Journal of Operations Management 17 1998.

5975

The TQM Paradox: Relations among TQM practices, plant

performance, and customer satisfaction
Thomas Y. Choi ) , Karen Eboch
Department of Management, College of Business Administration, Bowling Green State Uniersity, Bowling Green, OH 43403-0270, USA
Received 14 January 1997; accepted 17 November 1997

Abstract
We empirically examine a mediational model of TQM, in which TQM practices have a direct impact on customer
satisfaction and an indirect impact mediated through plant performance. We adopt a survey approach using the data from
339 manufacturing companies. We first establish convergent validity, discriminant validity, and reliability of the constructs.
We then examine the model using LISREL 8.10. The results suggest paradoxical relations among TQM practices, plant
performance, and customer satisfaction. TQM practices have a stronger impact on customer satisfaction than they do on
plant performance. Further, the plant performance, as described in the mediational model, fails to show a significant impact
on customer satisfaction. This observation is explained based on an institutional argument that states that loose coupling may
occur between TQM practices designed for customer demands and the activities on the plant floor designed for plant
performance. q 1998 Elsevier Science B.V. All rights reserved.
Keywords: Empirical research; Operation strategy; Interdisciplinary; Quality; Performance; Customer satisfaction; Institutional theory;
Supply chain

1. Introduction
US manufacturing firms have faced heightened
challenges from global competitors and a reduced
market share during the past two decades Meredith,
1992; Krajewski and Ritzman, 1996.. To renew their
competitiveness, many firms have adopted the practices of total quality management TQM., and their
experiences have been detailed in many books and
articles see, e.g., the cases presented in Dean and

Corresponding author. Present address. Arizona State University, College of Business, Department of Management and Department of Supply Chain Management, Tempe, AZ 85287-4006,
USA.

Evans, 1994; George and Weimerskirch, 1994; Ross,

1995.. In general, in the literature, TQM is described
as a collective, interlinked system of quality practices that is associated with organizational performance GAO, 1991; Tornow and Wiley, 1991;
Waldman, 1994; Madu et al., 1995. and customer
satisfaction Anderson et al., 1994a,b; Dean and
Bowen, 1994; Reeves and Bednar, 1994; Spencer,
1994.. Further, many authors e.g., Dean and Bowen,
1994; Dew, 1994; George and Weimerskirch, 1994;
Capon et al., 1995r1994; Ross, 1995; Black and
Porter, 1996. implicitly suggested a positive association among TQM practices, organization performance, and customer satisfaction, by adopting the
framework of the Malcolm Baldrige National Quality Award in their TQM model; the Baldrige Award

0272-6963r98r$ - see front matter q 1998 Elsevier Science B.V. All rights reserved.
PII: S 0 2 7 2 - 6 9 6 3 9 8 . 0 0 0 3 1 - X

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T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

incorporates these three constructs in the assessment

of TQM in an organization.
However, there appears to be ambivalence surrounding this positive association. Conflicting reports have been published regarding the effectiveness of TQM programs. For instance, although Rategan 1992. reported a 90% improvement rate in
employee relations, operating procedures, customer
satisfaction, and financial performance, Burrows
1992. reported a 95% failure rate for initiated TQM
programs. McKinsey and company also found that
two-thirds of the TQM programs they examined
were terminated, because these programs did not
lead to expected results Economist, 1992.. Furthermore, the empirical investigation of how much of
organizational performance brought on by TQM
practices, in turn, affects customer satisfaction appears to be non-existent. Although we found studies
that associated organizational performance e.g.,
quality service. and customer satisfaction e.g.,
Tornow and Wiley, 1991; Taylor and Baker, 1994.,
authors of these studies did not consider the overall
impact of actual TQM practices on this relationship.
If we give credence to the conflicting reports
about TQM, we are forced to consider that TQM
practices may add disappointingly little to organizational performance, and thus little to the satisfaction
of the customers who are thought to be
performance-conscious. At the same time, we cannot
disregard the mountainous literature, some of which
is cited above, that pointed out TQM as the pathway
to organizational performance and customer satisfaction. In this paper, we intend to add additional
insights into this seemingly paradoxical dynamic of
TQM practices, organizational performance, and customer satisfaction. To the best of our knowledge, no
researchers have empirically examined these three
constructs of TQM in a single model. These relationships are depicted as a mediational model see Baron
and Kenny, 1986. in Fig. 1.
Because the manufacturing industry has led the
quality initiatives Dertouzos et al., 1989; Womack

Fig. 1. A mediational model of TQM.

et al., 1990., we studied the TQM activities in that

industry. We focused on plant operations, and we
regarded plants as our unit of analysis. Consequently, the term customers refers to industrial customers. Therefore, the context in which we are
studying the dynamics of TQM is the supply chain
e.g., Ellram, 1991; Bamford, 1994. that exists upstream to the consumer market.

