor 1, is evaluated on the lines of equation (5). The complete
expression for the Per Bss1 is given as:

463

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464

Per Bss1 B1 B2 B3 B4 b12 b21 B3 B4 b13 b31 B2 B4 b14 b41 B2 B3


b23 b32 B1 B4 b24 b42 B1 B3 b34 b43 B1 B2 
b12 b23 b31 b13 b32 b21 B4 b12 b24 b41 b14 b42 b21 B3
b13 b34 b41 b14 b43 b31 B2 b23 b34 b42 b24 b43 b32 B1 
b12 b21 b34 b43 b13 b31 b24 b42 b14 b41 b23 b32 
b12 b23 b34 b41 b14 b43 b32 b21 b13 b34 b42 b21 b12 b24 b43 b31
b14 b42 b23 b31 b13 b32 b24 b41 
8
The value of permanent function for ss1 leads to the inheritance of behavioural factor
B1. Substituting the values from equation (7.1)
Per Bss1 1; 050 360 168 144 168 72 1; 962
(7) Step 7. Similarly the value of permanent functions of different subsystems are
evaluated from the variable permanent matrices in equations (7.1)-(7.6) and are
written as under:
Per Bss1 1; 962
Per Bss2 14; 130
Per Bss3 438; 120
Per Bss4 3; 408
Per Bss5 2; 156
Per Bss6 1; 600
(8) Step 8. Behavioural factor digraph is shown in Figure 2 and behavioural matrix
at system level is developed through equations (1)-(4). Variable permanent
matrix for this example is written in symbolic form as:
1
2B

6b
6 21
6
6b
31
VPM B 6
6
6 0
6
6
6 0
4
0

b12

b13

b14

b15

B2

b23

b24

b32

B3

b34

b35

b43

B4

b45

b52

b53

b54

B5

b62

6
b16 3
b26 7
7
7
b36 7
7
7
0 7
7
7
b56 7
5
B6

Factor
1
2
3

4
5
6

As explained, the values of diagonal elements are to be taken from step 7 and
the values of off diagonal elements are taken from Table II. Table III also

indicates the degree of dependence among factors based on scale given in


Table II. For the given application these may be modified, if required:

Role of human
factors in TQM

B1 Per Bss1 ; B2 Per Bss2 ; B3 Per Bss3 ; B4 Per Bss4 ; B5


Per Bss5 ; B6 Per Bss6

465
(9) Step 9. To obtain variable permanent matrix-behavioural for this example,
values are substituted as per step 8.
1
2 1; 962
6
6
6
6
VPMB 6
6
6
6
6
6
4

3
4

4
5

5
4

6
4

14; 130

438; 120

3; 408

2; 156

1; 600

Factor
3
7
7
7
7
7
7
7
7
7
7
5

1
2
3

10

4
5
6

(10) Step 10. Value of permanent function for the system is evaluated as per
equation (5).
The value of permanent of above matrix (equation (10)) is 1.42792 1023, which
indicates human index for the case considered. By carrying out similar analysis human
index for different organization can be obtained. As suggested, this will help an
organization to access itself and improve. For a particular period of time, similar
organizations may be compared and rated.
It is also suggested to find hypothetical best and hypothetical worst value of human
index. Human index is at its best when the inheritance of all its factors is at its best.
Since, inheritance of factors is evaluated considering sub factors and applying graph
theoretic approach at the subsystem level, it is evident that human index is at its best
when inheritance of sub factors is at its best. Since, Table I is used at subsystem level,
maximum value of Per B1 is obtained when inheritance of all the sub factors is
maximum, i.e. value taken from Table I is 9. Thus, equation (7.1) may be rewritten for
the maximum value of Per B1 as
1
2

9
6
VPM B1 6
63
6
60
4
0

2
4

3
3

4
4

Sub factor
3

7
27
7
7
47
5
9

1
2

11

3
4

The value of the permanent of the above function is 8361, i.e. max. Per Bss1 8,361.

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Similarly human index is at its worst when the inheritance of all its factors and sub
factors is at its worst. This is the case when inheritance of all the sub factors is
minimum, i.e. value taken from Table I is 1. Thus, equation (7.1) may be rewritten for
the minimum value of Per B1 as
1

466

1
6
6
VPM B2 6 3
6
60
4
0

2
4

3
3

4
4

Sub factor
3

7
27
7
7
47
5
1

1
2

12

3
4

The value of the permanent of the above function is 137, i.e. min. Per Bss1 137.
Similarly maximum and minimum values for each subsystem are evaluated and
different values of permanent of subsystem matrices are summarized in Table IV.
Maximum value of human index at system level is evaluated by considering maximum
values of all subsystems and minimum value of human index at system level is
evaluated by considering minimum values of all subsystems.
The value of per B indicates the value of human index. Thus, the maximum and
minimum value of human index indicates the range with in which it can vary.
Experts can use this range to decide a threshold value for a given set of similar
industries.
Monitoring at regular interval may be carried out by third party to assess TQM
environment in an organization. Moreover, the values may be used for self-assessment
of industry, i.e. the internal audit of TQM environment may be carried out at regular
intervals.
Conclusion
The paper endeavours to quantify the overall effect of human factors in TQM
environment through systematic approach. The human factors not only help an
organization to achieve intangible objectives better quality, customer satisfaction,
goodwill, and responsiveness through continuous improvement but also have long
lasting effect on tangible objectives profitability through productivity.

System/Subsystem

Table IV.
Values for
maximum/minimum
human index

Per
Per
Per
Per
Per
Per
Per

B1
B2
B3
B4
B5
B6
B

Current value

Maximum value

Minimum value

1,962
14,130
438,120
3,408
2,156
1,600
1.42792 1023

8,361
78,732
5,756,350
8,613
7,209
7,209
1.69614 1027

137
28
730
61
9
9
1.45711 1010

The proposed structural approach based on digraph and matrix method for the
evaluation of human aspects in TQM environment has the following features:
.
It identifies factors pertaining to human aspects in TQM environment.
.
It permits modeling of dependence among factors.
.
Application of graph theoretic approach makes it convenient for visual analysis
and computer processing.
.
The presence of human aspects in TQM environment is indicated by a single
numerical index.
.
It permits self-analysis and comparison of organizations.
.
Cause and effect analysis is useful in improving the environment.
.
The method permits to consider different factors in alternative environment.
.
Systematic methodology for conversion of qualitative factors to quantitative
values and mathematical modeling gives an edge to the proposed technique over
conventional methods.
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pp. 855-76.
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Saad, G.H. and Siha, S. (2000), Managing quality: critical links and a contingency model,
International Journal of Operations & Production Management, Vol. 20 No. 10, pp. 1146-63.
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analysis, International Journal of Production Research, Vol. 33 No. 11, pp. 3040-51.
Taveira, A.D., James, C.A., Karsh, B-T. and Sainfort, F. (2003), Quality management and the
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Prentice Hall of India Private Ltd, New Delhi.
Corresponding author
Sandeep Grover can be contacted at: grover2212@sancharnet.in

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Tourism services quality


(TourServQual) in Egypt
The viewpoints of external and internal
customers

Tourism services
quality in Egypt

469

Mohammed I. Eraqi
Tourism Studies Department, Faculty of Tourism & Hotels,
Cairo University, Egypt
Abstract
Purpose This research paper aims is to evaluate the customers views related to tourism quality in
Egypt. It attempts to measure the extent to which tourism business environment is creative and
innovative as necessary conditions for internal customer satisfaction.
Design/methodology/approach The objectives of this research have been achieved through
reviewing a number of literatures in the fields of services quality management and tourism quality
measurements. The papers outcomes have been obtained through two surveys, one to measure the
satisfaction of the internal customer (employees) and the second to measure the external customer
satisfaction (tourists).
Findings The main conclusions of this research paper are: quality can be considered as a
philosophy for guiding tourism organization/destination when taking decisions related to tourism
services; tourism business environment in Egypt does not support the internal customer satisfaction
because the absence of a suitable system for encouraging people to be creative and innovative; and in
the area of the external customer satisfaction there is still a need for things to be done such as the
environmental conditions improvements, internal transport quality enhancement, increasing people
awareness, and improving the level of safety and security conditions.
Research limitations/implications There is a number of limitations which faced this paper
research they are: the sample size is small, compared with the size of total population, that was
reflected on the level of reliability of the research results; and the limited time allowed to the
respondents was reflected on the validity of the research outcomes, because they interviewed at the
last time of their journey by the time they are ready for departure.
Practical implications A useful source of information about total quality management (TQM)
and how practitioners can measure it. It provides wide guidelines for improving the quality of tourism
services in total manner in Egypt.
Originality/value This paper provides useful information that are needed for tourism services
quality improvement. It offers a practical help to tourism planners and marketers in Egypt to
understand the concept of TQM and how they can improve their services continually.
Keywords Tourism, Quality, Customer satisfaction, Egypt
Paper type Research paper

Introduction
The complexity and globalisation of todays competitive business environments have
made quality as one of the most important sources of competitive advantage for the
tourism business enterprise/destination. Many leading quality organisations have
started to exploit opportunities to face this situation and recognized the importance to
have systematic processes to manage quality to gain and maintain this competitive
position. Each business management is aware of the fierce competition in every sector

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q Emerald Group Publishing Limited
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and customer expectations have never been greater. It is no longer sufficient just to
maintain a business; it is necessary to move forward if a business wants to achieve a
sustainable future. Customer care, improvements in efficiency, effective marketing,
benchmarking, staff training and development are all vital for survival and
competitiveness in a changeable business environment.
To improve, means to change, and change can be stressful. There is no magic formula
that can be applied to every business, but there are proven systems, such as quality
management that can bring great benefits if it is applied in the right way. For business to
be successful, the motivation to develop and implement a quality management system
must be based on a clear understanding of the business aims and objectives. Whatever
the size of the organisation and whatever the type of business, management will
appreciate just how important quality is to the organization/destinations continued
success.
After all, the term quality frequently leads to misunderstanding. A better
understanding of the term is essential, particularly if the quality has been seen from a
strategic viewpoint. However, the term quality has come to take on a broader meaning
in the management of organisations. The total quality management (TQM) movement
and other management philosophies have focused on the fitness of final products and
services for stakeholders, have emphasised not only the product quality, but also the
need to build quality into the production and delivery processes of the organisation and
have stressed the importance of employee involvement in process redesign and
commitment to the improvement of the final tourism product or service.
Tourism as a business is asserting itself as the engine of Egypts economic
development. In 1982 Egypt hosted about one million visitors. By 2003, that figure has
risen to 6.0 million visitors and it has continued to rise, despite the political turbulence
of the last few years. Egypts tourist facilities and destinations are able to compete well
by following tourism quality standards and sustainable tourism models.
Owing to the customer-oriented service endeavours, tourism enterprises, either
private or public, need to improve service offerings by determining the needs of their
target groups. Exploring the current ratings of customer expectations and customer
perceptions on specific service attributes provides a tool for management in order to
improve the service quality of the firm. Within this context, this study aims at
determining the current service quality level of tourism services in Egypt.
This paper endeavors to evaluate the customer overview related to tourism quality
in Egypt. Also, measuring the extent to which tourism business environment in Egypt
is creative and innovative.
Quality definitions and implication
Quality in service industries has both static and dynamic dimensions (Day and Peters,
1994). The static dimension represents the expectation of the customers, that always
changes over time as extra facilities such as in-flight meals become the rule rather than
the exception. Dynamic dimension of quality occurs during service delivery and offers
opportunities for the customer to be delighted by the extra efforts of staff to, for
example, address the customer tangible product which is a primary cause of customer
dissatisfaction, but dynamic quality is not achieved easily. By definition, spontaneous
acts of dynamic quality, cannot be pre-arranged or scripted, but are nevertheless an
important means of customer satisfaction (Ingram et al., 1997).

There are many definitions and implications for the quality as a concept. The main
definitions and implications are summarised in Table I.
Whatever the definition of quality is, for success in a highly competitive tourism
market, a tourism enterprise/destination has to make sure it is providing the goods or
services that the customer wants; it gets its quality right; and that it delivers on time. This
leads to customer satisfaction and achieving a suitable level of profits. Quality in service
delivery leads to more repeated visits and greater sales revenue. This enables serving staff
on performance-related pay to earn more and enhance the quality of their service to the
customer. In addition, the extra profit generated enables tourism enterprise/destination
management to invest in upgrading facilities to the customer and in training schemes
beside creating innovative business environment for tourism services improvement.
The philosophy of quality
Deregulation and globalization have increased competitive pressures, helping to bring
down prices and to improve the quality of services provided by professional tourism
enterprises/destinations. From this standpoint, what it is needed is to enforce compliance
with safety and environmental regulations and new working conditions. The 1980s
witnessed many service industries placing increased emphasis on managing quality.
Traditional ideas of quality, which had evolved from manufacturing industries and had
been based on the conformance to the standards defined by operation management, began
to be replaced by customer-focused notions. This required close consideration of what the
customer wanted and how their needs could be met. Different dimensions of service were
defined and customer satisfaction, considered to be the gab between perceived and
expected service, was assessed. Quality management began to be viewed as an overall
process which involved everybody from top management down to junior staff rather than
just to do with concentrating on the employee-customer interaction. New approaches such
as TQM and the continuous improvement programmes began to be applied by an
increasing number of service industries (Souty, 2003; Lockwood and Guerrier, 1989).
However, the source of competitive advantage is found firstly in the ability of the
organization to differentiate itself, in the eyes of the consumer, from its competitors and
secondly by operating at a lower cost and hence at greater profit. This requires
examining consumer service under three conditions (Lalonde and Zinszer, 1976):
(1) pre-transaction elements;
(2) transaction elements; and
(3) post-transaction elements.
Quality of service attracts new customers and ensures consumer retention. Consumer
retention provides a higher profit contribution and has to grow in terms of the value
and frequency of purchases. The importance of customer retention is underlined by the
concept of the lifetime value of a customer. The life time value of a customer is
calculated as follows (Christopher, 1998):
Life time value average transaction value yearly frequency of purchase
customer life expectancy
A successful business would better serve its shareholders needs by focusing
on customers, employees, suppliers and the wider community (Mann et al., 1999).

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Table I.
Quality definitions and
implications
Definition

Source: Adapted from Ingram et al. (1997)

Eraqi (2002)

Quality as a concept is considered as a philosophy


overwhelmed the organisation management. It is a
continuous improvement

Quality has three components: (1) internal customer


satisfaction
(2) external customer satisfaction
(3) the efficiency of processes

Quality is also measured on a cost/benefit basis


The final test of quality is a subjective one

Quality is derived through a range of processes


which transform the end product or service
Quality has to be equal to the demands place upon it

The implication of this definition is that quality has


to resolve the users actual or perceived needs
Quality is judged by its ability to meet needs
Quality is judged positively and negatively
compared to the expectation

Quality has two parts: (1) its inherent characteristics


(2) a standard of excellence

Implications

472

The degree or level of excellence; characteristic;


The Oxford Dictionary (Ingram et al., 1997) something that is special about in a person or thing
Quality is the totality of features and characteristics
of a product or service that bear on its ability to
satisfy stated or implied needs
The British Standards Institute (1987)
Juran (1980)
Quality is the fitness for purpose or use
Quality is the conformance to specifications and the
Ernst and Young (Ingram et al., 1997)
relative absence of defects
Quality is the total composite product and service
characteristics of marketing; engineering;
manufacture; and maintenance through which the
product and service in use will meet the expectation
by customer
Feigenbaum (1983)
Oakland (1989)
Quality is simply meeting the requirements
Quality is a predictable degree of uniformity and
Deming (1982)
dependability at low cost and suited to the market
Dodwell and Simmons (1994)
Quality is concerned with delighting the customer
Quality is rather like pornography in this respect. It
may not be easy defined, but it is known when it is
seen
Day and Peters (1994)

Source

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Culture management is an important aspect of leadership and plays a great role in


creating positive business environment for innovating and changing to the best. This
is vital to continuous improvements. It deals with the ability of leaders to know and
understand what the organization culture is, modifying that culture to meet the needs
of the organization as it progresses. Organizations that have tried to proactively exploit
new opportunities in the environment experienced successful culture change (Baron,
1995; Horner, 1997). The development of employees empowerment and autonomy
beside their participations in decision-making process are very important for ensuring
tourism quality.
As Hamel and Prahalad (1993, p. 76) have commented long term competitiveness
depends on managers willingness to challenge continually their managerial frame to
maximize their benefits from the new opportunities and minimize the negative effects.
This needs to create an atmosphere of generosity, freedom and safety in which
innovation can flourish. Effective knowledge management is essential to innovation
and it also needs an atmosphere of generosity, freedom and safety if it is to act as the
river on which innovation can sail (Brand, 1998, p. 17). For example, The Ritz-Carlton
fosters a work environment where diversity is valued, quality of life is enhanced,
individual aspiration are fulfilled, and The Ritz-Carlton mystique is strengthened. The
Ritz-Carlton pledges to provide excellent personal service and facilities for its
customers who will always enjoy a warm, relaxed yet refined ambience.
Customization has begun to play an important role in the tourism industry. Tourism
operators are attempting to gain a competitive edge by catering for the individual
needs of clients. The tourist product has thus been transformed over time from being
completely dominated by mass tourism to an industry that is quite diversified and
caters more to the individual needs of its participants, for example, the niche market
has become an important factor in the tourism industry reflecting the need to diversify
and customize the industry and ensure the sustainability of the product . . . the main
nich markets such as sports travel, spa and health care, adventure and nature tourism,
cultural tourism, theme parks, cruise ships, religious travel and others hold great
potential and are developing rapidly. So, suppliers will have to pay more attention to
the way people think, feel and behave than they have done hitherto. The increased
travel experience, flexibility and independent nature of the new tourists are generating
demand for better quality, more value for money and greater flexibility in the travel
experience.
In general terms, customer satisfaction is seen as the essential determinant of
business success (Moore et al., 1998). On the other hand, as the competition has
increased, service quality has been identified as a determinant of market share, return
on investment and cost reduction; thus it is seen as critical to corporate success (Burch
et al., 1995). There are three essential factors that have forced the firms focusing on
quality (Lockwood, 1994). These are: the style of offering the goods and services;
technological developments providing new service challenges, although the personal
contact is highly valued as an important theme; and, finally, increase in competition
and international markets. Within this context, evaluating service quality offered to
customers is essential, and several evaluation models have been developed
(Parasuraman et al., 1985; Cronin and Taylor, 1992; Cheung and Law, 1998). The
most known and used models are SERVQUAL, SERVPERF, TQS and ISQM.
The widely used model is SERVQUAL developed by Parasuraman et al. (1985).

