Relationship between quality and performance excellence

relationship between quality and performance excellence

Product cover for Quality & Performance Excellence 8th Edition by James Evans a variety of organizations, and illustrates the relationship between principles. James R. Evans is a professor in the Department of Operations, Business Analytics and Information Systems in the Lindner College of Business at the University. Key words: case study, empirical research, performance excellence, quality . examined the relationship between TQM practices and operations performance of.

Information Use The basic concept underlying the value of information use is that organizational well-being and an external focus are possible only with effective systems for information acquisition, analysis, and application. This includes identifying, studying, and comparing an organization's own activities to those of "benchmark" organizations—organizations that represent a standard of excellence and are therefore a focal point for performance comparison and improvement.

Specific kinds of information to be collected and used would include the answers to the following questions: What is the relative importance of these criteria?

Who are the key competitors? How do products, services, management approaches, and operational performance compare to those of competitors? Depending on what information is needed in order to answer any given question, the data may need to be gathered from external sources e. Collaboration Organizations are considered to be complex systems with numerous internal and external constituencies that interact with and depend on one another.

These interactions may take the form of exchanges of goods, services, capital, or information. The viability of organizations as systems and their ability to meet expectations of external constituencies depend largely on whether and how these internal interactions take place. Traditionally, organizations have been structured based on basic functions that need to be carried out.

Thus, a typical manufacturing company has divisions or departments of production, sales, operations, marketing, finance, research and development, and so on. This results in elaborate vertical structures and reporting relationships within each functional area of the organization. Vertical structures, sometimes termed "silos," facilitate interaction within functional divisions. At the same time, they set up obstacles to interaction and coordination between units. Individuals and departments often become detached from the overall mission of the organization.

Work process fragmentation, compartmentalization, and an "it's not my job" mentality tend to evolve. Thus, for example, the research and development division may design a product without the benefit of full collaboration with manufacturing, operations, and marketing, which can potentially lead to any of a number of unfortunate outcomes, such as a wonderful design for a product that the company cannot easily manufacture and for which there is no longer a viable market.

Simpler, better integrated, "flat" organizations, which facilitate cross-functional and cross-divisional collaboration, coordination, and teamwork, are considered to be a means for addressing consumer expectations, aligning individuals and functional units with the organization's mission, and improving the overall organizational quality.

Communication Communication is the means through which information is gathered and disseminated to and from stakeholders or consumers, and it is the mechanism through which work process collaboration occurs. It is also the process through which relationships are formed and developed—relation-ships that are essential to the creation of a culture and spirit of teamwork that is necessary to support and maintain an external focus, collaboration, and a good overall organizational quality.

Continuous Improvement Quality and high levels of performance do not occur naturally. Rather, they require a substantial commitment of time and resources to a process of continuous improvement and ongoing change— what many people writing in the quality area have called a "journey.

Quality Strategies and Processes What is the process by which the core quality and performance excellence values are implemented within an organization? Broadly speaking, the process has two phases: Assessment Fundamentally, assessment is a strategy for evaluating the current level of performance of an organization in relationship to the expectations of its constituencies and the organization's mission and vision.

It allows for the identification of service quality gaps, which become priorities for improvement. The Baldrige Award, signed into federal law on August 2,was initiated with the intent of improving quality and workmanship in the United States. Organizations that are interested in being considered for the award must complete a comprehensive self-study and application process.

Awards are given in five categories: Quality Improvement The process of quality improvement usually involves two steps: Basic to the improvement process are groups, or teams. A team simply is a group composed of individuals who represent various facets and levels of a unit or process earmarked for study and improvement. The team includes individuals who have a broad base of knowledge and experience with the processes that are being addressed.

Service Quality Measurement Because of the intangible nature of services, service quality is inherently more difficult to measure than product quality. Service quality perception results from a comparison of customer expectations with actual service performance. In their seminal paper, Parasuraman, Zeithaml, and Berry PZB proposed a conceptual framework for service quality. The PZB model was based on the interpretation of qualitative data from extensive exploratory research focus groups and in-depth executive interviews performed in four service businesses.

Their research revealed 10 dimensions transcending different types of services that customers use in forming expectations about and perceptions of services received. The intent of the instrument was to provide a tool for assessing customer perceptions of service quality in service and retailing organizations. Customer perceptions are subjective assessments of actual service experiences. Customer expectations are the standards or reference points for performance against which service experiences are compared and are often formulated in terms of what the customer believes should happen.

Their research found that customers consider five dimensions in their assessment of service quality, including: The number of dimensions that influence customer perceptions varies from service encounter to service encounter.

relationship between quality and performance excellence

Sometimes customers use all of the dimensions to determine service quality perceptions and other times consider a limited subset of the dimensions. The instrument has been used in a variety of service scenarios across the world. However, it has also been the subject of much criticism.