2. Literature review
In the special issue of the Academy of Management Reiew, which was dedicated to Total Quality,
Dean and Bowen 1994., in their lead article, offered
an overarching perspective that the entire quality
management effort must be focused on achieving
customer satisfaction. Three articles that followed
echoed this perspective. Reeves and Bednar 1994.
suggested that the historical definitions of quality
espouse customer or consumer satisfaction as the
ultimate goal of quality management. Spencer 1994.
introduced three models of TQM mechanistic, organismic, and cultural. and argued that all three
models suggest quality as conforming to or satisfying internal or external customers. Anderson et al.
1994a,b. summarized Demings TQM principles and
delineated customer satisfaction as the final outcome
of quality management. Researchers e.g., Waldman,
1994; Madu et al., 1995. have acknowledged organization performance as another key construct of the
TQM model. McCune 1989. described performance
management as the key source of customer satisfaction. According to the model forwarded by Anderson
et al. 1994b., quality performance outcomes are
driven by quality management practices, which, in
turn, leads to customer satisfaction.
Therefore, these theoretical discussions offer general support for the significance of the constructs
shown in the mediational model of TQM in Fig. 1:
TQM practices, plant performance, and customer
satisfaction. In the remainder of Section 2, we review more carefully the literature related to these
three main constructs. We examine the extent to
which authors of the extant literature support or do
not support the relations among these three constructs. Finally, we summarize the literature into
specific propositions.

T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

2.1. TQM practices

Built on a systems perspective Dean and Bowen,
1994; Hackman and Wageman, 1995., the Baldrige
Award framework of TQM is used to emphasize the
importance of how different organizational practices,
including such seemingly disparate areas as human
resources management, quality control, and information analysis, work together to increase an organizations performance. Many researchers have adopted
the Baldrige Award framework as the basic model of
TQM: Dean and Bowen 1994. used it to explore the
relationship between the principles of TQM and
management theories; Black and Porter 1996. used
it to develop and validate their TQM survey questions; and Capon et al., 1995r1994 used it to identify key measures of TQM success. According to the
Baldrige Award framework, there are four areas of
management practices within the TQM system to
assess: management of process quality, human resources management, strategic quality planning, and
information and analysis.
Management of process quality entails monitoring of work processes and improving operational
variations Feigenbaum, 1951; Juran, 1951; Crosby,
1979; Deming, 1986; Juran, 1989; Anderson et al.,
1994b; Dean and Bowen, 1994; Goetsch and Davis,
1994.. Data are gathered and analyzed, and corrective actions are taken to improve the work process.
When human resource management practices are
used, workers on the shop floor become the center of
the plants improvement efforts Deming, 1986; Dean
and Bowen, 1994; George and Weimerskirch, 1994;
Waldman, 1994; Hackman and Wageman, 1995;
Pegels, 1995; Ross, 1995.. In this case, workers
intellect and skills are cultivated. Employee involvement is encouraged, and management creates a reward system conducive to employee involvement.
Strategic quality planning can be referred to as
designing internal functions to reflect the organizations mission Juran, 1989; Dean and Bowen, 1994;
Goetsch and Davis, 1994.. It is used to keep the
organization focused on the chosen objectives. As
long-term goals are projected by management, the
operational decisions at all levels are made to remain
consistent with these goals. Information and analysis
practices are used to emphasize the importance of
data-based, factual decision-making Dean and