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The SERVQUAL model consists of 22 items on service attributes, which are grouped
along the five dimensions of tangibles, reliability, assurance, responsiveness, and
empathy. On the other hand, the SERVPERF model developed by Cronin and Taylor
(1992) includes these 22 items of SERVQUAL. What are additional in the SERVPERF
model are the overall ratings of satisfaction, perceived service quality and purchasing
intention. The main difference between SERVQUAL and SERVPERF is the focus of
SERVPERF underlying the fact that customer satisfaction is the result of (mostly)
service quality. As the case is based on public services and firms/institutions, the
current structure mainly bureaucratic is not compatible with the implementation
of quality. The centralized organizational structure of public firms retains new
incentives to be conducted. Thus, the efforts of managers of these firms play important
roles in applying service quality incentives.
Tourism product quality
Tourism is a highly competitive industry, and tourism enterprise sector can no longer
compete on the basis of cost alone. Quality is, therefore, a key element for the
competitiveness of the tourism industry. It is also important for the sustainable
tourism development of the industry and for creating and improving jobs. Therefore,
promoting quality in tourism and tourist products is a priority in different tourism
activities.
However, the main reasons behind the complexity of measuring quality in tourism
could be summarized as follows (CEC, 2001):
.
First there is the continuation of significant growth in tourism demand and the
volume of tourism in tourist destinations, along with diverging developments in
the various types of tourism. An appropriate response to these changes may be
found only through the emergence of new types of tourism and control mass
tourism for the sake of quality.
.
The lack of skilled manpower for certain jobs, mainly because of the working
conditions that may not encourage creative and innovation; the development of
transport and its effect on flows, service quality, sustainable development and
environmental protection; and the adoption and incorporation of new
information and communication technologies as a factor of competitiveness.
.
Tourism is a service sector with a particularly complex product which depends
on an extremely fragmented supply. Each link in the tourism value chain (travel
agencies, tour operators, carriers, hoteliers, restaurateurs, etc.) offers one element
in the overall product. Together, these components determine tourists
experiences and their appreciation of the quality of the service. The tourist
destination is the main place of consumption of tourist services and, therefore,
the location and place of activity of tourist businesses. Tourists identify the
product with both the businesses providing a service and the destination visited.
.
For a big number of people tourism activity does not meet a vital need, tourist
behaviour is particularly volatile and subject to psychological and social
influences, personal sensitivities and short-term reactions. If the image of just
one link in the chain is affected, it is the whole tourism value chain that suffers
the consequences. The foot-and-mouth epidemic and the various oil slicks that
have affected European coastlines in the recent past have already shown

the negative effect of a current event on the image of a tourist destination or


region, to the immediate detriment of the tourism industry.
The tourism product is extremely diverse. Natural and cultural resources, tourist
facilities, the communications infrastructure, accommodation and restaurants
are the basic resources of a tourist destination. The combination of local tourism
resources and the services offered determines the type of tourism to which a
destination belongs, such as coastal or mountain tourism, sport or religious
tourism, thermal or gastronomic tourism and, of course, business tourism.
In addition, vertical interdependence between tourism businesses is more
pronounced than in most other sectors of the economy. Such interdependence,
which also exists at world level, results in what are sometimes complex
structures and trends in commercial relations. Apart from businesses and their
representative organisations, destinations, with their different activities,
combining public and private interests, are important stakeholders.
Because of its diversity and fragmented nature, the tourism sector has no clear
identity. This may, in part, explain why tourism has featured little at a political
level, compared with its economic and social importance.
The diversity of the business environment and the public and private
stakeholders involved in tourism, its effect on many other economic activities, its
very wide social and emotional dimension and the geographically dispersed and
very variable consumption of the product mean that tourism is of a very
pronounced horizontal nature. A large number, if not the majority, of political
fields may directly affect it considerably, such as those for enterprise, transport
and regional development. The annual report on community measures affecting
tourism, which the commission drew up at the same time as this communication,
provides detailed information on this subject.

For tourism organization, to deal with these challenges successfully and to be able to
measure quality in tourism, it is necessary to take the following factors into
consideration when deciding tourism quality strategy:
.
the fundamental role of information, knowledge and its dissemination;
.
the need for competent human resources motivated by medium and long-term
prospects;
.
the integration of environmental policy and the promotion of sustainable
tourism;
.
recognition of the need for European harmonization of the concept of quality of
tourism services and infrastructures, and its assessment and monitoring;
.
the need to speed up the integration of information society tools and services in
all tourism activities and businesses, in particular SMEs;
.
the need for a network of the stakeholders involved and a generalized
partnership, particularly between those in the field to ensure implementation of
all the recommendations; and

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overall, the quality and satisfaction levels are average. Education for managers
and service personnel is the main proposal for the improvement in service
quality and consumer satisfaction.

Tourism quality requirements


According to world tourism organization program quality in tourism could be defined
as:
. . . the result of a process which implies the satisfaction of all the legitimate product and
service needs, requirements and expectations of the consumer, at an acceptable price, in
conformity with the underlying quality determinants such as safety and security, hygiene,
accessibility, transparency, authenticity and harmony of the tourism activity concerned with
its human and natural environment.

This definition could be summarized in what is called consumer value equation


(Fitzsimmons and Fitzsimmons, 2001):
Value

Results produced for the customer Process quality


Price to the customer Costs of acquiring the services

The analysis of each term used in this definition suggests concrete actions which can
be evaluated from the perspective of quality criteria (Myburgh, 2001; WTO, 1991, 1993,
1995):
.
Result implies that quality is attained and perceived at a given time. It cannot
be in place without harmonious and active engagement of all the factors
intervening in tourism experience. The result can be measured by consumer
satisfaction as well as by social, environmental and economic effects of the
tourism activity concerned.
.
Process means that a single undertaking is not sufficient to attain quality.
Work towards quality always has to be in place, it cannot discontinue because of
the temporarily attained quality result. It also implies a seamless or flawless
process in which it is possible to identify and do away with the constrains of a
supply which spoil the tourism product and are responsible for direct and
indirect losses to the company or destination. Also it is necessary to note that
because the customer is a participant in the service delivery, improvement in
process quality must be acceptable to customers.
.
Satisfaction introduces the elements of subjectivity in quality perception.
According to their characteristics, customers have different requirements and
expectations. Informed quality-driven marketing caters to these characteristics
and attempts to identify consumers according to the different types and levels of
perceived quality. This should be achieved with suitable prices levels.
.
Legitimate brings into the analysis the elements of rights and entitlement.
Consumers cannot expect to receive more than what they remunerate by
payment or what has been determined by social and environmental limits. The
role of tourism planners and entrepreneurs is to relate quality types and levels to
remuneration and external limitations, taking into consideration the private and
social costs relating to providing or offering tourism services.

The notion of needs follows on the concern for legitimacy and looks for
satisfying peoples basic and vital needs which should never be overlooked while
bringing into tourism projects and programmes the other aspects with a view to
introducing attractions, strengthening experiences, etc. The needs are primarily
related to the underlying quality determinants, although over time the
expectations related to the type and volume of basic needs change and usually
increase. Basic needs of the past are not exactly the basic needs of today.
The notion of product requirements emphasizes the need to relate a single
service and facility use to the whole product and the total tourism experience.
One good quality service is not sufficient to give rise to tourism product quality
perception, although an excellent service may positively impress the consumer to
make him or her close their eyes to shortcomings and defects experienced
elsewhere in the tourism product.
The term service requirements relates quality to its human, personal and
personnel dimensions which are often intangible and apparently difficult to
measure, evaluate and quantify in contrast with the physical attributes of
tourism facilities which are used primarily in facility classifications or grading.
However, certain service elements are quantifiable, for example, waiting time,
frequency of service (e.g. cleaning), the number and type of services included in
the basic price, etc.
The term expectations relates to the requirement of positive communication
and perception of the product characteristics to the potential consumer. There
should be no negative surprises at the time of delivery of a service or supply of a
product, the consumer must receive what has been promised (or even more).
Expectations should also be legitimate, there are limits to expectations, some
expectations cannot be fulfilled even at a very high price which can be offered.
The term consumer relates to individual (end) consumers, who may include
groups of people (e.g. a family), corporate consumers (e.g. a company purchasing
an incentive trip) and commercial intermediaries (e.g. a tour operator). The latter
may request that the product quality be assessed and certified by its own
representative or a recognized external third party.
Acceptable price suggests that the clients expectations reflected in the price
cannot be attained at any cost, and that positive surprises should not be too
generous, otherwise this may imply excessive allocation of resources which do
not receive adequate remuneration. If quality is guaranteed and the product is
exceptional, there should be no expectation that it should be sold cheap.
The underlying quality determinants suggest that there should be common,
irrevocable criteria of quality which are vital for the consumer independently of
category or class of the product, establishment, facility or service sophistication.
They establish the minimum level of consumer protection under which quality,
or total quality, is impossible to achieve, or when failing to meet any of such
determinants will significantly reduce the quality of tourism experience.

Tourism quality standards


World Tourism Organisation (WTO, 2003) has designed six standards for tourist
product or service that have to be put into consideration when tourism

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enterprise/destination management is taking decision related to tourism product


design and marketing. These standards could be summarized as follows:
(1) Safety and security. A tourism product or service cannot represent danger to life,
damage to health and other vital interests and integrity of the consumer (even if
we talk about adventure tourism). Safety and security standards are normally
established by law (e.g. by fire prevention regulations) and should be
considered as quality standards per se.
(2) Hygiene. For example, an accommodation facility just has to be safe and clean,
one cannot pretend that such requirements are more important to high-class
establishments. Food safety standards (often also established by law) must be
met and be common to all types of food outlets, from street vendors to luxury
gourmet restaurants to airline catering.
(3) Accessibility. This determinant requires that physical, communication and
service barriers must be done away with to allow, without discrimination, the
use of mainstream tourism products and services by all people irrespective of
their natural and acquired differences, including people with disabilities.
(4) Transparency. It is a key element to provide for legitimacy of expectations and
consumer protection. It relates to providing and effectively communicating
truthful information on the characteristics and coverage of the product and its
total price. In includes to state what is covered by the price and what is not in
the product on supply.
(5) Authenticity. In a commercial world, authenticity is the hardest and most
subjective quality determinant to attain. It also has marketing and competition
dimensions. Authenticity is culturally determined and one of its results is making
the product markedly distinct from other similar products. Authenticity must
meet consumer expectations. It diminishes and eventually terminates when the
product loses its links with its cultural and natural background. In this sense, a
genuine ethnic restaurant can never be entirely authentic in a place distinct
from its original setting. This does not mean that such an establishment cannot
be an attraction and that it cannot be assessed from the viewpoint of quality with
respect to production (content and design), marketing, distribution, sale and
delivery of the service concerned. A theme park representing other lands and far
away cultures is a good example of an initially artificial tourism product which
may create an authenticity and a quality image of its own. On the other hand, an
authentic product can also develop and adapt to needs and expectations.
(6) Harmony. Harmony with the human and natural environment pertains to
sustainability which is a medium- and long-term concept. Maintaining the
sustainability of tourism requires managing environmental and socio-economic
impacts, establishing environmental indicators and maintaining the quality of
the tourism products and tourist markets (WTO Guide for Local Authorities on
Developing Sustainable Tourism (WTO, 2003)). There can be no sustainability
without quality.
Quality should be implemented through a comprehensive system under the condition
of consistency and harmony for the quality system components or its subsystems
(value chain components).

Value creation management


The creation of value is managed through what is called supply chain or value chain
(Dumond, 2000), which refers to a series of integrated, dependent processes and
activities within/outside a tourism business enterprise through which value is
transferred to the final customers. This new managerial system for managing the value
creation processes concentrates on:
.
create improvements in the tourism product or service that increase the tourists
sense of its worth; or
.
reduce operation costs through the chain.
It is necessary to involve the customer in internal operations by incorporating
customer feedback into improving tourism product/service or process quality, placing
customers on internal teams or linking them into the companys information system.
Also involvement of the suppliers in the tourism companys operations is equally
essential in value management. These procedures give the tourism
enterprise/destination the opportunity to gain a competitive advantage and improve
its product/service quality by:
.
responding quickly to customers needs and requirements with new ideas and
technologies;
.
anticipating and tailoring product/service according to what exactly customers
demand characteristics are; and
.
personalizing the tourism product/service provided.
However, meeting customer expectations is not enough to be a world class
organizations. A world class organization expands on these expectations to the levels
that competitors find difficult to meet. Management is proactive in promoting higher
standards of performance and identifying new business opportunities by listening to
customers. World class service organization such as Disney, Marriott, and American
Airlines define the quality standards by which others are judged.
Quality system management
Quality has become a major interest of public and private tourism business enterprises,
according to the tourism market evolution, in terms of both supply of new tourism
services and the increasing complexity of tourists demand. Such a crucial issue
requires a comprehensive approach and a more definite integration among all the
factors involved in tourism.
Policies improving the quality of tourism services production and delivery should
be matched with both the features of the destination and the explicit/implicit
customers expectation. It is only through this synergy that competition, rising from
the value of global supply and its perception and evaluation by clients, can be met and
challenged.
An integrated approach to quality management is necessary because so many
different elements affect the tourists perception of a destination (such as transport,
accommodation, information, attractions, the environment, etc.). Integrated quality
management needs to take into account tourist businesses, tourists interests, the local
population and the environment, and to have a positive impact on all of them.

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It is not sufficient to inspect, control, or assure quality in order to achieve customer


satisfaction. TQM requires the application of quality management rules and principles
to every component and at every level of the organization. Everyone should be
committed to continuous improvement in their part of the operation. Through this
participation and commitment, with the use of different tools and techniques that the
TQM concept has adopted or developed, quality can be managed effectively. As a
result the quality system will be capable to minimize errors, to ensure continuous
improvement leading to excellence and to delight the customer (Augustyn, 1998;
Creech, 1994; Juran, 1964). Recent researchers and experts have proved that the concept
of TQM is currently the best possible strategy for building quality management
system to achieve or gain competitive advantage through achieving customer
satisfaction (Wilson et al., 1995; Eraqi, 2002). However, from the view points of
relationships between the quality systems subsystems, there are some shortages
they are:
.
Lack of advanced processes as a result they are based on the use of basic quality
management methods that have been developed at the lowest level of inspection
and quality control by setting basic quality objectives and standards depending
on basic statistics. In some cases quality assurance instruments techniques have
been applied like certificates and rewards.
.
Lack of comprehensiveness because quality management techniques are applied
in a selective manner without taking TQM concepts as a comprehensive
philosophy. These quality-management processes have inadequate tools of
monitoring and feedback.
.
Lack of consistency, inconsistency results from the incompatibility of
subsystems objectives with the quality objectives of the whole system.
For example, a room of top quality standard as a hotel X objective, is not in a position
to compensate the unfriendly and inhospitable behaviour of the hotel staff. Several
small tourism enterprises base their processes on the concept of inspection or quality
control, independently of the national or regional quality requirements.
In view of the fact that the great majority of public and private tourism
organizations are aware of and interested in quality improvement in tourism, the
employment of inappropriate tourism quality systems has been associated with the
major source of current quality problems in tourism. These problems are reflected in
an increasing number of customers dissatisfied with their total tourism experience.
The lack and incapability of securing an advanced, comprehensive, and consistent
quality-management process constitutes the major weakness of tourism quality
systems. Shortcomings in the systems inputs and its relations with the suppliers make
it impossible for the quality systems of individual tourism enterprises to close the
quality perception gap and quality control gap. None of the existing tourism quality
systems is in a position to introduce the required changes that would enable them to
conform to the conditions of tourism quality enhancement. Therefore, a new tourism
quality system, based on co-operative links among private, public and voluntary
organizations and operating within a tourism destination area, has been proposed. The
establishment of a total quality tourism consortium, TQTC, within the framework of
this system enables quality enhancement inasmuch as the TQTC is in a position to:

.
.

secure adequate inputs and close the tourism quality perception gap;
develop an advanced, comprehensive and consistent quality-management
process that converts the inputs into outputs (total quality tourism products);
and
manage effectively the relationships with the external environment and the
suppliers in particular with the result of bridging the tourism quality control gap.

The conceptual model of service quality (SERVQUAL), developed by Parasuraman


et al. (1990), is regarded as an important tool for identifying quality improvement areas
within individual service organisations in relation to enhancing customer satisfaction.
The model measures tangible and intangible elements of the service and investigates
gaps in the customer-supplier chain to highlight target areas where quality may be
improved. These gaps include the gap between:
.
customers expectations and managements perceptions of customers
expectations;
.
managements perceptions of customers expectations and service quality
specifications;
.
service quality specifications and service delivery;
.
service delivery and external communications to customers; and
.
customers expectations and perceived services.
The success of SERVQUAL as a concept depends, however, on circumstances in which
a tourism destination area attempts to survive, grow and improve the quality of tourist
products or services.
Policies for tourism quality continuous improvements
Quality is the perception by the tourist of the extent to which his expectations are met
by his experience of the product. Quality is not to be equated to luxury, and must not be
exclusive, but must be available to all tourists, including those who are with special
needs. The tourist product should be seen as the destination and process resulting in
the tourists overall experience. The key stakeholders are organisations fulfilling the
roles of: policy makers, destination management and quality control; suppliers of
tourist sub-products; commercial intermediaries; training suppliers; the guests, and the
host population.
The assessment of the contribution of relevant community policies and
programmes to quality in tourism revealed the following policy areas as particularly
relevant to quality development: structural policies; consumer protection; environmental
policies; transport and enterprise policies. Of these, the structural funds offered the most
potential to directly influence quality improvement in tourism.
There are four priority areas requiring specific efforts, they are:
(1) Indicators for the measurement of the quality improvement process. Quality
improvement is a cyclical and continuing process, and as such must be able to
be measured and evaluated. A list of appropriate indicators is regarded as a
management tool for use by those who are responsible for the different aspects
of quality improvement, e.g. destination management.