Since the inception of the original instrument, Parasuraman, Zeithaml, and Berry ; and other researchers have published numerous refinements, reassessments, and rebuttals to criticisms. Operations Performance Measures According to the production-line approach put forth in the early works of Levitt ; cost should be the most important objective for the service factories. Increased competition and the market-driven nature, however, require all services to also constantly upgrade their quality, delivery, and flexibility performance Hayes and Wheelwright In addition, service-marketing literature emphasizes that operational objectives should include both market and financial-based measures Rust, Zahorik, and Keiningham ; Kordupleski, Rust, and Zahorik ; Karmarkar and Pitbladdo ; Verma and Young In addition to collecting survey data, detailed qualitative information about the organization and the business environment in Hong Kong was collected.

relationship between quality and performance excellence

The case study examined presents issues within the context of the banking industry in Hong Kong. During the last few years, the banking industry in Hong Kong has experienced significant pressure from market forces due to changes in the government structure.

Hence, this organization provided a unique opportunity to assess quality culture, strategic consensus, and their impact on performance in a turbulent business environment.

relationship between quality and performance excellence

In this section, the authors describe the case study background, and then they present the results of the survey research. Case Study Background The banking organization studied provides a wide range of financial services through a network of 28 retail branches situated at strategic locations around Hong Kong Island, Kowloon, and the New Territories.

Retail banking functions as the core of the organization by providing support to the growth of the bank with respect to the infrastructure, customer base, and funding. The infrastructure consists of the distribution channels, including branches, ATM, and the phone-banking center.

The customer base consists of depositors, loan customers, and account holders. Funding includes deposits, both fixed and cartel.

The banking industry in Hong Kong is not a level playing field. Organizations must operate in a very competitive environment. There are two primary banking groups that occupy approximately 70 percent of the market.

In addition, there are about 10 family-owned banking groups of similar size to the case study organization that also target a similar customer base. Facing new competitive threats, senior management believes that building strong relationships with their customers would gain an enduring competitive advantage.

While products can be copied, customer service takes years to develop and sustain. To address the service mission the organization implemented a comprehensive program to improve service quality. The intent was to set the tone for a quality culture to exist within the organization.

Senior management has been supporting and communicating this objective throughout the organization to help foster the cultural change. Capital and resources have been invested in the retail network in order to position the organization as an innovative retail bank. Previously, its competitive position was based on offering superior products at a competitive price. Recently, it has seen a diminishing gap between financial service products.

An innovative product can only lead the marketplace for a short time as competitors quickly introduce similar products. Customers are becoming more sophisticated, and they are less loyal to a particular institution. They are willing to switch for better service or lower price. The banking organization studied has experienced three significant changes in recent years.

First, it has attempted to transform the retail culture from operations oriented to sales and service oriented. Second, it has modernized the infrastructure, both hardware and software, to help improve productivity and efficiency.

It created a climate for nurturing the sales and service culture through proper staffing training, staff benefits, and provided incentives to foster a sense of belonging.


To help improve front-line service standards, counter supervisor trainees with teller functions were also recruited. To reinforce the importance of quality, daily briefing sessions and regular branch, zone, and regional meetings were conducted. Business targets were assigned to branch and individual staff for performance measurement in conjunction with a reward system. They also established work teams procedure simplifications committee, new product committee, and service quality committee to streamline procedures, develop new products, and enhance service standards.

Finally, a regional concept was implemented with senior staff members assigned to each of the three regions. The senior staff members are responsible for accelerating decision making, maintaining closer understanding of market conditions, and reviewing customer and staff needs. The second significant change was to modernize the infrastructure of both hardware and software.

Branches were reconfigured to improve the counter area to enhance the interaction with customers.

relationship between quality and performance excellence

The organization also increased the customer service waiting area and updated the general branch premises. The bank made a significant investment to upgrade its computer systems. It installed new technology via the new retail banking system to automate the majority of the operational procedures.

It created a regional advisory council to help understand the voice of the customer and the marketplace. Selected community leaders act as advisors to individual branches by providing regular feedback on products, delivery, and service standards. To communicate a clear corporate image throughout the network, a new bank logo with a coordinated design and color yielding a higher marketing profile for the bank was introduced.

relationship between quality and performance excellence

The organization redesigned, repackaged, and reprinted all of the customer statements, product information, and promotional material. The branch staff uniforms were redesigned with high-quality materials to make the employees proud to wear their uniforms.

Finally, it established a corporate communications department to enhance the relationship with media and public. The survey was administered to every front-line employee at each retail location.

The executive vice president of consumer banking sent a letter to the three regional mangers requesting the entire retail branch locations participate in the study. Each location received copies of the survey instrument and a forwarding letter from the researchers explaining the purpose of the survey. To ensure confidentiality, the participants were provided with confidential return envelopes. The participants were assured that bank employees would not open their responses.

The surveys were collected and couriered to the authors for analysis. A total of surveys were returned, with the effective response rate of Each of the constructs described were measured by a seven-point likert-type scale. Survey questions corresponding to each research construct are included in the Appendix.