61

Bowen, 1994; Hackman and Wageman, 1995.. In

this case, decisions to improve quality and productivity are made based on concrete data and analysis.
Information from and about customers is collected
and distributed within the organization.
2.2. Plant performance
Plant performance refers to quality, cost, and
delivery outcomes of the plant. Examples of specific
measures of plant performance include production
down time, on-time delivery, internal and external
reject rates, costs per unit produced, and inventory
turnover ratio.
Many authors have suggested that TQM practices
can have a positive impact on a firms quality and
productivity results e.g., Goetsch and Davis, 1994;
Pegels, 1995.. For instance, Bounds et al. 1994. and
George and Weimerskirch 1994. suggested that
TQM practices should lead to decreased internal and
external product reject rates and production downtime. TQM practices also should increase the overall
efficiency of plant operation. Based on his experience, Thomas 1989. claimed that TQM leads to
improvement in total production cycle time, level of
inventories, productivity, and delivery lead time.
However, most of these claims were based on anecdotal evidence, and systematic studies correlating
TQM practices and quality and operational results
are rare.
There have been a few exceptions. The General
Accounting Office GAO. filed a report on the relationship between quality management practices and
organization performance GAO, 1991.. A study
based on survey research by Flynn et al. 1995.
established a positive relationship between TQM
practices and plant operation i.e., cycle time improvement.. Adam 1994. found a strong relationship between quality improvement approaches statistical process control, reward, training, etc.. and
performance quality scrap, rework, inspection, etc...
More recently, a few authors have presented empirically developed and validated constructs of TQM
Ahire et al., 1996; Black and Porter, 1996.. Although they did not offer an empirical argument for
the relationships among the TQM constructs, Black
and Porter 1996. implicitly assumed a positive relationship by building their instrument based on the
Baldrige Award framework.

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T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

However, as alluded to previously, some authors

have argued that TQM has little to do with the actual
improvement of performance results Broetzmann et
al., 1995., and some view TQM as a fad, which was
discussed by Neal and Tromley 1995.. An Arthur
D. Little survey of 500 executives in US manufacturing and service firms indicated that only one-third
believe that TQM made them more competitive
Economist, 1992; Mathews and Katel, 1992.. In a
survey by A.T. Kearney of 100 British firms that had
implemented quality programs, only one-fifth expressed that their programs had a significant impact
on organizational effectiveness Economist, 1992..
Further, in an American Electronics Association survey, 63% of the firms reported that TQM practices
failed to reduce defects by 10% or more, even when
these practices had been implemented for more than
two and half years Eskildson, 1994..
2.3. Customer satisfaction
The impact of TQM practices on customer satisfaction is less disputed than its impact on plant
performance results. Both Deming 1986. and Juran
1986. promoted customer satisfaction as the ultimate goal of TQM. Deming suggested that the goal
of firms should be to constantly improve their services and products for the customers, and Juran
defined quality as fitness for use, or the ability of a
service or product to satisfy a customers needs.
Further, many leading firms such as IBM, Xerox,
and 3M have claimed that their TQM efforts have
contributed to increased customer satisfaction Ross,
1995.. For instance, one of the key effects of TQM
practices has been on employee involvement and
empowerment, which has a positive impact on customer satisfaction Flood, 1993; Ross, 1995..
Through empowerment, management avails its workers increased access to information and resources
and delegates decision-making Blau and Alba, 1982;
Ahire et al., 1996.. When empowered employees
come in contact with customers, workers remain
flexible and responsive to satisfying the needs of the
customers.
Dean and Bowen 1994. suggested that the study
of customer satisfaction typically falls under the
domain of marketing. In general, authors of the
marketing literature concur with the observation that
TQM practices lead to customer satisfaction Babich,

1992; Rust and Zahorik, 1993; Anderson et al.,

1994a.. They portray customer satisfaction as an
important indicator of a firms overall financial
health, largely because it is perceived to be a key
indicator of a firms market share and profitability.
Simply stated, a satisfied customer will repeat his or
her purchases of the goods or services, increasing a
firms market share and profits. Zairi et al. 1994.
argued that TQM practices lead to improvement of
the bottom-line results such as profits and returns on
assets. It follows, then, that TQM practices will have
a positive impact on the firms market share and
profits, although mediated through customer satisfaction. Therefore, there appears to be support for a
positive relationship between TQM practices and
customer satisfaction.
2.4. Formulation of propositions
There are three relationships portrayed in our
TQM model shown in Fig. 1. We will reemphasize
the main arguments of the literature and state each of
these associations as a formal proposition.
Overall, there is consistent support for a positive
relationship between TQM practices and customer
satisfaction e.g., Deming, 1986; Juran, 1986; Flood,
1993; Anderson et al., 1994b; Dean and Bowen,
1994; Ross, 1995.. However, as discussed previously, there have been conflicting reports about how
TQM practices lead to the expected performance
results of a firm e.g., Burrows, 1992; Economist,
1992; Eskildson, 1994; Broetzmann et al., 1995..
Regarding the negative reports, authors do not necessarily argue that TQM is bad for the firm or it has
no positive impact on the firm; they generally contend that TQM does lead to the performance gains in
quality and operational results, albeit such gains are
less than the expectations of the firms.
Few authors have addressed the relationship between performance results and customer satisfaction.
McCune 1989. offered a conceptual model in which
an organizations performance leads to customer satisfaction. Tornow and Wiley 1991. also argued,
based on an empirical study, that there was a positive
relationship between operational performance and
customer satisfaction. However, the overall relationships they noted are, in fact, quite weak. They
offered six indicators of organization performance
and seven indicators of customer satisfaction. Of 42