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(2) Benchmarking. Benchmarking of destinations will help to ensure quality


improvement and could benefit from common quality indicators. It should be a
voluntary exercise, led by the destinations, supported by information-exchange
procedures based on networking.
(3) Non-financial support for tourism SMEs implementing quality systems. E.g.
consultancy, business advice, flora and fauna, etc. should be improved to
encourage adoption of a quality approach, this in preference to direct financial
aid, which risks distorting local competition.
(4) More intensive use of structural funds to improve the quality of tourist
products. The structural funds should concentrate resources on creating the
framework for tourism business development, rather than supporting
individual enterprises or destinations, (e.g. through training, infrastructure
improvement, non-financial business support). Tourism authorities should be
actively integrated into the implementation and operation of structural fund
programmes. There is a need for better dissemination of information on the
operation of structural funds programmes throughout the tourism industry.
Tourism services quality in Egypt
On the basis of the above analysis, quality can be considered as a philosophy for
guiding tourism business managers in taking their managerial decisions on the level
of all tourism enterprise/destinations departments. For achieving tourism services
quality (TServQual) tourism organization management has to ensure that fulfilment of
three requirements:
(1) internal customer satisfaction;
(2) external customer satisfaction;quality-management process; and
(3) achieving the efficiency of processes.
In the context of this philosophy of quality, this paper depends on the first two factors
for evaluating TServQual in Egypt, from the view points of the internal customers
(employees) and the external customers (tourists) assuming that the efficiency of
processes has been fulfilled.
Research methodology
The research sample frame is based on two groups. The first one is the number of direct
employees in the Egyptian tourism sector which amounted to 1.2 million employees in
the year 2001 (ETF, 2001). The second is the number of departures at Cairo Airport
which amounted to 252,000 in average per month (Egypt, 2001). Sample size of the first
group is 500 employees and 700 tourists for the second group. These two samples sizes
have been decided according to the outcomes of discussions with tourism experts from
the Tourism Training and Research Department (TTRD) of Ministry of Tourism.
There are two questionnaires, one for the employees to measure the internal
customer satisfaction indicators (employee satisfaction). The other questionnaire is
designed for tourists to measure the external customer satisfaction level (tourist
satisfaction). The questions of both questionnaires have been chosen according to the
output points of two pilot studies and discussion with ten tourism experts from
the tourism experts from the TTRD. Data has been collected through distributing 500

questionnaires among employees from 50 Egyptian tourist companies who have


worked in the tourism sector for at least two years. Among tourists at Cairo Airport
and the Egyptian Museum, 700 questionnaires have been distributed. The questions of
both questionnaires have been designed based on the outcome of reviewing the
relevant literature and with the help of the experts of TTRD. The two samples items
(employees and tourists) have been chosen randomly.
Likert scale has been used to measure the indicators of employee satisfaction.
This scale involves a serious of questions or statements related to the attitude in
question. The respondent is required to indicate degree of agreement or disagreement
with each of these statements, and responses are given a numerical score that will
consistently reflect the direction of the persons attitudes on each question/statement.
The respondents total score is computed by summing scores for all statement and the
final measure depends on the percentage of each indicator (Kinnear and Taylor, 1991).
Based on Likert scale it has been suggested three options (good, fair, and weak) for
each question/statement to measure the external customer satisfaction.
Questionnaires have been distributed and collected under the supervision of TTRD
of the Ministry of Tourism.
The validity and reliability of these processes are based on the outcomes of
discussions with the Egyptian tourism experts and the inter- items statistical correlation
indicators. The inter-items correlations, according to the results of using SPSS Ver. 10,
range from 0.749 to 0.972 for employee satisfaction indicators and from 0.601 to 0.971 for
tourists satisfaction indicators. The a value (Cronbachs a coefficient) for the scale of
employees satisfaction indicators is 0.9915 and the corrected item total correlation
ranges from 0.9699 to 0.8628. For the scale of tourists satisfaction indicators, the alpha
value is 0.9749 and the corrected item total correlation ranges from 0.9724 to 0.8287. In
both two cases the value of alpha is above 0.7000 and the range of corrected item total
correlation is greater than 0.3000. So the scale of satisfaction indicators that both two
cases can be considered reliable with the two chosen samples (Pallant, 2001).
However, there is a number of limitations which faced this research as follows:
.
the sample size is small, compared with the size of total population, that was
reflected on the level of reliability of the research results; and
.
the limited time allowed to the respondents was reflected on the validity of the
research outcomes, because they are interviewed at the last time of their journey
by the time they are ready for departure.
The internal customer satisfaction
For achieving this task there were 500 questionnaires which have been distributed
among employees and managers from 50 tourist companies based on a random
technique. The internal customer satisfaction is measured as follows.
The mean of employees satisfaction indicators
Table II demonstrates the statistical mean of employees satisfaction indicators.
It is clear that the statistical mean of the internal customer satisfaction indicators
ranges from 2.4 to 3.7. The location of this range is between the scale of agree and the
scale of neither agree nor disagree with standard deviation that ranges from 0.9755 to
1.4121. This result indicates that the level of the internal customer satisfaction is still
less than the accepted level from the view points of employee.

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Items/the employee opinions


A. Tourism organization management attitudes towards quality
1. Tourism company/destination attention is focused on meeting customer
quality requirements
2. Management leads the way in disseminating TQM values throughout the
organization structure
3. Employees are asked and empowered to continuously improve all key
business processes
4. Management nurtures a flexible and responsive corporate culture
5. Management systems support fact-based decision making
6. Partnerships with suppliers improve tourism product or service quality
B. The health of tourism business environment
7. Employees are involved in the strategic planning process, providing its
inputs as well as developing appropriate plans to support the organisations
short- and long-term objectives and goals
8. Human resources, HR, planning is proactive rather than reactive,
covering all key issues including recruitment, retention, training and
development, leadership succession, employee participation, recognition and
reward, management-labour relations and employee satisfaction
9. The Tourism organization/destination has a wide variety of mechanisms
to encourage employee participation at all levels, promote teamwork and tap
on the innovative potential of its employees

Table II.
Internal customer
satisfaction indicators
descriptive statistics

Meana

Std
deviation

2.7400

1.1467

2.3700

1.2555

3.4800
3.7000
3.5800
3.0800

0.9755
1.0735
1.0982
1.1732

3.0200

1.1145

2.9900

1.4121

2.5300

1.1627

C. Offering suitable opportunities for training and a fair mechanism for performance measurements
10. The tourism organization/destination has a systematic approach to
identify training and development needs for all levels of employees, taking
into account skills requirements and current skills inventory
3.2400
1.2351
11. The tourism organization/destination has a systematic approach to assess
the effectiveness of training and development undergone by employees
2.8000
1.1325
12. The tourism organization/destination has a systematic approach to
measure employee satisfaction, obtain feedback from employees, and act on
issues arising from such feedback
2.4600
1.1964
13. The tourism organization/destination has a fair and effective system to
measure employee performance
2.5800
1.2597
14. The tourism organization/destination has a wide variety of reward and
recognition schemes that support high performance, innovative and creative
behaviour, and are linked to the corporate objectives and values
3.1000
1.1544
15. The tourism organization/destination regularly evaluates and improves on
its HR planning process, employee participation, training and development
process, employee satisfaction approach, and recognition and reward systems
2.9000
1.3392
Note: aLikert scale: 1-5 (strongly disagree-strongly agree)

Proportional distribution of responses of employees


Table III shows the proportional distribution of responses of employees.
It is clear from the previous table that the internal customer (employees) satisfaction is
weak because the average of satisfaction percentage has ranged from 32 per cent for
disagree scale and 12 per cent for strongly disagree, and there is only 28 per cent from the
total sample (500 employees) who are satisfied (28 per cent for agree). This result does not
compatible with total quality requirements. This result is supported by the following
criteria:

Strongly agree
(per cent)

B. The health of tourism business environment


7. Employees are involved in the strategic planning
process, providing its inputs as well as developing
appropriate plans to support the organisations short
and long-term objectives and goals
8. Human resources, HR, planning is proactive
rather than reactive, covering all key issues
including recruitment, retention, training and
development, leadership succession, employee
participation, recognition and reward,
management-labour relations and employee
satisfaction
9. The tourism organization/destination has a wide
variety of mechanisms to encourage employee
participation at all levels, promote teamwork and tap
on the innovative potential of its employees
Average (B)
20
26

16
13

33
36

5
11

12

50

25

14

45

18

15

56

18
17

15

18

11

15

33

13

Neither agree nor disagree


(per cent)

19

Agree
(per cent)

A. Tourism organization management attitudes towards quality


1. Tourism company/destination attention is
focused on meeting customer quality requirements
10
2. Management leads the way in disseminating
TQM values throughout the organization structure
8
3. Employees are asked and empowered to
continuously improve all key business processes
8
4. Management nurtures a flexible and responsive
corporate culture
23
5. Management systems support fact-based
decision-making
17
6. Partnerships with suppliers improve tourism
product or service quality
11
Average (A)
13

Items/the employee opinions

37
31

22

35

33
29

16

15

18

38

51

Disagree
(per cent)

20
15
(continued)

20

7
9

28

Strongly disagree
(per cent)

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485

Table III.
Internal customer
satisfaction indicators

Table III.
Agree
(per cent)

Neither agree nor disagree


(per cent)

C. Offering suitable opportunities for training and a fair mechanism for performance measurements
10. The tourism organization/destination has a
systematic approach to identify training and
development needs for all levels of employees, taking
into account skills requirements and current skills
inventory
17
33
14
11. The tourism organization/destination has a
systematic approach to assess the effectiveness of
training and development undergone by employees
10
19
19
12. The tourism organization/destination has a
systematic approach to measure employee
satisfaction, obtain feedback from employees, and
act on issues arising from such feedback
7
15
18
13. The tourism organization/destination has a fair
and effective system to measure employee
performance
8
20
17
14. The tourism organization/destination has a wide
variety of reward and recognition schemes that
support high performance, innovative and creative
behaviour, and are linked to the corporate objectives
and values
16
22
20
15. The tourism organization/destination regularly
evaluates and improves on its HR planning process,
employee participation, training and development
process, employee satisfaction approach, and
recognition and reward systems
18
18
13
Average (C)
13
21
17
General average
12
28
16

Strongly agree
(per cent)

7
7

23
23

13
12
12

45

37
32

40

38
37
32

Strongly disagree
(per cent)

29

Disagree
(per cent)

486

Items/the employee opinions

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Tourism organization management towards quality as criterion is relatively


weak because there is 36 per cent from the employees agree and 13 per cent
strongly agree, however, there is 29 per cent with the scale of disagree and 9 per
cent with the scale of strongly disagree.
The health of tourism business environment indicates that 31 per cent from the
total sample does not support this criterion (31 per cent disagree) and 15 per cent
strongly disagree, and there is 26 per cent support this indicator (26 per cent
agree) and 11 per cent is strongly agree.
Offering suitable opportunities for training and a fair mechanism for
performance measurements as criterion for internal customer satisfaction is
weak because there is only 21 per cent agrees and 13 per cent strongly agree, and
there 37 per cent does not support this indicator (37 disagree) and 12 per cent
strongly disagree.

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487

Figure 1 shows the percentage of general average of the internal customer satisfaction
indicators.
External customer satisfaction
External customer satisfaction as dependent variable of equality, from the viewpoints
of tourists, has been measured depending upon a number of criteria such as:
.
the general evaluation of tourism services in Egypt;
.
the extent to which tourists are satisfied with hotels services;
.
customer value related to tourism services prices;
.
level of services at accommodations;
.
internal transport quality;
.
the extent to which tourism services prices at suitable levels; and
.
tourist desire to repeat his/her visit to Egypt.
The next tables explains the tourists points of view related to these criteria, based on a
survey distributed among 700 tourists whom are interviewed at International Cairo
Airport and the Egyptian Museum.
Agree
Neither agree
nor disagree
Disagree
Strongly
Disagree
Strongly Agree

Strongly
Disagree
12%

Strongly
Agree
12%

Disagree
32%

Agree
28%

Neither
agree
nordisagree 16%

Figure 1.
Likert scale indicators of
the internal customer
attitudes

BIJ
13,4

The mean of tourists satisfaction indicators


Table IV explains the statistical mean of tourist satisfaction indicators.
According to the previous table the statistical mean is more than 2 (the scale of fair)
which means that the level of TServQual in Egypt is accepted from the view points of
tourists.

488

Proportional distribution of responses of tourists


Table V shows the proportional distribution of responses of tourists.
The results show that the average of external customer satisfaction (tourists
satisfaction) with tourism services in Egypt ranges from 71 per cent to the scale of good,
18 per cent for the scale of weak to 11 per cent for the scale of fair. However, the general
evaluation of tourism services, from the viewpoints of tourists, in Egypt is good.
The weakness point may attributed to the internal transport quality criterion which
scored 60 per cent for the scale of good.
There is 22 per cent of tourists do not like to repeat their visit to Egypt for the
following reasons (according to the analysis of tourists viewpoints):
.
the weakness of infrastructures services levels, 40 per cent;
.
unsuitable environmental conditions, 30 per cent;
.
bad behaviour of people, 20 per cent; and
.
unsuitable safety and security conditions, 10 per cent.
Figure 2 shows the percentage of general average of the external customer satisfaction
indicators.

Table IV.
External customer
satisfaction indicators
descriptive statistics

Tourists satisfaction criteria

Meana

Std deviation

The general evaluation of tourism services in Egypt


The extent to which tourists are satisfied with hotels services
Customer value related to tourism services prices
Level of services at staying places
Internal transport quality
The extent to which tourism services prices at suitable levels
Tourist desire to repeat his/her visit to Egypt

2.7400
2.5200
2.6000
2.6600
2.2700
2.4600
2.4600

0.5941
0.7813
0.7354
0.6671
0.9265
0.8058
0.8303

Note: aSurvey scale: 1-3 (weak-good)

Tourists satisfaction criteria

Table V.
External customer
satisfaction indicators

The general evaluation of tourism services in Egypt


The extent to which tourists are satisfied with hotels services
Customer value related to tourism services prices
Level of services at staying places
Internal transport quality
The extent to which tourism services prices at suitable levels
Tourist desire to repeat his/her visit to Egypt
Average

Good
(per cent)

Fair
(per cent)

Weak
(per cent)

82
70
75
77
60
66
68
71

10
12
10
12
7
14
10
11

8
18
15
11
33
20
22
18

Conclusions
This paper has tried to examine the concept of quality as a philosophy that guides
tourism organization management when taking decision related to tourism services as
well as determining TServQual improvements requirements applied to tourism
services in Egypt.
The main conclusions of this paper can be summarized as follows:
(1) For improving tourism service quality it is necessary to achieve three
requirements:
.
internal customer satisfaction (employee satisfaction);
.
external customer satisfaction (tourists satisfaction); and
.
the efficiency of processes.
(2) For quality improvements it is necessary to be a creative and innovative
business environment which support the employee new ideas and their
participating in making decision processes.
(3) It is important to be a wide range of empowerment to give the employee the
opportunities to behave positively according to the condition he/she faces in
tourism competitive markets.
(4) In the case of Egypt it is necessary to restructure tourism business sector to be a
kind of cooperation between tourism enterprises such as strategic alliances in
the field of information technology, strategic marketing, etc.
(5) Business environment in the Egyptian tourism sector still has a number of
weaknesses that do not support the internal customer satisfaction for the
following reasons:
.
there is no suitable system for encouraging people to be creative (or to be
innovative) and participate in decision making processes;
.
the weakness of empowerment levels within tourism business enterprises;
and
.
the style of family business management overwhelmed tourism business
sector in Egypt and this put obstacles in the way of creativity and innovation.
(6) Tourism services levels are quite suitable, in general, from the viewpoints of
tourists (external customers).
(7) There is a lot of efforts need to be done for TServQual improvement in Egypt in
areas of infrastructure services, the environmental conditions, the safety and
security conditions, increasing people awareness, and the internal transport
quality.

Tourism services
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489

Weak
18%
Good
Fair
Weak

Fair
11%
Good
71%

Figure 2.
The grade of the external
customer satisfaction
indicators

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(8) It is necessary to be an effective system for designing and implementing more


efficient quality control measures in the areas of food safety, security and the
environmental tourism activities.
(9) It is necessary to be a kind of co-operation between tourism government
institutions and tourism private sector in the fields of tourism product safety
and tourism crisis management for improving TServQual in Egypt.
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Tourism services
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WTO (1995), Newsletter, Vol. 1.


WTO (2003), Quality standards, WTO tourism quality, World Tourism Organisation, availalble
at: www.world-tourism.org

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Further reading
Bemowski, M.T. (1991), The competitive benchmarking wagon, Quality Progress, January.
EC (1990), EC Directive on Package Travel, Package Holiday and Package Tours, EC Commission,
Brussels.

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www.emeraldinsight.com/1463-5771.htm

An empirically validated quality


management measurement
instrument
Prakash J. Singh

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management

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Department of Management, The University of Melbourne, Melbourne,


Australia, and

Alan Smith
Department of Mechanical and Manufacturing Engineering,
The University of Melbourne, Melbourne, Australia
Abstract
Purpose To develop a quality management (QM) measurement instrument that has sound
psychometric properties and recognizes a key feature of the field, i.e. QM is currently characterized by
three competing approaches: standards-based; prize-criteria; and, elemental implementation approaches.
Design/methodology/approach The three disparate approaches were analyzed to identify sets of
key constructs and associated items. The assembled instrument was empirically validated through a
survey of 418 Australian manufacturing organizations. A full set of reliability and validity tests were
performed. Wherever applicable, confirmatory approach using structural equation modeling was used.
Findings The results of psychometric tests suggest that the constructs of the three approaches
have good empirical support. In the manner in which the instrument is presented, it is possible to
separately measure constructs related to each of the three approaches.
Research limitations/implications The measurement instrument has been validated with
manufacturing organizations from Australia. It is applicability to other industry sectors or country
contexts needs to be verified.
Practical implications Practitioners and consultants can use the measurement instrument for
conducting QM benchmarking exercises within and across organizations. Researchers can use the
instrument in future studies for, inter alia, theory development in the area.
Originality/value The measurement instrument overcomes the shortcomings of the existing
instruments by explicitly including all three practical approaches to quality management. Also, a
rigorous psychometric validation process is adopted that provides credible outcomes.
Keywords Quality management, Performance measures, Psychometric tests, Australia
Paper type Research paper

Introduction
To hasten the rate of knowledge consolidation in the quality management (QM) area,
there needs to be greater consensus on its ontological bases and epistemological
principles among researchers. Measurement instruments that have sound
psychometric properties can make important contribution towards this end. These
instruments would provide confidence to users that the information they obtain are
reliable and valid. Further, if these instruments get universally accepted, then this will
prevent the continual reinvention of the wheel facilitate congruence in research, and
eventually, impact positively upon the intellectual development of the field (Filippini,
1997; Amundson, 1998; Wacker, 1998).