Multiple item measures were used to assess the employee perceptions for the six dimensions except business results of quality system, which form the basis of MBNQA criteria see Figure 1. The items used to measure the quality management constructs have been previously used in published empirical studies such as Ahire, Golhar, and Waller ; Samson and Terzioyski ; and Black and Porter Therefore, the authors have built their analysis on the assumption that the scales have been tested and validated in earlier studies.

Managing for Quality and Performance Excellence

Therefore, the authors have not undertaken a detailed validation analysis of their survey instrument. They did, however, conduct a reliability analysis of the scales to ensure that the inter-item correlations are indeed acceptable. The reliability coefficients for each of the six quality system dimensions leadership, strategic planning, customer and market focus, information and analysis, human resources focus, and process management were found to be greater than 0.

Organizational Quality and Performance Excellence |

Therefore, the authors concluded that the multi-items scales were reliable measures and used them for subsequent analysis presented later in this article. In this study they used the perceived measures of each of the five SEQVQUAL constructs tangibles, reliability, responsiveness, assurance, and empathy to test the relationship between quality system, perceived service quality, and performance measures.

Finally, multi-item scales were used to measure operational performance along the two dimensions: As shown in Table 3both performance measures showed an extremely high degree of reliability close to 0. After assuring that the scales used in this study are reliable, the authors conducted a series of stepwise regression analyses to test the relationships proposed in Figure 1. Advanced multivariate techniques such as structural equation modeling can be used to test the entire framework proposed in Figure 1.

However, the intent of this study was exploratory and, therefore, at this point the authors have chosen to test the relationships between a series of independent variable and a specific dependent variable, one at a time.

The first series of stepwise regressions explored the relationships between the seven quality management system constructs with employee perceptions of service quality delivered to the customers.

As shown in Table 4, each of the five regression models was found to be statistically significant at the 5 percent level with adjusted R 2 values ranging from 0. Tangibles was found to be significantly related to market focus and leadership; reliability was found to be significantly related to process management and leadership; responsiveness was found to be significantly related to leadership and market focus; assurance was found to be significantly related to process management and leadership; and, finally, empathy was found to be significantly related to strategic planning and market focus.

Relative regression coefficients and goodness-of-fit statistics are presented in Table 4. Following the guidelines proposed by Verma and Goodaleall results presented in this article are based on p-value of 0. The results presented in Table 4 demonstrate that an overall employee perception of quality management system in the organization is related to the service quality delivered to the customers. Among the seven quality management system constructs, leadership was found to be related to four, and market focus was found to be related to three SERVQUAL dimensions.

Next the authors conducted a series of stepwise regression analyses to test the relationships between employee perceptions of service quality and operational performance. The results presented in Table 5 show that both regression models are statistically significant at the 5 percent level with adjusted R 2 values ranging from 0.

Hence, they conclude that employee perceptions of service quality are related to operations performance. Monetary gain was found to be significantly related to four SERVQUAL dimensions except assurance, but value gain was found to be statistically related to only tangibles and responsiveness. Figure 2 summarizes these regression results.


As discussed in the case study and shown by the survey results, the proposed relationships seem to hold true for a large service organization operating in a turbulent business environment. It is equally essential to understand that superior service quality can lead to higher levels of operational performance.

The authors can conclude from these results that this organization is doing a good job of stressing the importance of quality management in the successful operation of the entire company to its front-line staff. Specifically, for example, the MBNQA performance excellence criteria propose that the leadership triad leadership, strategic planning, and customer and market focus drives the organization.

The organizations top management was integral to formulating and identifying new strategies to compete in the marketplace, which evolved into more effective service systems and strategies leading to strong quality-oriented attitude from the front-line employees. The banking organization studied has been attempting to transform the culture to customer-service oriented, which seems to be communicated well to the front-line employees.

In addition, the organization modernized the infrastructure, both hardware and software, to help improve productivity and efficiency, which the authors believe seems to impact performance for example, significant linkages between tangibles and monetary or value gain.

Methodologically the authors undertook a combination of a detailed case study and survey research approach to explore the theories of interest to them. During recent years, leading researchers in operations management have recommended the use of such in-depth case analyses in combination with quantitative techniques for exploring the research questions beyond what can be observed on the surface.

The authors consider their study to be exploratory and therefore have resisted the use of advanced statistical analysis.

They would like to go back to the organization during two years after the current data collection exercise to collect longitudinal data. The authors hope to present the additional results shortly thereafter. Development and validation of TQM implementation constructs. Operations strategy and organizational performance: International Journal of Operations and Production Management 16 5: Journal of Operations Management 8 2: Journal of Business Research Identification of the critical factors of TQM.

Decision Sciences 27 1: The empowerment of service workers: What, why, how, and when. Sloan Management Review 33 3: Journal of Retailing 66 1: Where does the customer fit in a service operation? Harvard Business Review November-December.

The customer contact approach to services: Theoretical bases and practical extensions. Operations Research 29 4. The mall is my factory: Reflections of a service junkie.