T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

possible combinations of relationships, only 7 relationships were significant. Although marketing researchers have conducted studies on the relationship
between performance and customer satisfaction, they
focus mainly on the consumer satisfaction regarding
the performance of the purchased products Tse and
Wilton, 1988; Zeithaml, 1988; Anderson et al.,
1994a,b; Taylor and Baker, 1994.. Therefore, it may
be difficult to draw applicable conclusions for the
industrial purchasing context where the interaction
occurs between two organizations.
Overall, the positive relationships are suggested
among the three constructs in the TQM model e.g.,
Dean and Bowen, 1994; Capon et al., 1995r1994;
Ross, 1995 Black and Porter, 1996.. However, the
levels of support for these relationships vary. In
general, there is less dispute about the impact of
TQM practices on customer satisfaction than the
impact it has on plant performance results. Also, the
strength of the positive relationship between plant
performance, as affected by TQM practices, and
customer satisfaction, is still quite uncertain. In sum,
the level of impact may vary among the three constructs of Fig. 1. In this study, the level of impact is
operationalized by the level of correlation coefficient
according to Backstrom and Hursh-Cesar 1981.,
the level of correlations measures the level of impact
one construct has on the other, as the squared term of
the correlation coefficient represents explained variance that the associated two constructs have in common. Therefore, we offer the following propositions
to guide our study.
Proposition 1: TQM practices hae a strong impact on customer satisfaction.
Proposition 2: TQM practices hae a moderate
impact on plant performance.
Proposition 3: Plant performance has a weak
impact on customer satisfaction.
3. Data collection
3.1. Surey instrument
A list of TQM activities was compiled based on
the extant literature e.g., Feigenbaum, 1951; Juran,
1951; Crosby, 1979; Deming, 1986; Sashkin and

63

Kiser, 1991; Wellins et al., 1993; Dean and Bowen,

1994; Ross, 1995.. The list was categorized into the
four areas of a TQM system as specified in the
Baldrige frameworkprocess quality, human resources, strategic quality planning, and information
and analysis see Appendix A.. We studied TQM in
the industrial context e.g., customer as an industrial
buyer in the supply system. and focused on the
activities on the shop floor. For example, we probed
for the involvement of workers on the shop floor for
managing process quality and addressed such issues as problem-solving techniques are actively used
by the workers on the shop floor.
Once compiled, the survey form was refined
through a series of reviews by external judges. Operations management faculty were used as expert judges
for content alidation to determine how well the
chosen items represented the defined constructs. Executive MBA students and plant managers at six
manufacturing sites in the targeted industries were
interviewed while they reviewed the questionnaire to
identify any language ambiguities and perceived
omissions of other TQM practices used in manufacturing plants but not included in the survey. The
discrepancies and comments were used to further
refine the instrument.
3.2. Sample
We compiled a list of transportation and electronics parts manufacturers located in Ohio as the target
sample, based on the 1994 Ohio Manufacturers
List. The state of Ohio is in the heart of the US
manufacturing belt. According to the Harris Ohio
Industrial Directory, 1995, Ohio is the nations third
leading manufacturing state, and, according to the
SSTI Profile-Ohio 1997., 27.4% of Ohios gross
state product GSP. comes from manufacturing vs.
18.6% of the GNP. In this regard, data from Ohio
may be more representative than data from smaller
states with less manufacturing emphasis.
The SIC code, which identifies groups of common manufacturing processes and technologies, was
used to identify the organizations. The actual SIC
codes were selected from the companies in the 3400
to 3700 range of industries, which represents fabricated metal products, industrial machinery and
equipment, electronic and other electric equipment,
and transportation equipment. Based on the industry

64

T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

descriptions provided at the four-digit level, 55 classifications were selected that related to automotive
and electrical manufacturing.
Plant managers were determined as the most appropriate respondents, because they are most familiar
with their plants operating practices and performance outcomes. Of the 1679 mailed surveys, 67
were returned as undeliverable. Within two months
of mailing, 339 completed surveys were returned,
which was a 21% response rate.
According to the responses to the demographic
questions regarding principal products and plant size,
the sample was generally representative of the targeted industries, but responding plants were, in general, larger than the samples reported norms. The
target population had a mean sales of US$23.5 million and 183 employees, according to the Ohio Manufacturers List 1994.; however, the survey respondents reported a mean of US$40.8 million and 286
employees. It is possible that plant managers of
larger companies had more readily accessible data
and were able to take the time to complete and return
the surveys. It is also possible that some organizational growth had occurred, because there was a
two-year gap between the database figures 1993.
and survey results 1995.. According to the Ohio
Department of Development, Ohio showed the highest manufacturing growth among all 50 states in the
United States during this period.