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q Emerald Group Publishing Limited
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The QM literature shows that several measurement instruments have been published.
Table I provides a summary of four such instruments. These four were selected for
analysis because psychometric details are provided. The researchers developed these
instruments with the intention of measuring organizational QM practices. Some other
researchers (Black and Porter, 1996; Zeitz et al., 1997) have used QM measurement
instruments, but have not provided details of how they were developed.
As Table I shows, all of these instruments attempt to ensure that good quality
information can be collected. However, these instruments have a number of shortcomings.
Firstly, none of these instruments reflects the current state of practice in the area. The QM
area has evolved to the stage where three major approaches dominate: the standards-based
approach in which the ISO 9000 is the most prominent; the prize-criteria approach which
comprises the various business excellence and quality awards; and, the elemental approach
promoted by various academicians and practitioners. None of the published instruments
truly reflect the three-pronged approach that currently dominates: Saraph et al.(1989)
instrument reflects the modus operandi of the 1980s when the ideas of quality gurus such as
Deming and Juran were popular; Flynn et al.(1994) instrument is too broad-based (i.e.
addressing the concepts of World Class Manufacturing); and, Ahire et al.s (1996) and
Grandzol and Gershons (1998) instruments are narrowly focused on TQM only.
Secondly, there is significant disparity in the types of analyses used to demonstrate the
ability of the instruments to collect good quality information. Saraph et al.(1989), Flynn
et al.(1994) and, Grandzol and Gershon (1998) use exploratory approaches which have a
number of limitations. Saraph et al.s (1989) instrument has been used in other studies
(Quazi et al., 1998; Joseph et al., 1999), but the statistical procedures used to show reliability
and validity are limited to simple exploratory techniques. Only Ahire et al. (1996) use the
preferred confirmatory approach. Finally, many organizational theories, including those on
QM, have low universal applicability due to cultural, economic, political and social
differences that exist between countries (Shenkar and Glinow, 1994). Except Saraph et al.
(1989), the other existing QM instruments have been validated in organizations in the USA
and Japan. As a result, it is unclear if these instruments are suited for studies in other
countries. In sum, owing to differences in the subject areas emphasized, analysis tools used
and the domains in which the instruments are validated, there are significant differences in
the instruments, leading to low universal acceptance.
Whilst we understand the calls made for not reinventing the wheel and using
existing instruments, we feel the limitations outlined above are serious and warrant the
development of a new instrument. In this paper, an empirically validated QM
measurement instrument is presented. In order to ensure that the instrument reflects
the state of art in the field, the content is based on a review of literature and practice.
Also, a scientific process that comprehensively tests the psychometric properties of the
instrument is used. The outcome is a QM measurement instrument that has sound
reliability and validity that researchers and practitioners can use for benchmarking
within and across organizations.
The next section of this paper provides details of the instrument development and
psychometric validation process that was used. Within this section, details of the tests
performed are provided. The paper concludes by summarizing the characteristics of
the instrument, identifying the contributions it makes to the QM body of knowledge,
and describing the implications of the instrument to research and practice in the area.

QM as prescribed by quality
gurus and eminent academics
Companies in Minneapolis/St
Paul area in the USA

Areas emphasized

Flynn et al. (1994)

QM as part of World Class


Manufacturing (WCM)
Domain
USA and Japanese machinery,
transportation components
and electronics plants
Sample size(response rate) 20 firms (35 percent) 162
45 plants (60 percent) 716
respondents
respondents
Respondents
Quality managers and general Randomly selected managers,
managers
supervisors and workers
Level of analysis
Firm
Plant
Scale
5-point Likert scale
5-point Likert scale
Pre-testing of instrument? Yes
Yes pretest and pilot test
combined
Pilot testing of
No
instrument?
Analysis of pilot testing
Not applicable
Qualitative improvements
data
Content validation
Literature survey and expert Comprehensive literature
panel review
review
Multicollinearity of items No
No
analysis
Unidimensionality
No
No
analysis
Reliability analysis
Cronbachs a
Cronbachs a and item
intercorrelations

Saraph et al. (1989)

Instrument

Suppliers to USA Navys


Aviation Supply Office
273 respondents (47 percent)
Chief executive officers
Firm
6-point Likert scale
Yes

Motor vehicle parts and


accessories industry in the
USA
371 respondents (37 percent)
Plant managers
Firm
7-point Likert scale
Yes pretest and pilot test
combined

Cronbachs a

(continued)

Exploratory factor analysis

Confirmatory factor analysis


(goodness of fitness index)
Cronbachs a and
Werts-Linn-Jorsekog
coefficient

Comprehensive literature
review
No

Reliability and validity


analysis
Literature survey and expert
panel review
Inter-item correlation

Qualitative improvements

Yes

TQM

Grandzol and Gershon (1998)

TQM

Ahire et al. (1996)

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Table I.
Comparison of four
published QM
measurement
instruments

Ahire et al. (1996)

Final instrument
constructs (number of
items)

Predictive
(criterion-related)
validation

Exploratory factor analysis

Exploratory factor analysis


and univariate correlation
between selected constructs
and independent measures of
similar constructs

Convergent validity:
confirmatory factor analysis
(Chi-square difference between
all pairs of constructs)
discriminant validity:
Bentler-Bonnett coefficient
Canonical correlation between Structural equation modelling
Correlation between QM
(correlation between QM
QM scales and measures of
constructs and measures of
constructs and measures of
quality performance
quality performance
quality performance)
1. Top Management
Dimension I: Top
1. Role of divisional top
Commitment (6)
Management Support
management and quality
2. Customer Focus (4)
1. Quality Leadership (5)
policy (13)
3. Supplier Quality
2. Quality Improvement
2. Role of the quality
Management (6)
Rewards (6)
department (5)
4. Design Quality
D II: Quality Information
3. Training (8)
Management (6)
3. Process Control (3)
4. Product / service design (6)
5. Benchmarking (4)
4. Feedback (7)
5. Supplier QM (8)
6. SPC Usage (4)
D III: Process Management
6. Process management /
7. Internal Quality
5. Cleanliness &
operating procedures (10)
Information Usage (6)
7. Quality data & reporting (8) Organization (5)
8. Employee
D IV: Product Design
8. Employee relations (8)
Empowerment (5)
6. New Product Quality (4)
9. Employee Involvement (8)
7. Inter-functional Design
10. Employee Training (5)
Process (4)
D V: Workforce Management 11. Product Quality (4)
8. Selection for Teamwork 12. Supplier Performance (6)
Potential (3)
9. Teamwork (4)
D VI: Supplier Involvement
10. Supplier Relationship (4)
D VII: Customer Involvement
11. Customer Interaction (3)

Flynn et al. (1994)

Construct validation

Table I.
Saraph et al. (1989)

1. Exogenous leadership (5)


2. Continuous improvement (4)
3. Employee fulfilment (5)
4. Learning (5)
5. Process management (8)
6. Cooperation (8)
7. Customer focus (4)

Mean scale scores correlations


between exogenous and
endogenous variables

Exploratory factor analysis


and item-construct correlation

Grandzol and Gershon (1998)

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Instrument

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Instrument development and validation process


The psychometric method (Nunnally, 1978) was employed for the purpose of
developing and validating the measurement instrument. Based on this method, a
number of researchers have proposed instrument development and validation
processes (Malhotra and Grover (1998), Flynn et al. (1990) and Saraph et al. (1989).
A synthesized version of these schemes was used in this study. These included
conducting a literature review, identifying key constructs and associated items,
selecting suitable scale, pretesting, pilot testing, collecting data, and finally,
performing statistical tests on data collected. Details of these are provided next.
Literature review
A careful review of literature ensures that all the important aspects in the field are
covered, i.e. the instrument has content validity (Flynn et al., 1990). This is a subjective
process. For the instrument developed in this study, the literature review was based
mainly on the existing instruments, ISO 9000 (2000), the business excellence/quality
awards frameworks such as the Australian Quality Awards (2001), and ideas on QM
published by practitioners and academicians. A summary of this literature review is
presented in the next section.
Constructs of QM
Using the psychometric approach, the QM concepts were estimated with items which
were grouped into constructs. From the literature review, eight QM constructs were
synthesized. Also developed were one business environment and four performance
constructs. These constructs and their items are discussed below.
Top management leadership. The role of the top management leadership team is
regarded as being important by all three QM approaches. However, the scope differs.
In the standards-based approach, the top management leadership group is expected to
ensure that the QM system is regularly audited, revised and continually improved for
effectiveness. The top management leadership team also needs to ensure, where
relevant, that the QM system is based on statistical thinking. In the prize-criteria
approach, the top management leadership team plays a broader role than in the
standards-based approach. It needs to be committed to quality and use a participative
style in order to involve all stakeholders in creating quality-based value system for the
organization. As for the elemental approach, the top management leadership team
needs to demonstrate commitment to quality, take a long-term strategic view of
quality, and ensure that sufficient resources are available for quality related activities.
All three approaches advocate a contingent view to leadership. The approaches are not
prescriptive on the leadership styles needed for effective QM, suggesting that it is
possible to use any combination of participative and authoritative styles depending on
context. Similarly, leadership behavior can range from transformational to
transactional, again depending on context.
Customers. QM places great emphasis on organizations achieving strong customer
focus and high satisfaction levels. All three approaches reflect this core principle,
however, the extent of treatment differs. In the standards-based approach, the
emphasis is on ensuring that the requirements of customers are well understood and
that mistakes in this aspect are minimized. Organizations are expected to have
procedures in place to ensure this. In the prize-criteria approach, organizations are

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required to have systems to deal with customers complaints. Suitable feedback from
customers should be obtainable. Also, organizations need to systematically capture
customer requirements and satisfaction levels. The elemental approach includes all of
prize-criteria approach, with the addition of viewing customer satisfaction as an
important measure of quality.
Employees. All three approaches recognize employees as an important construct of
QM. The focus is on the organization enabling employees to contribute meaningfully to
quality of work. The standards-based approach concentrates on employees being aware
of and empowered to act on quality-related matters and being suitably trained for the
jobs they do. The prize-criteria approach focuses on having an open culture, teamwork,
and continuous improvement. The human resources management and remuneration
systems are required to be in place to support these. The elemental approach shares with
the standards-based approach the requirement that employees be aware of their roles
and goals and are trained for their jobs. It also shares with the prize-criteria approach the
need for open culture and teamwork. In addition, the elemental approach suggests
employees be engaged in continuous improvement of work output.
Suppliers. QM promotes the idea that long term, stable, cooperative and mutually
beneficial relationships with a few suppliers is preferable to having multiple suppliers
that are dealt with in an overly formal, competitive, contractual and arms-length
manner. The standards-based approach focuses on ensuring that misunderstandings
with suppliers are avoided, materials from customers are treated in the same way as if
they are from other suppliers and subcontractors are suitably pre-qualified. The
prize-criteria approach strongly emphasizes the need for mutually-beneficial
collaborative relationships. In addition, organizations are expected to have systems
in place to ensure quality of incoming goods and services, share relevant information
with suppliers, pass on some of the cost-savings to suppliers and make quality an
important criterion for selecting suppliers. The elemental approach is similar to the
prize-criteria in terms of developing long-term relationships, quality being the main
criteria for selecting suppliers and ensuring quality from suppliers. In addition to these,
the elemental approach expects organizations to involve suppliers in the development
of new products.
Information and communication system. All three approaches recognize that
an efficient and effective information and communication system forms the bedrock
upon which many quality initiatives and activities take place. However, the extent
to which each of the approaches addresses this construct differs considerably. The
standards-based approach has a rather narrow focus with emphasis on ensuing that
practices relating to documentation are sound, and that goods and services, whether
they are in-process or finished form, are traceable. The prize-criteria approach focus on
ensuring that the information and communication system outputs are used for
measuring performance and thus are of very high quality. The elemental approach
requires that the information and communication system enable data to be collected in
a timely fashion, transparently shared, and used to provide feedback to employees.
All three approaches require that information relating to quality is readily available.
Processes. All three approaches have strong emphasis on the business processes
that impact upon quality of products. The standards-based approach has a very
practical outlook to processes. A planned and systematic approach to quality is
required. Regular reviews of all aspects of operations are expected, and, if problems are

detected, remedial actions are required to be taken in a timely manner. Systems need to
be in place to ensure that defective products are not produced. The prize-criteria
approach takes a broader approach to processes and emphasizes the key role of
innovation, suggesting that high degree of innovativeness is required for continuous
improvement of processes. Also, there is recognition that a focus on quality needs to
start at the design stage. The elemental approach also recognizes this last point. In
addition, this approach requires that processes be safe, constantly monitored and
formal methods such as statistical process control are used when appropriate.
Wider community. Only the prize-criteria approach formally addresses the issue of
organizations needing to meaningfully engage with their wider community.
Organizations are expected to address their societal responsibilities and where
possible, provide support to relevant community groups. There is also an expectation
to reduce risks posed to society as a result of organizations activities, as well as share
best practice information where possible.
Competitors. All three approaches favor quality (ahead of cost, flexibility and
delivery) as the basis for competition. However, it is only the elemental approach that
seems to require specific actions. Organizations are required to assess the impact of
competition by benchmarking themselves against leading competitors, as well as
developing understanding of the competition they face.
Business conditions. The prize-criteria approach is the only one that explicitly requires
organizations scan their business environments as part of the strategic planning process
in order to assess the conditions they face. The scanning involves understanding the state
of the industry, macro-economic conditions, the rules and regulations that are in place, and
the rate at which changes take place in products, processes and customers.
Product quality. The standards-based and prize-criteria approaches both predict that
organizations can expect improvements in the quality of products that are produced.
Specifically, organizations can expect reductions in quality costs, defective and
wastage rates, as well as improvements in perceived product quality. The elemental
approach does not appear to make any explicit predictions in terms of direct product
quality performance outcomes. Instead, it appears to imply that product quality would
inherently improve once other aspects of QM are in place.
Customer satisfaction. Similar to the product quality construct, the standards-based
and prize-criteria approaches suggest that organizations can expect to generate high
levels of customer satisfaction. Organizations can expect to offer higher levels of
customer service, achieve greater consistency in documentation, have fewer
second-party audits and generate higher perceived quality by customers.
Business performance. The prize-criteria approach is the only one that makes explicit
predictions that its implementation will lead to financial and other organizational
performance outcomes. These are in the form of greater demand for products, better
operating efficiency levels, improved employee satisfaction levels, and better relationships
with suppliers. All of these culminate in improved profitability and market share levels.
Community relations. As with the business performance construct, the prize-criteria
approach is also the only one that suggests this approach will generate greater positive
involvement of organizations in community activities. This will enable greater levels of
community goodwill to accrue to organizations.
These QM constructs and the final sets of associated items in the form of a
questionnaire are shown in the Appendix. As can be seen, the three approaches have

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a number of constructs that share the same labels. However, the items for these
constructs are quite different for all three approaches, with only a handful being
common across two or three of the approaches. Also shown in the Appendix are the
scales used to measure the items. The rest of this section provides details of
psychometric analyses performed on the constructs of the three QM approaches.

500

Measurement scales
The Likert scale was used throughout to measure all the items. This scale is able to deal
with the conceptual nature of the subject area, large number of items and difficulties
with eliciting specific information from respondents. A five-point scale was used since
reliability does not improve further with higher-resolution scales (Forkeret et al., 1997).
Also, it was deemed not necessary to force respondents to choose a position by using an
even numbered scale. This is because it was felt that respondents might sometimes
genuinely arrive at a neutral position. Finally, a not applicable option was provided.
For the QM constructs, respondents were requested to indicate their level of
agreement with the items that most closely reflected the situation at their work site. For
the business conditions construct, managers perceptions of how their organizations
were affected by business environmental factors were gauged. As for the
organizational performance items, managers perceptions of the degree of
satisfaction their organizations had with their performance levels were assessed.
Pretesting
Independent third-party advice to fix possible tautological problems and improve the
clarity of the statements was obtained. A panel of eight people (experts in QM,
statisticians, and linguists) were asked to examine the draft questionnaire and suggest
possible improvements. Many useful suggestions were made and these were incorporated
into the instrument.
Pilot testing
The instrument was sent to quality managers of 50 manufacturing organizations in
Victoria, Australia in order to obtain feedback on the questionnaire. Useable responses
were received from 22 organizations. A range of statistical tests for reliability and
validity was performed. However, the small sample size meant that some tests were not
meaningful. As a result, the items that violated the statistical tests that could be
performed were modified, instead of being eliminated from the instrument, as is
recommended (Hair et al., 1998).
Data collection
The empirical data for this study was obtained from Australian manufacturing
organizations. A total of 1,053 organizations were randomly selected from the
JAS-ANZ register (1999) and requested to take part in this study. This register lists all
organizations that are accredited to quality, environmental, safety and other standards.
About 418 organizations responded. After accounting for non-deliverable
questionnaires, a final response rate of 42 percent was achieved.
The level of analysis for this study was limited to the plant level. Only one
registered site per organization was included in the sample. Managers in charge of
quality-related activities were specifically asked to complete the questionnaires

because it was felt that they were best qualified to answer the questions. It was also
necessary to ensure that the sample consisted of organizations that were practicing
QM. Several indicators suggested that this was the case: all the organizations were
registered to QM standards; 31 percent claimed to have formally implemented TQM
programs; and, some had applied for national and other quality awards.
Checks were performed to ensure that the sample of responding organizations was
representative of the broader population of manufacturing firms. First, the
demographic characteristics of the sample were compared to the general population
of manufacturing organizations. The distributions in terms of location, type of
manufacturing and size of organizations were similar in proportion. Second, the
possibility that non-response bias could have resulted in a non-representative sample
was investigated. A sub-sample of organizations that had not taken part in the study
was contacted by telephone cited time, resource and confidentiality constraints. Also,
the survey was conducted in two phases and a comparison of responses between these
phases showed no significant differences. This suggested that the late respondents
(who could have been non-participants) were not significantly different to the
responding organizations. Together, these two tests suggested that there were no
systematic biases. Overall, it was possible to assume that the sample was
representative of the total manufacturing sector.
Statistical tests
A range of statistical tests was performed on data obtained from the survey to assess
the reliability and validity of the instrument. The essence of these analyses was to
ensure that the constructs had acceptable psychometric properties. Since, a
confirmatory approach was adapted, most of these analyses depended on the output
of structural equation modeling analysis for each construct. The asymptotically
distribution free (ADF) estimation procedure was used because all the variables were
measured with ordinal scales. Prior to performing these tests, missing data were
replaced with values obtained through the expectation-maximization iterative
algorithm (Hair et al., 1998) since this method has been shown to be better than other
substitution and elimination techniques (Jamshidian and Bentler, 1999).
The set of statistical tests for validity and reliability is shown as a flow chart in
Figure 1. These involved tests for multicollinearity, unidimensionality, reliability, item
assignment, construct validity and predictive validity. The results of tests for
unidimensionality, reliability and construct (convergent) validity is provided in this
paper. Tests for multicollinearity, item assignment, construct (discriminant) validity
and predictive validity involve a number of large correlation matrices. Owing to space
constraints, these are not shown in this paper. These matrices are available from the
authors on request.
Test for multicollinear-ity. Multicollinearity occurs when two or more items measure
the same entity and are therefore identical (Ahire et al., 1996). Highly collinear items
can distort the results substantially or make them unstable and not generalizable (Hair
et al., 1998). If inter-item correlations, measured as polychroic correlations (Joreskorg,
1993) in this case because of the ordinal data type of the items, are greater than 0.9, then
the possibility that multicollinearity exists is high (Hair et al., 1998). For all the items of
the constructs of this study, none of the inter-item correlations was greater that 0.9.
Hence, multicollinearity type problems did not appear to be present.

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502

Are all items assigned


to constructs unique
(i.e., not identical)?

Y
Are all items assigned
to constructs one
dimensional?

Y
Are all items assigned
to constructs reliable?

Y
Are the assignment of
items to constructs
proper?

Y
Do items (representing
alternative measures),
measure the same
construct?

Y
Do the constituent
items estimate only one
construct?

Test for multicollinearity


Inter-item correlations
(polychroic) should be <0.9 to
avoid multicollinearity between
items
Test for unidimensionality
One-factor congeneric model
(SEM)if items load significantly
on a single factor, then the items
are unidimensional
Test for reliability
Reliability coefficients (maximal
componsite) should be > 0.6 for
items tobe reliable measures of
constructs
Item assignment test
Correlations (polyserial) between
a construct and items assigned to
it should be higher than
correlations between a construct
and items assigned to other
constructs
Test for convergent construct
validity
One-factor congeneric model
(SEM) analysis should reveal that
all items have factor loadings that
significantly contribute to the
factors represented
Test for discriminant construct
validity
Intercorrelations between
constructs in pairwise SEM
analysis shouldbe low

Figure 1.
Statistical analysis
procedure used in the
validation of the
measurement instrument

How well do the items


relate to independent
measures of the concept?

N
Modify and/or
delete items

Test for predictive validity


Correlations (polyserial) between
instrument items and
independent measures of the
items should bereasonably high

Y
INSTRUMENT

Test for unidimension-ality. Having established that items had no multicollinearity


problems, it is then necessary to check if all items are one-dimensional, i.e. all items
collectively estimate one single construct (Ahire et al., 1996; Hair et al., 1998). To check
for unidimensionality of the pre-specified items, a confirmatory method was used that

involved the specification of one-factor congeneric measurement models (Joreskog,


1971) for all the constructs. The results are shown in Table II. For most of the
constructs, the goodness-of-fit indices for the initial models (not shown in Table II)
suggested poor data model fits. This implied, inter alia, the items of these initial
models were not unidimensional. For these offending models, modifications were made
to improve data model fit. Two types of modifications were carried out: items that
were not significantly loading on the construct were eliminated; and, wherever there
was logical and theoretical justification, error terms of items were allowed to covary
with error terms of other items. As can be seen from Table II, the levels of fit between
data and modified models for most of the constructs were good. Analyses of the path
diagrams of the final models showed that the factor loadings for the majority of
constructs were significant. Overall, it was possible to assume that the majority of
constructs in their final form consisted of items that were unidimensional.
Test for reliability. Once unidimensionality of the items is established, it is then
necessary to assess the reliability of the constructs (Flynn et al., 1990). The most
common method for measuring reliability of self-administered survey questionnaires
involves estimating internal consistency. The assumption behind internal consistency
is that items are all slightly different measures of the same concept (Nunnally). The
inter-correlation between items would be high if they were indeed measuring the same
concept. Cronbachs coefficient a is commonly used as a measure of internal
consistency, but it has some flaws (Novick and Lewis, 1967; Cortina, 1993; Ahire et al.,
1996). To overcome these flaws, maximal composite reliability coefficients developed
by Werts et al. (1978) were calculated for all the constructs in this study that had three
or more items. Table III shows these coefficients. As can be seen, these coefficients
exceed the minimum threshold level of 0.6 (Hair et al., 1998) for all the constructs of the
prize-criteria and elemental approaches, and six out of eight constructs of the
standards-based approach. The two constructs of the standards-based approach that
were below the threshold (customers and suppliers) were only marginally outside the
limit. Overall, the items assigned to the constructs were generally reliable measures of
the constructs.
Test for proper assignment of items to constructs. The next step in the validation
process involves evaluating whether the items have been properly assigned to
constructs. An item-construct correlation matrix can be used to assess this (Grandzol
and Gershon, 1998). Since, the items were measured on ordinal scale and the weighted
mean scores for the constructs were continuous, polyserial correlation is most suitable
measure of the relationships between the variables (Joreskorg, 1993). The results
showed that overwhelmingly, the correlation coefficients for items that were assigned
to constructs were higher than that of items not assigned to the constructs. This
suggested that all items were properly assigned to their respective constructs.
Test for construct validity. Assessing construct validity involves two issues: do the
items truly measure what they are supposed to measure, and, do they measure nothing
else? This requires assessing convergent and discriminant validities (Pannirselvam
et al., 1998). Convergent validity refers to the extent to which varying approaches to the
measurement of the constructs yield the same results (Ahire et al., 1996). In the case of
self-administered questionnaire survey, each item is treated as a different approach to
measuring the same construct. The Tucker Lewis Index (TLI) values obtained as part
of the structural equation modeling analysis were used to assess the convergent

Quality
management

503

Suppliers

Employees

2.574, 2, 0.276
93.6, 50, 0.000

21.097, 13, 0.071

26.836,7, 0.000
5.141,2, 0.076

Standards-based

Prize-criteria

Elemental
Standards-based
Prize-criteria
Elemental

14.299,5, 0.014

Elemental

Elemental

46.905,18, 0.000

Prize-criteria

41.4, 23, 0.011

71.562, 39, 0.001

Standards-based

Top
management
leadership

Standards-based
Prize-criteria

3.874, 2, 0.144

QM approach

Construct

Table II.
One-factor congeneric
confirmatory
measurement models for
constructs of quality
management

Customers

Measures of fit

Incremental fit indices

504

0.976

0.964
0.991

0.927

0.995

0.981

0.959

0.96

0.942

0.992

0.948

0.892
0.956

0.887

0.973

0.942

0.92

0.92

0.902

0.958

0.031

0.042
0.022

0.051

0.015

0.029

0.039

0.046

0.060

0.017

0.039

0.082
0.061

0.046

0.026

0.067

0.044

0.062

0.045

0.048

0.914

0.671
0.855

0.74

0.981

0.824

0.887

0.775

0.770

0.914

0.947

0.847
0.952

0.803

0.994

0.912

0.921

0.855

0.837

0.971

1.623

3.834
2.571

1.871

1.287

2.86

1.8

2.606

1.835

1.937

51.097

54.836
21.141

149.565

18.574

34.299

85.404

82.905

125.562

19.874

Model parsimony index

T5-T6, T7-T8,
T7-T9, T9-T11,
T11-T12
T14-T15,
T20-T21

C4-C5, C4-C8,
C6-C9, C7-C11
No covariances
needed
No covariances
needed
E5-E9, E6-E8,
E10-E11,
E12-E13
E4-E18

S5-S6, S7-S8
No covariances
needed
(continued)

No covariances
needed

Covariances of
error terms
allowed in the
final one-factor
Root
Root mean
Akaike
mean-square square error of
Adjusted
Comparative Normed information congeneric model
2
representing
Chi-square(x , df, Goodness-of-fit goodness-of-fit
residual
approximation Tucker-Lewis
criteria
fit index
Chi-square
each construct
(RMR)4
(RMSEA)5
(AIC)9
(AGFI)3
(CFI)7
(x2/ df)8
p-value)1
(GFI)2
index (TLI)6
Absolute Fit Indices

BIJ
13,4

QM approach

Wider
community
Competitors
Business
conditions

Processes

55.2, 11, 0.000


6.211,4, 0.184

106.8, 55, 0.000

Prize-criteria

Elemental
Prize-criteria

Elemental
Prize-criteria

0.949

0.992

0.93

0.996
0.904

0.978

13.5. 7, 0.061
1.829,1, 0.176
88.0, 39, 0.000

0.981

11.711, 7, 0.110

Elemental
Standards-based

Information & Standards-based


communication
system
Prize-criteria

Construct

0.916

0.968

0.821

0.96
0.838

0.935

0.942

0.046

0.023

0.096

0.011
0.065

0.022

0.035

Measures of fit

0.048

0.036

0.098

0.045
0.055

0.047

0.040

0.881

0.921

0.593

0.966
0.739

0.911

0.937

0.916

0.969

0.787

0.994
0.815

0.958

0.971

Incremental fit indices

1.941

1.553

5.021

1.829
2.258

1.93

1.673

178.781

28.211

89.234

(continued)

BC2-BC3,
BC5-BC9,
BC6-BC7,
BC6-BC9,
BC7-BC12,
BC8-BC9,
BC9-BC10,
BC9-BC12,
BC10-BC12

IC9-IC10,
IC10-IC12
IC12-IC12
P1-P2, P3-P5,
P3-P9, P6-P11,
P8-P9
P12-P18,
P14-P16, P15-P17
P11-P19

41.51
19.829
142.046

IC1-IC2, IC2-IC3

39.711

Model parsimony index

Covariances of
error terms
allowed in the
final one-factor
Root
Root mean
Akaike
Adjusted
Comparative Normed information congeneric model
mean-square square error of
Chi-square(x2, df, Goodness-of-fit goodness-of-fit
representing
fit index
Chi-square
residual
approximation Tucker-Lewis
criteria
each construct
(AGFI)3
(CFI)7
(x2/ df)8
(RMR)4
(RMSEA)5
(AIC)9
p-value)1
(GFI)2
index (TLI)6
Absolute Fit Indices

Quality
management

505

Table II.

Incremental fit indices

0.944

69.5, 29, 0.000

0.976

11.331, 2, 0.003

0.990

5.319, 2, 0.070

0.893

0.880

0.951

0.074

0.037

0.018

0.04

0.106

0.063

0.783

0.673

0.897

0.86

0.891

0.966

2.395

5.666

2.659

121.469

27.331

21.319

Model parsimony index

No covariances
needed
No covariances
needed
PF1-PF8,
PF4-PF7,
PF5-PF6,
PF6-PF10,
PF8-PF9,
PF8-PF10

Notes: 1Chi-square (x2, df, p-value): p-value . 0.05 (good fit); 2Goodness-of-fit (GFI): 0.95 , GFI , 1.00 (good fit); 0.90 ,GFI , 0.95 (acceptable fit); 3Root mean-square residual (RMR): RMR , 0.05
(good fit); 4Root mean square error of approximation (RMSEA): RMSEA , 0.05 (good fit); 0.05 , RMSEA , 0.08 (acceptable fit); 5Adjusted goodness-of-fit (AGFI): 0.95 , AGFI , 1.00 (good fit);
0.90 , AGFI , 0.95 (acceptable fit); 6Tucker-Lewis Index (TLI): TLI . 0.95 (good fit); 0.90 , TLI , 0.95 (acceptable fit); 7Normed Fit Index (NFI): 0.95 , NFI , 1.00 (good fit); 0.90 , NFI , 0.95
(acceptable fit); 8Normed Chi-square (x2/df): 1.0 , (x2/df) , 2.0 (good fit); 2.0 , (x2/ df) , 3.0 (acceptable fit); and 9Akaike Information Criteria (AIC): Model with smallest AIC is most parsimonious

Prize-criteria

Standards-based,
Prize-criteria
Standards-based,
Prize-criteria
Prize-criteria

Product
quality
Customer
satisfaction
Business
performance

Community
relations

QM approach

Table II.

Construct

Measures of fit

506
Covariances of
error terms
allowed in the
final one-factor
Root
Root mean
Akaike
mean-square square error of
Adjusted
Comparative Normed information congeneric model
Chi-square(x2, df, Goodness-of-fit goodness-of-fit
representing
residual
approximation Tucker-Lewis
criteria
fit index
Chi-square
each construct
(RMR)4
(RMSEA)5
(AIC)9
(AGFI)3
(CFI)7
(x2/ df)8
p-value)1
(GFI)2
index (TLI)6
Absolute Fit Indices

BIJ
13,4

Construct
Top management leadership
Customers
Employees
Suppliers
Information & communication systems
Processes
Wider community
Competitors
Business conditions
Product quality
Customer satisfaction
Business performance
Community relations

Maximal composite reliability coefficient


Standards-based
Prize-criteria
Elemental

Not
Not
Not
Not
Not

0.7585
0.5574
0.7918
0.5921
0.8659
0.8538
applicable
applicable
applicable
0.7922
0.6450
applicable
applicable

0.8675
0.8625
0.9056
0.8297
0.9128
0.8382
0.8578
Not applicable
0.9342
0.7922
0.6450
0.8325
Not applicablea

0.9056
0.8194
0.8745
0.7286
0.8853
0.6293
Not applicable
0.9665
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable

Note: Single item construct not possible to calculate reliability coefficient

validity of all the constructs, as suggested by Ahire et al. (1996) Table II shows the TLI
statistics for the final models representing the constructs of QM. Seven out of the
20 constructs had TLI values that indicated acceptable fits. A further four were close to
the threshold, with values between 0.824 and 0.9. Overall, the TLI values in Table II
indicated that a reasonable number of constructs had acceptable levels of convergent
validity. In terms of discriminant validity, a construct exhibits this validity if items
assigned to it estimate only one construct (Ahire et al., 1996). If an item of one construct
reflects heavily on another construct, then the correlation between these constructs
would be high (Ahire et al., 1996). Based on this logic, constructs were tested for
discriminant validity using a chi-square difference test suggested by Ahire et al. (1996)
Results for all pairs of constructs yielded chi-square differences to be statistically
significant at p-values of less than or equal to 0.01. Thus, all the constructs that could
be tested were distinct constructs with good discriminant validity levels.
Test for predictive validity. Predictive validity assesses the extent to which items are
related to their independent measures (Flynn et al., 1990). In this research, truly
independent measures of the items were not available. As is the case with other similar
studies (Ahire et al., 1996; Saraph et al., 1989), managers assessments of performance
were used in place of truly independent items. Since, performance was measured as
18 individual items with a Likert ordinal scale and the constructs of QM were
composite constructs measured on continuous scale, polyserial correlation coefficients
were calculated. Results showed that all these coefficients were positive and
statistically significant at 0.01 levels. The correlation coefficients suggested support
for predictive validity of the constructs.
Discussion and concluding remarks
This study has shown that most of the constructs of the three QM approaches have
been well measured. The constructs as defined by their items generally have sound
psychometric properties, i.e. errors were within tolerable range and levels of reliability
and validity were higher than conventionally acceptable in most cases.

Quality
management

507

Table III.
Results of reliability
analysis

BIJ
13,4

508

The methodology used to develop constructs for the standards-based and


prize-criteria approach differed slightly from that used with the elemental approach.
Since, the standards-based and prize-criteria approaches are reasonably well
established, the choice of constructs and items was rather constrained. In other
words, items for these approaches were a priori specified. There was little freedom to
choose these items. On the other hand, for the elemental approach, the constructs and
associated items were chosen based on a broader view of QM literature. While slightly
different approaches were taken, the psychometric properties of the constructs of the
three approaches were similar.
The measurement instrument proposed in this paper has a number of features that
suggest that it is an improvement over the existing ones, and that it more closely
reflects the status quo of the field. These include: recognizing that there are three
distinct approaches to QM that are currently being advocated; using a confirmatory
approach to psychometric analysis; and relaxing many assumptions relating to
statistical analysis of data, thus enabling results to more accurately reflect the actual
situation. Each of these is discussed next.
Throughout the instrument development and validation process, a clear attempt
was made to ensure that the contemporary reality in terms of how it is practiced was
reflected, i.e. three separate approaches (standards-based, prize-criteria and elemental)
are popular. None of the existing instruments seriously addresses this. The instrument
enables users to easily identify the constructs and associated items for each of the
approaches. In this way, users can tailor the instrument to their requirements. At the
same time, the instrument enables an integrated approach to QM. This is through
the common labels used for many of the constructs, as well as, the common items
shared between constructs across the three approaches.
In this paper, a purely confirmatory approach to instrument development and
validation process was adapted. This was deemed appropriate because the instrument
is based on QM concepts (i.e. the three approaches) that have been practiced for a while
and are therefore reasonably well defined and understood. Also, the instrument
attempts to consolidate a number of existing instruments. Given the rather mature
state of the QM field, purely exploratory and inductive methods are no longer
appropriate. The confirmatory approach will assist in knowledge consolidation in the
area.
In all the statistical analysis performed, particular care was taken with respect to
the assumptions made about the data type and the impact these have had on the output
and interpretation of statistical tests. Throughout this instrument, five-point Likert
scale has been used. Some researchers (Flynn et al., 1990) assume that the Likert scale
is of metric interval data type and therefore use inferential parametric statistical tests.
In this paper, we do not make this assumption. All statistical analyses reflect this. For
example, where correlation coefficients were required, polychroic and polyserial
correlation coefficients were calculated instead of the popular Pearsons correlation
coefficients. In the structural equation modeling analyses, the asymptotic distribution
free parameter estimation algorithm was used. In reliability calculations, the maximal
composite reliability values were calculated instead of Cronbachs a coefficients.
Assuming Likert scale to be of interval data type leads to underestimation of
correlation, reliability and goodness-of-fit structural equation modeling coefficients
(Novick and Lewis, 1967; Joreskog, 1971). This, therefore, inflates type I error levels.

Treating the Likert scale as being of ordinal data type and calculating the more
appropriate above-mentioned correlation, reliability and structural equation modeling
fit coefficients allows them to more closely estimate the actual values and therefore
minimize type I error level. This has improved the confidence in the results obtained.
Given that this measurement instrument has sound psychometric properties, it could
be of interest to several parties. Practitioners, consultants and researchers could use it to
conduct self-assessments, audits, and survey-type research in organizations. All parties
can be confident that the data they collect with this instrument are reliable and valid.
One of the major reasons for the lack of consistency in research in the QM area is the
absence of standard and universally accepted measurement instruments. For the
proposed instrument in this paper to make a contribution in this respect, considerable
additional work remains. These include further validation of the instrument in a
longitudinal sense over several time intervals, testing of the instrument in several other
geographical domains, using it in other industry settings and triangulating the
instrument with other research methods. All of these will generate greater consensus
on its acceptance as a universally applicable QM measurement instrument.
In sum, the process that was used to develop the QM measurement instrument
provides ample confidence that high quality data can be collected and that the three
QM approaches can be measured well. If used consistently, this should contribute to
accelerated empirical research in the area, leading to knowledge consolidation,
increased levels of paradigm consensus and maturity of the QM field.
References
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implementation constructs, Decision Sciences, Vol. 27 No. 1, pp. 23-56.
Amundson, S.D. (1998), Relationships between theory-driven empirical research in operations
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Cortina, J.M. (1993), What is coefficient alpha? An examination of theory and application,
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Filippini, R. (1997), Operations management research: some reflections on evolution, models and
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Forker, L., Mendez, D. and Hershauer, J. (1997), Total quality management in the supply chain:
what is its impact on performance?, International Journal of Production Research, Vol. 35
No. 6, pp. 1681-701.
Grandzol, J.R. and Gershon, M. (1998), A survey instrument for standardizing TQM modeling
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Hair, J.F. Jr, Anderson, R.E., Tatham, R.L. and Black, W.C. (1998), Multivariate Data Analysis,
Prentice-Hall, Englewood Cliffs, NJ.

Quality
management

509

BIJ
13,4

510

ISO 9001 (2000), ISO 9001:2000 Quality Management Systems Requirements, Standards
Australia, Homebush.
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No. 2, pp. 109-33.
Joseph, I.N., Rajendran, C. and Kamalanabhan, T.J. (1999), An instrument for measuring total
quality management implementation in manufacturing-based business units in India,
International Journal of Production Research, Vol. 37 No. 10, pp. 2201-15.
Malhotra, M.K. and Grover, V. (1998), An assessment of survey research in POM: from
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Novick, M.R. and Lewis, C. (1967), Coefficient alpha and the reliability of composite
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Nunnally, J.C. (1978), Psychometric Theory, McGraw-Hill, New York, NY.
Pannirselvam, G.P., Siferd, S.P. and Ruch, W.A. (1998), Validation of the Arizona governors
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and guidelines for self-assessment: the case of Singapore, Total Quality Management,
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Further reading
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Register, Standards Australia, Homebush.
Appendix
Items assigned to constructs of the three approaches to QM (Table AI)

Top
management
leadership

Construct

Strongly
Please circle the degree of
agreement that most closely Agree
reflects the CURRENT
situation at your local
organization
1
T1: Q Manager ensures
quality system is
continually improved
1
T2: Quality system
regularly reviewed by
management
1
T3: Internal quality audits
verify effectiveness of
quality system
1
T4: Statistical thinking
reflected in
policies/processes/reporting
system
T5: CEO plays key role in
1
creating values
T6: Values converted into
1
practical policies and plans
T7: Customers contribute to
1
development of values
T8: Suppliers had input in
1
developing values
T9: Employees contribute
1
to development of values
1
T10: Culture that CEO is
creating is consistent with
values
1
T11: Employees are
responsible/exercise
leadership
T12: Employees know their
1
roles and goals

Items

3
3
3
3

3
3
3
3
3
3
3
3

2
2
2

2
2
2
2
2
2
2
2

Neutral Disagree

Agree

Strongly
Disagree

Not
Applic-able

(continued)

Std-based Prize-Criteria Eleme-ntal

Quality
management

511

Table AI.

Table AI.

Customers

T13: Changes to systems


enable improvements
T14: Top management
committed to quality
T15: Organization
encourages participation of
all stakeholders
T16: Top management
accepts responsibility for
quality
T17: There are sufficient
personnel to manage
quality-related activities
T18: Quality regarded as
most important competitive
priority
T19: Reward/remuneration
of parties based on quality
of output
T20: Top management
generates consensus on
future direction
T21: Top management
encourages long-term
strategic thinking
C1: Misunderstandings
about customer orders are
rare
C2: All contracts are
systematically reviewed
C3r1: Changes to contracts
lead to lots of confusion
C4: Customers access
appropriate persons to
resolve complaints

Items
2
2
2
2
2
2
2
2
2
2
2
2
2

1
1
1
1
1
1
1
1
1
1
1
1
1

(continued)

Std-based Prize-Criteria Eleme-ntal


p

512

Construct

BIJ
13,4

Employees

Construct

C5: There are systematic


processes for handling
complaints
C6: Customer feedback
improves customer
relations etc
C7: Customers contribute to
development of values
C8: Organization measures
customer satisfaction
C9: Customers are
encouraged to provide
feedback
C10: Organization is aware
of customer requirements
C11: Customers help design
new products/processes
C12: Processes/activities
increase customer
satisfaction
C13: Customer satisfaction
is a measure of quality
E1: Everyone is aware how
quality policy affects his
job
E2: Employees are
responsible/exercise
leadership
E3: Employees know their
roles and goals
E4: Employees are fully
trained for the work they
perform
E5: HR plans integrated
with overall plans/values

Items
2
2
2
2
2
2
2
2
2
2
2
2
2
2

1
1
1
1
1
1
1
1
1
1
1
1
1
1

(continued)

Std-based Prize-Criteria Eleme-ntal


p

Quality
management

513

Table AI.

Table AI.

E6: Individual employee


development and
motivation promoted
E7: Employees find their
work very fulfilling
E8: Managing performance
of employees improved
flexibility/ responsiveness
E9: Recognition/reward
processes achieve goals
E10: Employees provided
with feedback
E11: Employees aware of
changes to performance
measurement
E12: Employees freely
communicate with others
E13: Communication
system is effective
E14: Processes/structures
are in place to achieve
OH&S obligations
E15: Organization has
open culture
E16: Employees work in
teams
E17: Employees effect
change to achieve
objectives
E18: Employees have role
in formulating plans
E19: Employees
continuously improve work
output

Items
2
2
2
2
2
2
2
2
2
2
2
2
2
2

1
1
1
1
1
1
1
1
1
1
1
1
1
1

(continued)

Std-based Prize-Criteria Eleme-ntal


p

514

Construct

BIJ
13,4

S1: Misunderstandings
about orders placed with
suppliers are rare
S2: All subcontractors
suited to tasks they perform
S3: Materials from all
customers/suppliers treated
same
S4: Quality of supplied
products/services are
assessed
S5: Suppliers receive
information to improve
quality/responsiveness
S6: Gains from cooperation
with suppliers shared with
them
S7: Quality is the main
criterion for choosing
suppliers
S8: Organization seeks
assurance of quality from
suppliers
S9: Long-term stable
relationships with suppliers
is sought
S10: Suppliers involved in
development of new
products
IC1: Quality manual cover
all requirements for quality
IC2: Obsolete documents do
not cause confusion with
new versions
IC3: Possible to establish
details of finished products

Suppliers

Information and
communicat-ion
system

Items

Construct
2
2
2
2
2
2
2
2
2
2
2
2
2

1
1
1
1
1
1
1
1
1
1
1
1
1

(continued)

Std-based Prize-Criteria Eleme-ntal


p

Quality
management

515

Table AI.

Table AI.

Processes

IC4: Possible to identify


inspection status of
materials
IC5: Quality manual is
updated when processes
change
IC6: Data collected is able to
measure performance
IC7: Data is reliable and
valid
IC8: Data collection
promotes management by
facts
IC9: Key data enhances
understanding of issues
IC10: Statistical thinking
reflected in
policies/processes/reporting
system
IC11: Data on quality is
always timely
IC12: Data on quality
widely shared
IC13: Employees provided
with feedback
IC14: Data/documents on
quality readily available
P1: Before starting job,
plans for quality are
produced
P2: Disciplined design
process has led to
improvements
P3: Products are checked
against orders before
delivery

Items
2
2
2
2
2
2
2

2
2
2
2
2
2
2

1
1
1
1
1
1
1

1
1
1
1
1
1
1

(continued)

Std-based Prize-Criteria Eleme-ntal


p

516

Construct

BIJ
13,4

Construct

P4: Products that cannot be


tested are continuously
monitored
P5: Equipment to
test/inspect is available
P6: Everyone is aware of
what happens to products
that fail inspections
P7: Reviews of all aspects
are carried out
P8: If reviews indicate
problems, actions are taken
P9: If problems occur,
actions are taken
P10:
Handling/storage/delivery
methods minimize quality
problems
P11: Products/processes are
inspected/tested
P12: Innovative
processes/products/services
have been commercialized
P13: R&D develop
world-class
techniques/technologies
P14: Organization supports
culture of creativity and
innovation
P15: There is strong
emphasis on internal
customer/ supplier
relationships
P16: Employees
continuously improve work
output

Items
2
2
2
2
2
2
2

2
2
2
2
2

1
1
1
1
1
1
1

1
1
1
1
1

(continued)

Std-based Prize-Criteria Eleme-ntal


p

Quality
management

517

Table AI.

Table AI.

Competitors

Wider
community

P17: QA processes ensure


customer requirements are
met
P18: Strong emphasis is
given on quality in design
P19: SPC techniques are
used
P20: Physical work
environment is safe for
employees
P21: Employees have
zero-defects mentality
W1: Organization included
community responsibilities
into policies
W2: Organization
developed plans to manage
risks to community
W3: Experience gained
through best practice
shared with community
CP1: Organization
benchmarks itself
CP2: There is keen
competition in local and
foreign markets
CP3: A few large
competitors dominate the
industry

Items

2
2

1
1

(continued)

Std-based Prize-Criteria Eleme-ntal


p

518

Construct

BIJ
13,4

Business
conditions

Construct

Please circle how the local


organization is
CURRENTLY being
affected by the following
business environmental
factors:
BC1: The costs of business
inputs (e.g. labor, material,
overheads)
BC2: The availability of
suitably qualified staff
BC3: The industrial
relations environment
BC4: Competition in local
and foreign markets
BC5: The margins in the
industry
BC6: The competitive
structure of the industry
BC7: Customers loyalty
BC8: The rules and
regulations that govern the
industry
BC9: Ecological
considerations in this
industry
BC10: The rate of
introduction of new
products and services
BC11: The rate of
innovation of new
operational processes

Items

2
2
2
2
2
2
2
2
2
2
2

1
1
1
1
1
1
1
1
1
1

Positively

Very
Positively

3
3

4
4

Neutral Negatively

5
5

Very
Negatively

0
0

Not
Applic-able

p
p

(continued)

Std-based Prize-Criteria Eleme-ntal

Quality
management

519

Table AI.

Table AI.

Business
performance

Customer
satisfaction

Product quality

p
p
p
p

p
p

p
p

(continued)

Std-based Prize-Criteria Eleme-ntal


p

1
2
3
4
5
0
BC12: The rate of change in
taste and preferences of
customers
Very
Satis-factory Neutral Dissatis-factory
Very
Not
Please circle the degree of
Satis-factory
Dissatis-factory Applic-able
satisfaction of the
organization that most
closely reflects the
CURRENT situation at the
local organization:
p
PQ1: Costs relating to
1
2
3
4
5
0
quality of products
p
PQ2: Defective products
1
2
3
4
5
0
rate
p
PQ3: Perceived product
1
2
3
4
5
0
quality by customers
p
PQ4: Wastage
1
2
3
4
5
0
p
CS1: Perceived product
1
2
3
4
5
0
quality by customers
p
CS2: Consistency in
1
2
3
4
5
0
documentation
p
CS3: Customer service
1
2
3
4
5
0
p
CS4: Quality audits by
1
2
3
4
5
0
customers
PF1: Inventory levels
1
2
3
4
5
0
PF2: Profits
1
2
3
4
5
0
PF3: Cashflow
1
2
3
4
5
0
PF4: Demand for products
1
2
3
4
5
0
made at the registered site
PF5: Downtime
1
2
3
4
5
0

Items

520

Construct

BIJ
13,4

PF6: Capacity utilization


rates
PF7: Market share
PF8: Employee complaints
PF9: Employee morale
PF10: Relations with
suppliers and
subcontractors
CR1: Involvement of the
organization in community
activities

Items
2
2
2
2
2
2

1
1
1
1
1
1

Noet: 1 This item was stated negatively and required reverse coding

Community
relations

Construct

3
3
3
3

4
4
4
4

5
5
5
5

0
0
0
0

p
p
p
p

Std-based Prize-Criteria Eleme-ntal


p

Quality
management

521

Table AI.

BIJ
13,4

522

About the authors


Prakash J. Singh is a lecturer at the Department of Management at the University of Melbourne,
Australia. His research interests are in operations management, quality management, project
management, supply chain management and innovation management. Dr Singh has published
his research in several journal articles and presented papers at a number of international
conferences. He is the author of a new book entitled What really works in QM: a comparison of
approaches. Dr Singh holds a PhD from the University of Melbourne. He also holds Bachelor of
Engineering (first class honours) and Bachelor of Business (Distinction) degrees from
Queensland University of Technology. He is the corresponding author and can be contacted at:
pjsingh@unimelb.edu.au
Alan Smith is deputy head of the Department of Mechanical and Manufacturing Engineering
at the University of Melbourne, Australia. For about fifteen years, Dr Smith has taught
undergraduate and industry courses and carried out research in various aspects of engineering
management including quality management and quality standards, operations management,
performance measurement and inventory management. He has presented at several international
conferences and been an invited lecturer on his quality research findings in Hong Kong.
Dr Smiths particular interests are in supporting the manufacturing industry through advanced
studies.

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www.emeraldinsight.com/1463-5771.htm

A worldwide analysis of ISO 9000


standard diffusion

Analysis of ISO
9000 standard
diffusion

Considerations and future development


F. Franceschini, M. Galetto and P. Cecconi

523

DISPEA, Politecnico di Torino, Torino, Italy


Abstract
Purpose To provide a cross-section of International Standardization Organization (ISO) 9000
quality certification diffusion over time and its impact on industrial systems.
Design/methodology/approach The starting point of the analysis is The ISO survey of ISO 9000
and ISO 14001 certificates document. Available data concur to trace a synthesis of what has
happened and what is in process all over the world. Five main aspects are discussed: the
correspondence between ISO 9000 standards and total quality management strategy; the effects of
ISO 9000 certification on business performance; the ISO 9000 certificates diffusion in the world; the
comparison between economical and entrepreneurial structure of different countries and certificates
diffusion; the proposal of a prediction model for the diffusion of ISO 9000 certificates.
Findings The evolution curve of the number of certificates over time in each country presents a
saturation effect. This behavior has been analyzed by a diffusion forecasting model. The analysis of
regional share certificates evolution evidences a sensible increase of Far East countries. The analysis
of ISO 9000 certificates share by industrial sector highlights a growth for the most sectors; only a few
of them show a negative trend in last two years. A relationship between ISO 9000 certificates and
socio-economic indicators of a country (human development index, gross national product) has been
individuated.
Practical implications The stunning growth of ISO 9000 certifications all over the world
confirms a strong polarization of enterprises interest in this practice. Looking at the empirical data,
some questions come out about the future. Will the certification market go on? Will certified
enterprises continue to be interested to the certification process?
Originality/value This paper analyzes the worldwide evolution of ISO 9000 certification and
suggests a new prediction model for the diffusion of ISO 9000 certificates.
Keywords ISO 9000 series, Quality standards, Quality systems, Quality management
Paper type Research paper

1. Introduction
Since, the early eighties, a proliferation of ideas for enterprises management according
to Quality principles has been taking place. Quality assurance models (Military
Standards Mil, 9859A:1963, 1963; ISO, 9000s:1987, 1987), first, and total quality
management (TQM), lean organization and benchmarking models, afterwards, have
constituted a basis for involving and integrating all the factory competencies which
can contribute to the competitiveness enhancement.
In such a context, International Standardization Organization (ISO) 9000
certification has acted as a catalyst of the existing tendencies, in order to induce
organizations towards a structural model based on the logic of strategic quality
management (ISO 9000-1:1994, 1994; ISO 9001:1994, 1994; ISO 9002:1994, 1994;
ISO 9003:1994, 1994).

Benchmarking: An International
Journal
Vol. 13 No. 4, 2006
pp. 523-541
q Emerald Group Publishing Limited
1463-5771
DOI 10.1108/14635770610676326

BIJ
13,4

524

The first attempt to draw a series of guidelines for applying quality principles in
industrial sectors dates back to fifties in USA, initially in the military sector, subsequently
in the nuclear, pharmaceutical and automotive ones. Originally this was done in order to
ensure that products matched technical requirements defined by contracts. Later, these
rules have been adopted by British Standard Institution, which broadened the application
field to the whole company system by the introduction of BS 5750 Standard.
As from the end of seventies, even though the most developed countries were
possessing their own internal standardization bodies, at least for specific sectoral
applications, the need of giving a unique and coherent international configuration to
the quality assurance standardization structure and to the related activities
(certification, accreditation, laboratories, etc.) began to be even more impelling.
The International Standardization Organization (ISO), at first only interested in the
regulation of measurement activities in the different industrial sectors, took its cue
from these standards, and in 1987 published the first edition of ISO 9000 series. This
was fated to become in a few years the leading reference for Quality System
Organization all over the world.
The expectation was to facilitate the international commerce and improve the
competitiveness of European and North-American companies in an ever more selective
market, characterized by a strong penetration of far-eastern products, by harmonizing
terms, systems and methodologies. This could only be done by acquiring competitive
advantage in terms of customer satisfaction and product reliability (Withers and
Ebrahimpour, 2000).
ISO 9000 family standards specify organization requirements for giving a formal
evidence of the capability to organize resources and processes with respect to
regulation, prescriptions and customer requirements. The aim is to ensure
stakeholders satisfaction (Franceschini, 2002).
ISO 9000 standards represent a benchmark for company management in its whole.
They are not focused on the intrinsic product/service quality, but on the related
processes, enlarging their action to the entire network of interactions in which the
factory is acting. The extension of the application field originates from the awareness
that quality is a strategic variable to be planned and managed through the whole
network of the value-chain (Romano and Vinelli, 2001).
Nowadays, quality certification is steering towards a new frontier which is
represented by the Vision 2000 project, aimed to the reorganization of the whole
quality standard structure. The leading philosophy results from the need of aligning
factories growth opportunities towards market dynamics in order to redefine their
strategies and their industrial/commercial targets.
The past approach of conformity to requirements which has largely conditioned
the application of 1994 and earlier editions, is now trimmed in order to promote a
review of the organizational order, coherent with a quality-oriented model. Still
preserving its bargaining power and connotation of commercial visibility media in
terms of credibility, the certification becomes a tool for integrating factory
management, performance and process verification according to a scheme of
continuous improvement (ISO 9000:2000, 2000).
ISO 9000 standard series represents a special category of horizontal standards of
general application, aimed to guarantee product quality through an adequate
management of resources and processes (quality system management). These

standards define the criteria for quality evaluation and the guidelines for the
implementation of related tools and methodologies (ISO 9000:2000, 2000; ISO 9001:2000,
2000; ISO 9004:2000, 2000; ISO 19011:2002, 2002).
Up to the end of December 2002 more than 560,000 certificates had been issued in
159 countries all over the world, still persisting a significant growing rate (about 10
percent on annual average over the end of December 2001) (ISO, 2003). On the other
hand, a drastic reduction of growth in the last year (Table I) is evident.
In the present paper, the ISO 9000 quality standard diffusion and its impact on
industrial system is analyzed. Particular attention is dedicated to future trends and
evolution.
Five main aspects are discussed:
(1) the correspondence between ISO 9000 standards and TQM strategy;
(2) the effects of ISO 9000 certification on business performance;
(3) the ISO 9000 certificates diffusion in the world, with particular attention to
actual trends, geographic share, and most involved industrial sectors;
(4) the comparison among economical and entrepreneurial structure of different
countries and certificates diffusion; and
(5) the proposal of a prediction model for the diffusion of ISO 9000 certificates.

Analysis of ISO
9000 standard
diffusion
525

In the rest of the paper, case by case, it will be specified if the analysis refers to the new
or the past standard edition.
2. ISO 9000 standards and TQM
The standard reassessment which led to the Vision 2000 project can be interpreted as
an effect of a reorientation of factory management principles, induced by the increasing
diffusion of TQM philosophy (Laszo, 2000; Conti, 2000).
The similarity to TQM can be easily found in many aspects of the new standards.
Basic concepts such as customer centrality and satisfaction, continuous improvement,
employees valorization and involvement, process-organization-results integration,
customers-suppliers-competitors connection, which represent the basis of TQM, have
been assimilated and emphasized in the new ISO 9000 architecture.
Year

World total

December 2002 561,747 of which 9001:2000 167,210


December 2001 510,616of which 9001:2000 44,388
December 2000
408,631
December 1999
343,643
December 1998
271,847
December 1997
223,299
December 1996
162,701
December 1995
127,349
March 1995
95,117
June 1994
70,364
Septemer 1993
46,571
January 1993
27,816
Source: ISO (2003)

World growth Number of countries/economies


51,131
101,985
64,988
71,796
48,548
60,698
35,352
32,232
24,753
23,793
18,755

159 of which 9001:2000 134


161of which 9001:2000 98
157
150
141
126
113
96
88
75
60
48

Table I.
Worldwide total of ISO
9000 certificates since
1993

BIJ
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526

Referring to the efficacy of the two models, the scientific literature is disagreeing and
there is no common interpretation so far. Many empirical researches reveal in ISO 9000
standard application a potentiality for valorization of TQM (Beattie and Sohal, 1999;
Ismail and Hashimi, 1999; Lee and Palmer, 1999), some others interpret the ISO 9000
implementation as the starting point for the construction of a factory model for TQM
(Parr, 1999; Kanji, 1998). Recent researches characterize the ISO 9000 standards as a
tool for facilitating and implementing the adoption of TQM (Sun et al., 2004), but not as
a necessary precondition (Sun, 1999; Brown and van Der Wiele, 1996) or as the signal of
a natural migration towards its implementation (Sun, 1999; Wiele et al., 1997). They
only give a set of general/generic guidelines, but they do not guarantee that the process
is durable, capable and mature in the application of related constructs.
Although the 2000 series of ISO 9000 standards is closer to TQM principles,
the cultural gap between the two models still remains large and not easily fillable
(Laszo, 2000; Conti, 2000).
3. The effects of the ISO 9000 certification on business performance
Currently, a common point of discussion concerns the effectiveness of ISO 9000
certification on business performance. Many researches tried to find an empirical
evidence of the relationship between these two aspects.
A cross-sectional study undertaken on the Australian market showed that the
motive for adopting ISO 9000 certification and the maturity of the quality culture are
significant factors for determining the benefits derived from ISO 9000 certification
(Terziovski et al., 2003). The style of the auditor, on the other hand, does not appear to
have a significant and positive effect on the benefits derived from ISO 9000
certification. According to that, the natural conclusion is that certification contributes
to business performance when the quality culture in the organization is well developed
and the managers motivation to gain certification is to improve business performance
and not to conform to a standard.
Furthermore, many empirical evidences show that ISO 9000 certification is a
necessary condition to support competitive and marketing objectives. Attention must
be given in assuring that the company and its customers obtain the maximum benefits
by the integration of the certification process in the marketing program (Stevenson and
Barnes, 2002).
To confirm the influence of ISO 9000 certification on marketing results, a recent
study, performed on a set of Spanish companies, analyzed the stock markets reaction
to a publicly announced winner of a quality award (Nicolau and Sellers, 2002). Results
show that the stock market reacts positively to such a certification. Quality
certification can be considered as a useful tool for reducing the information asymmetry
between buyers and sellers, as well as a strategic element for the companies to
distinguish themselves in the business competition (Nicolau and Sellers, 2002).
4. A cross-section of ISO 9000 certificates diffusion in the world
The starting point of the analysis is The ISO survey of ISO 9000 and ISO 14001
certificatesdocument (ISO, 2001, 2002, 2003). Available data concur to trace a synthesis of
what has happened and what is in process all over the world. It must be highlighted that
the surveys do not claim to be completely exhaustive and the reported data should be
considered with care. In some cases undercounting has occurred, elsewhere accredited and

non-accredited certificates are added together without distinction, and the certificates
mentioned may either cover single or multiple site certifications (ISO, 2001, 2002, 2003).
A main goal of the present paper is to provide an analysis of the world certification
dynamics over time.
4.1 The saturation effect
Comparing different nations, the evolution of certification over time is not a synchronous
phenomenon. In some countries ISO certification has been deeply practiced since
standards introduction (see, for example, UK, France and Germany), in some others it met
with maximum interest only in the last years (China and other eastern countries).
Looking at those countries in which the certification diffusion is a long-standing
phenomenon, we see that the number of certificates is close to arrive at a saturation
level. This effect is particularly evident for UK, Germany and France (Figure 1). In
these countries the certification market is coming to saturation. The saturation level
represents only a limited fraction of the total number of Corporation Companies (C.C.).
The empirical saturation values for UK, Germany and France are, respectively, 9, 8 and
2 percent of C.C. in each country (Franceschini et al., 2004).
Quality certification diffusion began when some companies, with the aim of
distinguishing themselves in the business competition, manifested a wish to give

Analysis of ISO
9000 standard
diffusion
527

Certificates in European countries


70,000

60,000

Number of certificates

50,000

40,000

30,000

20,000

10,000

0
1986

1989

1992
France

1995
Year
Germany

1998

2001

2004

United Kingdom

Sources: ISO (2001, 2002, 2003); Comite Franaise d'Accrditation (2003); TGA Accreditation
Body and DQS GmbH (2003); United Kingdom Accreditation Service (2003)

Figure 1.
Time evolution of the
number of certificates in
some European countries
with the highest number
of certificates in 2002
(since 1986)

BIJ
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528

an external and formal evidence of their organizational efforts towards quality practice.
Achieving success in a more and more careful market, their number has progressively
grown up according to an almost exponential trend. This dissemination was promoted by
central governments and by quality national bodies, reducing administrative features and
supporting the diffusion of the certification bodies in the countries. As a result of these
joint actions, an increasing attention of the enterprises towards the certification was
caused: inside of the organization, in order to increase the resource involvement; outside, to
give customers the evidence of excellence achievement. But the increasing process does
not go on without end. Caught up the interest apex, the driving push slowly begins to
attenuate under the effect of some concomitant factors: the reduction of the competitive
gap between certified and not certified companies, and the limited number of enterprises
potentially interested to certification. So, the growth slowly tends to a gradual saturation
(Franceschini et al., 2004).
This saturation effect strongly depends on the economic and productive structure of
each country. For some European countries, with comparable entrepreneurial structures,
the obtained results show that the predicted average saturation level is around 10 percent
(number of certificates over the total number of C.C.) (Franceschini et al., 2004). Table II
reports the observed values for the top five European countries in 2002.

Date
December 1986
December 1988
December 1989
December 1990
December 1991
January 1993
September 1993
December 1993
June 1994
December 1994
March 1995
December 1995
December 1996
December 1997
December 1998
December 1999
December 2000
December 2001
December 2002

Table II.
Percentage of certificates
over the total number of
C.C. for the top five
European countries in
2002

France

Germany

0.00a

0.36

0.00a
0.00a
0.05a
0.05a
0.18
0.35
0.47a
0.79

0.45
0.59
0.86
1.26
1.50
1.70
1.82

1.33
2.32
2.94
4.67
5.44
6.82
7.35

Percentage of C.C.
Italy

Spain

UK
0.00a

0.11
0.17

0.00a
0.06
0.25
0.56
0.81
1.25
1.83
2.92
4.15
4.58
6.19
9.56

0.00a
0.00a
0.00a
0.01a
0.02
0.04
0.05a
0.07
0.10a
0.12
0.19
0.31
0.54
0.80
1.09
1.58
1.95

2.13a
2.83
4.28
5.60
6.71
8.00
8.08
8.63
8.97
9.40
9.70

Note: aData refer to ISO surveys, with the exception of the marked ones. These lasts have been
collected by each national accreditation body
Sources: ISO, 2001, 2002, 2003; Comite Francaise dAccreditation, 2003 (France); Ministe`re de
lEconomie de France, 2003 (France); TGA Accreditation Body and DQS GmbH, 2003 (Germany);
Deutsche Bundesbank, 2003 (Germany); Statistisches Bundesamt, 2003 (Germany); SINCERT, 2003
(Italy); Italian Ministry of Productive Activities, 2003 (Italy); Entidad Nacional de Acreditacion, 2003
(Spain); Instituto Nacional de Estadstica, 2003 (Spain); United Kingdom Accreditation Service, 2003
(UK); UK National Statistics, 2003 (UK); Eurostat, 2003)

The same saturation effect can be observed for many other non-European countries
(see, for example, Australia, Republic of Korea, and USA in Figure 2).
4.2 ISO 9000:2000 certificates geographic distribution
The number of ISO 9000:2000 certificates is 29.77 percent of the overall total at the end of
2002 (Figure 3). Considering that within the end of December 2003, the full transition to the
new standards is supposed to take place, this percentage does not represent an
encouraging result for the Vision 2000 project. Even if considering that this delay can be
ascribed to some inertial effect towards change (typical in industrial/social environments),
this percentage is too exiguous to give assurance of a complete transition.

Analysis of ISO
9000 standard
diffusion
529

Certificates in non-European countries


40,000
35,000

Number of certificates

30,000
25,000
20,000
15,000
10,000
5,000
0
1988

1994

1991

1997

2000

Year
Australia

Republic of Korea

USA

Sources: ISO (2001, 2002, 2003)

2003

Figure 2.
Time evolution of the
number of certificates in
some non-European
countries with the highest
number of certificates in
2002 (since 1988)

ISO 9000:2000
(167 210)
ISO 9001,9002,9003:1994
(394 537)

Source: ISO (2003)

Figure 3.
Portions of ISO 9000:2000
and ISO 9000:1994
certificates at the end of
2002

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530

A further investigation about the causes of this phenomenon is mandatory.


Three points of view may be considered:
(1) organizations consider ISO certification as a flop, hence they decide to not
renew the process;
(2) organizations still consider ISO certification 1994 standard version an effective
model for industrial quality management, hence they do not require a transition
towards the Vision 2000 model; and
(3) the transition follows an exponential growth (Figure 4). This behavior can be
explained by a cascade effect induced by the deadline approaching (December
2003).
4.3 Emerging countries
Analyzing the regional share of certificates in the lapse of time from January 1993 till
December 2002, two elements are particularly relevant: a continuous and systematic
reduction of European countries percentage (compared to the overall number of
certificates), and a parallel growth of Far East countries percentage (Table III and
Figure 5). More details for European and Far East countries are shown in Figure 6.
This phenomenon can be justified by two main causes:
(1) the maturity of European quality market particularly evidenced by the
achievement of the so-called saturation level in most countries in this area; and
(2) the appearing of emerging countries such as, for example, China (for its large
size) and Republic of Korea.

ISO 9000:2000 certificats growth

Figure 4.
Growth of ISO 9000:2000
certificates at the end of
2001 and 2002 compared
to a hypothetical
exponential growth

Percentage of ISO 9000:2000 certificates

100.00%
100%

80%

60%

40%

29.77%

20%
8.69%
0%

Source: ISO (2003)

2001

2002
Year

2003

Total percentage
Africa and
Central and
Australia and
West Asia South America North America Europe Far East New Zealand
January 1993
September 1993
June 1994
March 1995
December 1995
December 1996
December 1997
December 1998
December 1999
December 2000
December 2001
December 2002

3.42
2.73
2.64
2.75
2.65
3.79
3.88
4.47
5.04
4.94
3.87
4.19

0.10
0.30
0.68
0.77
0.96
1.05
1.34
1.92
2.61
2.64
2.83
2.44

4.32
5.61
6.99
7.77
8.15
10.44
11.25
12.34
13.14
11.82
9.97
9.58

83.02
81.12
78.73
75.61
72.72
67.58
64.31
61.13
55.36
53.87
52.87
52.16

2.46
3.4
4.39
6.29
7.26
11.31
13.42
13.99
16.48
20.05
24.83
26.45

6.69
6.84
6.58
6.81
8.27
5.83
5.79
6.16
7.36
6.68
5.65
5.2

Sources: ISO (2001, 2002, 2003)

Analysis of ISO
9000 standard
diffusion
531

Table III.
Percentage values of the
regional share of
certificates in the world
(since 1993)

Regional share of certificates in percent

Regional share (%)

100
80
60
40
20

99
3
ne
.1
99
4
M
ar
.1
99
5
D
ec
.1
99
5
D
ec
.1
99
6
D
ec
.1
99
7
D
ec
.1
99
8
D
ec
.1
99
9
D
ec
.2
00
0
D
ec
.2
00
1
D
ec
.2
00
2

.1

Ju

pt
Se

Ja

n.

19

93

Year
Africa/West Asia
Europe

Central and South America


Far East

North America
Australia / New Zealand

Sources: ISO (2001, 2002, 2003)

4.4 The top ten countries for ISO certificates in 2002


The top ten countries for ISO certificates in 2002 represent more than the 70 percent of
the overall certificates in the world (Figure 7). It must be specially highlighted that five
of them (France, Germany, Italy, Spain, and UK) are European countries.
The pole position is held by China, which is ever more imposing as emerging
country in the global market.
USA position reveals a curious aspect. The adoption of ISO 9000 certifications in
USA industry has lagged that of other developed countries due to questions about

Figure 5.
Time evolution of the
regional share of
certificates percentage in
the world (since 1993)

BIJ
13,4

Detail for European and Far East countries


90.00
Europe

80.00

Far East

532

Regional share (%)

70.00
60.00
50.00
40.00
30.00
20.00
10.00

2
00

1
ec

.2

00
D

0
.2

00

ec
D

9
D

ec

.2

99

8
.1

99

ec
D

7
.1

99
D

ec

6
.1

99

ec
D

ec

.1

99

5
.1
ec
D

ar
M

.1

.1

99

99

3
99

ne
Ju

Se

pt

n.

.1

19

93

0.00

Ja

Figure 6.
Time evolution of the
regional share of
certificates percentage in
the world. Detail for
European and Fare East
countries (since 1993)

Year
Sources: ISO (2001, 2002, 2003)

Japan
6%

Australia
5%

Spain
5%

France
4%

Korea
3%

Germany
6%

Others
29%

Usa
7%

Figure 7.
Share of certificates
referring to top ten
countries in 2002

United Kingdom
11%

Italy
11%

China
13%

Source: ISO (2003)

whether the benefits of ISO 9000 registration were sufficient to offset costs and sheer
complexity (Stevenson and Barnes, 2002). This behavior was also supported by the
natural dynamism of USA market, which did not force companies in pursuing ISO
9000 certification as distinguishing element in business competition.
Nine countries of the top ten in 2002 (China, Japan, Italy, Germany, UK, Spain,
Australia, France, and USA) are also part of the top ten for ISO 9001:2000 (2000)
certificates.
4.5 ISO 9000 certificates share by industrial sectors
Certificates subdivided by industrial sectors are reported in Table IV (ISO, 2003).

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

Agriculture, fishing
Mining and quarrying
Food products, beverages and tobacco
Textiles and textile products
Leather and leather products
Wood and wood products
Pulp, paper and paper products
Publishing companies
Printing companies
Manufacture of coke and refined petroleum products
Nuclear fuel
Chemicals, chemical products and fibers
Pharmaceuticals
Rubber and plastic products
Non-metallic mineral products
Concrete, cement, lime, plaster, etc.
Basic metal and fabricated metal products
Machinery and equipment
Electrical and optical equipment
Shipbuilding
Aerospace
Other transport equipment

EAC No. Industrial sector


610
1,052
7,347
2,835
2,313
2,218
1,316
363
1,998
1,009
279
11,803
1,160
6,277
2,328
4,998
28,885
20,275
36,653
398
1,052
3,040

1998
678
1,791
8,746
3,673
2,093
1,967
3,279
354
2,939
1,669
220
12,615
1,105
13,575
3,571
7,107
28,972
19,827
40,035
4,670
4,131
7,656

1999
1,745
2,028
11,440
5,178
926
2,225
4,785
445
3,299
1,929
115
14,790
1,451
18,036
4,209
6,467
40,713
23,027
38,148
589
924
9,072

2000
1,265
2,359
13,805
6,706
1,063
2,791
4,961
1,048
3,191
1,927
96
15,505
1,349
18,243
5,363
7,290
41,534
29,812
42,710
881
1,314
9,573

2001
112
131
1,317
593
115
197
420
68
378
127
4
1,232
137
1,315
454
544
2,912
2,146
3,558
50
58
599

Of which 9001:2000
2,381
2,423
17,038
9,071
1,490
2,910
5,693
1,212
3,630
1,620
192
19,612
1,697
21,517
5,753
8,218
50,234
35,047
43,839
689
866
10,561

2002

813
607
5,113
3,045
492
868
1,227
190
1,097
407
108
5,481
496
5,210
2,113
2,312
13,248
9,246
14,001
188
184
2,465
(continued)

Of which 9001:2000

Analysis of ISO
9000 standard
diffusion
533

Table IV.
ISO 9000 certificates
subdivided by industrial
sectors (since 1998)

Source: ISO (2003)

30
31
32
33
34
35
36
37
38
39

Manufacturing not elsewhere classified


Recycling
Electricity supply
Gas supply
Water supply
Construction
Wholesale and retail trade; repairs of motor vehicles,
motorcycles and personal and household goods
Hotels and restaurants
Transport, storage and communication
Financial intermediation, real estate, rental
Information technology
Engineering services
Other services
Public administration
Education
Health and social work
Other social services
2,275
204
1,221
773
1,017
1,590
1,886
331
580
411
332

Of which 9001:2000

16,451 13,803 18,530 22,385


865 1,794 1,187 1,500
11,738 11,366 13,181 12,732
4,690 3,218 4,367 4,950
5,826 6,706 11,067 7,529
8,064 9,201 11,451 13,303
13,088 12,150 13,160 15,762
689 2,086 1,404 1,840
1,833 3,996 4,282 4,879
1,250 2,871 3,820 4,010
2,513 2,005 1,529 2,372

2001
807
97
171
41
106
3,507

2000

2,106 4,844 5,534 5,680


1,001 1,765
932
959
860
932
979 1,349
390
558
531
664
505
799 1,242
932
19,768 25,273 32,389 40,948

1999

23
24
25
26
27
28
29

Table IV.
1998

30,280
1,840
20,356
7,195
7,777
15,089
21,270
1,932
4,544
5,807
3,111

6,914
966
1,503
584
874
51,093

2002

8,723
670
4,592
2,322
2,661
4,699
5,169
780
1,529
1,723
629

1,879
357
569
171
331
15,752

Of which 9001:2000

534

EAC No. Industrial sector

BIJ
13,4

The top five sectors in 2002 are construction (28), basic metal and fabricated metal
products (17), electrical and optical equipment (19), machinery and equipment (18), and
wholesale and retail trade; repairs of motor vehicles, motorcycles and personal and
household goods (29) (Figure 8).
This outcome reveals some particular aspects. The first position, held by the sector
construction (28), can be justified by considering a regulatory/legislation effect.
Many countries impose a ISO 9000 quality certification for participating to public-work
contracts. Certificates in this sector manifest a constant growth since 1998.
Till 2001 (except 2000) the first place was held by electrical and optical equipment
(19), currently holding third position.
The second position, held by the sector basic metal and fabricated metal products
(17), is due to the large influence of automotive industry, which is one of the most
involved in quality certification (QS-9000:1998, 1998; ISO/TS 16949:2002, 2002
standards are an evidence of this strong attention).
Looking at Table IV, a series of particular behaviors leaps out. In some cases, the
limited number of certificates is due to the small number of companies operating in a
specific sector (see, for example, nuclear fuel (11)); in other cases, sectors are still
immature towards the implementation of a quality system (see, for example,
agriculture, fishing (1)).
The common trend for most sectors is a regular growth over years till a saturation level
(maturity stage). However, some sectors reveal a reduction of the number of certificates in
the last years. This is a questionable aspect. Referring to sectors such as aerospace (21) and
shipbuilding (20) the causes can be found in the reduction of the number of companies

Analysis of ISO
9000 standard
diffusion
535

Top five sectors in 2002


60,000

Number of certificates

50,000
40,000
30,000
20,000
10,000
0
1998

1999

2000

2001

2002

Year
Construction
Basic metal & fabricated metal products
Electrical and optical equipment
Machinery and equipment
Wholesale & retail trade; repairs of motor vehicles,motorcycles & personal& household goods

Source: ISO (2003)

Figure 8.
Time evolution of the top
five sectors for number of
certificates in 2002

BIJ
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536

currently operating in these fields. In other cases, the causes must be ascribed to the
monopolistic conditions and to the low sensibility to the market competition (manufacture
of coke and refined petroleum products (10) and gas supply (26)).
Service sectors show a clear growth in the last two years (see, for example, financial
intermediation, real estate, rental (32), engineering services (34) and other services (35)).
On the other hand, after an initial booming period, the information technology (33)
sector is displaying a moment of stagnation.
5. ISO 9000 certification in developed countries and GNP
A comparison between economical and entrepreneurial structure of different countries
can help to better understand the ISO certificates regional share. A natural index for a
thorough analysis could be the ratio between ISO 9000 certificates and the total
number of potentially certifiable companies in each country (Franceschini et al.,
2004). Unfortunately this kind of information is not available for all the countries, as a
consequence of the different entrepreneurial classification.
Some authors tried to normalize the number of certificates for each country by
introducing the so-called ISO 9000 per capita index defined as the average number of
ISO 9000 certificates per inhabitant (Saraiva and Duarte, 2003). This approach can be,
at least, fairly hazardous. There is no direct correlation between the number of
companies in a country and the number of its inhabitant.
On the other hand, it is interesting to analyze the relationship between ISO 9000
certification and the economic development of a country. This can be done by
considering the number of certificates in a country and the corresponding gross national
product (GNP). A one-to-one comparison between the ISO 9000 ranking position and the
GNP is reported in Table V.
Eight of top ten countries for ISO 9000 certificates also appear in the first ten
positions in GNP ranking (i.e. China, Italy, UK, USA, Germany, Japan, Spain and
France). This shows a high correlation between the two sets of indicators.
To better understand the correlation between ISO 9000 certification and
socio-economic development of a country, the analysis has been enlarged to the human
development index (HDI) (see Table VI). HDI is a composite index that measures the
average achievements in a country in three basic dimensions of human development: a

Country

Table V.
Comparison between the
ISO 9000 ranking
position and the GPN for
the top ten countries in
2002

China
Italy
UK
USA
Germany
Japan
Spain
Australia
France
Republic of Korea

Certificates (2002)
(percentage of world total)

GNP (2002)
(billions US dollars)

GNP
ranking

13.49
10.90
10.85
6.93
6.37
6.05
5.11
4.83
3.54
2.58

1,234.157
1,100.713
1,510.771
10,207.039
1,876.340
4,323.919
596.469
384.075
1,362.077
473.050

6
7
4
1
3
2
10
14
5
13

Sources: ISO (2003); World Bank (2003)

long and healthy life, as measured by life expectancy at birth; knowledge, as measured by
the adult literacy rate and the combined gross enrolment ratio for primary, secondary and
tertiary schools; and a decent standard of living, as measured by GDP per capita in
purchasing power parity (PPP US dollars) (United Nations Development Program,
2004).
Considering HDI values in Table VI, Italy, UK, USA, Germany, Japan, Spain,
Australia, France, and Republic of Korea are considered high human development
countries. China is still classified as a medium human development country (United
Nations Development Program, 2004).

Analysis of ISO
9000 standard
diffusion
537

6. A forecasting model for the diffusion of ISO 9000 standard certifications


In a previous paper, Franceschini et al. (2004) empirically showed that ISO 9000
diffusion process is very close to the behavior of the so-called logistic systems, firstly
introduced by the Belgian mathematician Pierre Verhulst (1838) in order to describe
phenomena related to bio-population growths. The set of hypothesis considered by the
predictive model are the following:
.
the model considers only the total number of certified enterprises, paying no
attention to their specific dimension and to their commodity sector;
.
the saturation level is affected by market competition and by economic policies
pursued by central governments;
.
the diffusion growth is influenced by national incentives, by the presence of local
Governments encouragement and by the number of certification bodies; and
.
there are not events or external interferences (for example, international/national
regulatory/legislation changes) that can change the natural evolution of the
so-called certus-population (i.e. the ISO 9000 standards certified companies,
hereinafter called certus-population).
Denoting by N(t) the number of ISO 9000 standards certified companies over time, the
modified-logistic-curve for a certus-population is the following (Franceschini et al.,
2004):
N t

Country
China
Italy
UK
USA
Germany
Japan
Spain
Australia
France
Republic of Korea

N0 K
2 N0
N 0 K 2 N 0 e 2r0 t

Certificates (2002) (percentage of world total)

HDI (2002)

HDI ranking (2002)

13.49
10.90
10.85
6.93
6.37
6.05
5.11
4.83
3.54
2.58

0.745
0.920
0.936
0.939
0.925
0.938
0.922
0.946
0.932
0.888

94
21
12
8
19
9
20
3
16
28

Sources: ISO (2003); United Nations Development Program (2004)

Table VI.
Comparison between the
ISO 9000 ranking
position and the HDI for
the top ten countries in
2002

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538

where the parameters have the following meaning: r0 is the population growth rate in
the absence of intra-specific competition; N0 is a constant to assure the initial condition
N 0 0;
N 1 K 2 N 0 is the certus-population saturation level, that is the total number
of companies that will be interested in the certification process.
Analyzing by this model the ISO 9000 top ten countries, a series of considerations
take rise. Consider, for example, the case of Germany, which has achieved the
saturation plateau (maturity stage see Figure 9). The prediction curve has been
derived by applying to the empirical data a first-order non-linear regression fit (Seber
and Wild, 1989). The estimated average asymptotic value N 1 is approximately
40,000 (about 8 percent of C.C.). These results show that the certificates growth has
come to the end.
It can be shown that this phenomenon is happening in many other countries, such
as, for example, United Kingdom (the first country to introduce the ISO certificates),
Australia, France, Republic of Korea, and USA, (see also Figures 1 and 2).
The modified-logistic-curve model can be applied to certus-populations only until
the plateau level is reached. After this point, other mechanisms drive the diffusion and a
more appropriate model should be individuated. At the moment many different scenarios
can be hypothesized for the evolution after the saturation plateau. Related mechanisms are
not clear yet (Figure 9). Some current behaviors let believe that a reverse mechanism is
taking place (see, for example, UKPPP and Germany curves in Figure 1).

Prediction curve with confidence band


50,000
45,000

Number of certificates

40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000

Figure 9.
Forecast of the German
ISO 9000 standard
certificates elaborated by a
modified-logistic-model
until 2012

0
1988

1993

1998

2003
Year

2008

2013

Note: The figure reports the empirical data (circles), the fit curve (thick line), and the
forecast confidence interval (95%) (dotted lines)
Source: Franceschini et al. (2004)

7. Conclusions
The paper presents a cross-section of the diffusion of ISO 9000 family certification in
the world. Many aspects which highlight the peculiarity of this framework have been
analyzed. Some main results are hereafter summarized.
By the analysis of the scientific literature a correlation among certification and
business performances is not univocally demonstrable. It is still a matter of discussion
if the increase of business is due to the management methodology prescribed by
quality standards, or if it is only a question of marketing (certification as a way for
distinguishing itself in a global market).
If we look at the evolution curve of the number of certificates over time in each country,
we can observe a kind of saturation effect. This means that after a certain period of
fast growth a physiologic break take places. This phenomenon can be explained by
interpreting the certification process as a distinction element. When the number of
certified organizations reaches a certain limit, certification loses its connotation and
becomes less attractive for the remaining companies.
This behavior has been analyzed by a diffusion forecasting model. The saturation
effect has been verified for those countries which are attaining the so-called maturity
level (i.e. the level in which no certification growth is registered).
The analysis of regional share certificates evolution evidences a sensible increase of
Far East countries.
On the other hand, referring to the new Vision 2000, the results do not seem to be so
exciting. Up to the end of 2002, the number of certificates issued for the revised
standard (ISO 9001:2000, 2000) seems too exiguous to give assurance of a complete
transition by the fixed term.
The analysis of ISO 9000 certificates share by industrial sector evidences a growth
for the most sectors; only a few of them show a negative trend in last two years.
A relationship between ISO 9000 certificates and socio-economic indicators of a
country (HDI, GNP) has been considered.
Looking at the obtained results, some questions come out about the future of
certification. Will the certification market go on? Will certified enterprises continue to
be interested to the certification process?
A possible future scenario will polarize the certification focus from the inside of
enterprises (internal quality systems) to the actual beneficiaries of their performances
(stakeholders). Some markets are already showing examples in this direction. Many
commodity associations are adopting their own quality standards. At this point, how
can international standardization authorities act for avoiding this new certification
Far-West?
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diffusion
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Corresponding author
F. Franceschini can be contacted at: fiorenzo.franceschini@polito.it

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Analysis of ISO
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Benchmarking: An International
Journal
Vol. 13 No. 4, 2006
pp. 542-544
q Emerald Group Publishing Limited
1463-5771

Book review
Benchmarking: A Guide for Educators
Sue Tucker
Corwin Press
Thousand Oaks, CA
1996
pp. 104
Paperback: $18.95
ISBN: 080396367X
Keywords Benchmarking, Education, Measurement
Review DOI 10.1108/14635770610676335
While the quality of education in the US higher education system undoubtedly leads
the world, the education in K through 12 grades admittedly demonstrated relative
weakness in quality compared to many Asian and European nations. As a result, the
issues of quality, quality standards, the measurement of quality and performance in
the public education system have been a matter of concern in the socio-political arena
of the nation. The governmental responses to these issues in the form of subjecting
institutions to a defined national standard (for measuring student competencies and
performances at various grade levels for funding purposes) have been controversial
and often led to partisan political rhetoric. Public schools and school districts in the
nation under pressures of compliance have begun to embrace the business model of
continuous improvement through benchmarking performance toward achieving world
class standards.
However, as the culture of continuous improvement and the adoption of best
practices through benchmarking are more readily accepted in the business community
for competitive advantage, the public school system with their elective governance
bodies and entrenched bureaucratic system find it quite difficult to change the
traditional culture. Sue Tucker of the NETWORK, Inc. a consultant for the public
education system for many years wrote this guidebook in nine sequential chapters as a
step by step manual for the educators who have been contemplating restructuring
and reform. The approach described in the book conforms to peer benchmarking
or competitive benchmarking methodology. The intended readers are primarily
the educators in the public institutions, an individual school or the school district in the
nation. In authors own words, This book provides step-by-step actions that
improvement teams can take . . . (p. x). Each chapter of the book contains a purpose
statement, limited background information on the step, a simple and illustrative
exercise aimed at empirical understanding of the step.
In the first chapter (ten pages), the book provides an introduction of terms, concepts,
benefits of benchmarking, and the existing methodologies of benchmarking drawing
from the successes in the business world. The level of explanation in this chapter is
generic and rudimentary with a focus on simple and empirical understanding of the
concepts by an ordinary individual. In Chapter 2, under a catchy question or phrase,
Should your school begin benchmarking, the author in seven pages discusses the

experiences of benchmarking and continuous improvement in business organizations;


the prerequisites that must be in place for benchmarking; a desirable time frame for a
benchmarking study; the cost and logistical considerations; and the provision of some
general resource guidelines. Again, the level of analysis in this chapter was also kept
very simple. The third chapter consists of nine pages and dealt with the planning
aspect of the benchmarking project. The author stressed such things as what to and
what not to benchmark; selecting a benchmarking team; and writing a term of
reference for the team.
Chapter 4 consists of 11 pages. The author describes the need to document current
practices; establishing performance measures; and understanding of the current
processes and the bottlenecks associated with them. The Chapter 5 consists of seven
pages. It deals with the development of relevant criteria to be used in selecting a
benchmarking partner (i.e. a peer). In brief statements, the need for conducting research
to locate a partner, and once located, concluding an agreement with the same was
emphasized. The Chapter 6 in seven pages deals with the mechanics of developing a
questionnaire and a site visit guidelines. In this important segment, the author
provides the likely contents of the questionnaire and the important logistical
considerations for the site visit. In the Chapter 7, also in seven pages, the author
discusses actions, Analyze-Recommend-Communicate. She highlights actions such as
comparative analysis (relative to the peer institution) of data leading to the
determination of performance gaps; and development of performance improvement
ideas for the institutions. In the six pages of Chapter 8, the author discusses the need
for developing an implementation plan. Establishing a structure with a mission to
Plan-Do-Check-Act Cycle through an action plan was also recommended. In the four
pages of the concluding (Chapter 9) chapter, the author demonstrated the need for
celebration of the success, recording of the process improvement, and the team
recognition.
Sue Tucker wrote this book in a workshop format for an audience of educators in a
commonsense language. The complex and technical vocabulary of the benchmarking
study were carefully avoided. She has the background and understanding of the public
educational system, the target readers of the book, and the political, administrative,
and economic realities of the public schools. This book was probably the first of its
kind to address benchmarking, best practices and continuous improvement in the
public elementary through the secondary school system. The important strength of
this book is that it takes the fear out of the reader of a perceived complex system of
measurement methodology of benchmarking. The workshop format provides
empirical grounding of concepts and methods. Another good aspect of the book is
that it prepares the reader in the understanding of the logistical imperatives, the
requirement of financial, the time, and the leadership commitments for a benchmarking
study. Researching for a peer institution as a reference point for calculating
performance gaps should be interesting to the target readers.
Making benchmarking simple and worthwhile for any organization is a noble but
task. In many ways, Sue Tuckers book would appear to be too simplistic. It raises
more questions of how in every step that she describes in the book. Neither does it
deal with the complexities of measurement, nor does it provide examples. Within a
little over a page, the author provides an overview of benchmarking methodology.
In such a brief space, only certain pertinent questions that a benchmarking

Book review

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methodology should address were listed. One wonders how the educators would
operationalize these questions and develop reliable and valid instruments. They would
definitely need and seek assistance of the consultants or professionals in the absence of
in-house expertise of the proposed team. There is also no discussion about the
composition of the benchmarking team or discussion of cases of success in locating a
peer institution. The reader may also become puzzled in handling the action
imperatives of Chapter 7 of the book. The author only affirms the need for analyzing
the findings and confirming and articulating performance gaps. But how would these
activities be accomplished? In an intuitive exercise of performance gap, the author
asked the readers to use the performance measurement technique developed in Chapter
4. But in Chapter 4, the author asks the reader to develop a process chart of existing
operation and analyzing the root causes of problems in the existing processes; but how
should the reader do these activities? In exercise 4.1: establishing performance
measures, the author implies gathering of subjective and global opinions to be listed on
a flip chart implying a sort of brainstorming exercise. Without quantifiable
outcomes, attempting a comparative analysis toward establishing the performance gap
is good for intuitive exercise and probably best for conceptual understanding but not
practical and useful in quantitative analyses of any benchmarking study. In the
absence of a discussion pertaining to a robust methodological model and empirical
exercises, this guide may be treated as an orientation workshop rather than actual
guide of benchmarking for best practices.
M. Ruhul Amin
Department Chairperson and Co-Coordinator of MBA Program,
Bloomsburg University, USA

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