4. Analysis and results

We began the measurement analysis by first establishing the convergent validity and discriminant
validity of the three key constructsTQM practices,
plant performance, and customer satisfaction. We
then proceeded to assess the instruments reliability
or the ability of its scales to consistently yield the
same response. We assessed construct validity or
extent to which the items in the scale measured one
dominant dimension. Once the scales were determined to be reliable and valid, a correlation matrix
was constructed for all items under TQM practices,
plant performance, and customer satisfaction.
We recognized that the model shown in Fig. 1 is a
mediational model, and each of the three constructs
has multiple indicators attached. Baron and Kenny

1986. recommended using a structural modeling

technique to examine a mediational model with multiple indicators. Therefore, we ran a structural model
using LISREL 8.10. We used the final correlation
matrix as the input in the LISREL run.
4.1. Conergent and discriminant alidity
Confirmatory factor analysis was conducted to
address the convergent and discriminant validity of
the constructs. We first examined the convergent
validity of all TQM scales to their respective constructsprocess quality, human resource management, strategic quality planning, and information and
analysis. All scales showed significant loading at
0.05 level e.g., their t-values were greater than 2.0..
We aggregated the scores for all four TQM constructs, after reversing the scores of the reverse-scaled
indicators see Appendix A..
We then proceeded to examine the convergent
and discriminant validity of the three key constructsTQM practices with four indicators, plant
performance with 10 indicators, and customer satisfaction with nine indicators. All indicators showed
significant loading except two under plant performance on-time delivery and inventory turnovers.,
which were subsequently dropped from further analysis. The results, as shown in Table 1, demonstrate
the convergent validity of the constructs.
To examine the discriminant validity, the unconstrained model and the constrained models were
comparedeach model has three latent constructs
TQM practices, plant performance, and customer
satisfaction.. The unconstrained model allows the
correlation between all three pairs of the three constructs to vary, and the constrained model fixes one
of the three pairs to 1.0in essence, the constrained
model converts a three-construct model into a twoconstruct model. If the unconstrained model is more
parsimonious than each of three constrained models,
based on the x 2 statistic, we establish that the two
models are different; thus, the correlation of a constrained pair should be allowed to vary or should be
a value less than 1.0. In other words, the x 2 for the
constrained model are compared with the x 2 for the
unconstrained model Anderson and Gerbing, 1988;
Podsakoff and MacKenzie, 1994.. Significantly lower
x 2 for the unconstrained models would indicate that

Constructs

X1

X2

X3

X4

X5

X6

X7

X8

TQM practices
Plant performance
Customer satisfaction

0.68 0.05.
0.58 0.06.
0.59 0.05.

0.66 0.05.
0.70 0.06.
0.62 0.05.

0.76 0.05.
0.16 0.06.
0.55 0.05.

0.62 0.05.
0.68 0.06.
0.55 0.05.

0.29 0.06.
0.61 0.05.

0.37 0.06.
0.48 0.06.

0.36 0.06.
0.56 0.05.

0.37 0.06.
0.29 0.06.

X9

Range of t-values

0.68 0.05.

11.4214.70
5.2113.31
5.0413.13

T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

Table 1
Convergent validity of constructs

65

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T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

Table 2
Discriminant validity of constructs
Unconstrained model
2

x s 578 d.f.s 186

Constrained pair

Constrained model

TQM practices plant performance

TQM practicescustomer satisfaction
Plant performancecustomer satisfaction

x s 829 d.f.s 187

x 2 s 717 d.f.s 187
x 2 s 827 d.f.s 187

x 2 differencea

Difference in d.f.

251
249
139

1
1
1

Significant at p - 0.05 after adjusting the a-level for the number of tests performed Anderson and Gerbing, 1988..
For instance, a o s 1 y 1 y a i . t , where a o is the significance level i.e., 0.05. and t is the number of tests, which in our case is 3.
a i is the adjusted significance level that should be used for each test, which in our case was computed to be 0.01 for a conservative
measure.

each correlation between pairs is less than 1.0

Bagozzi et al., 1991., and that the constructs are
empirically distinct, rendering support for the discriminant validity of the constructs. In our case, for
all three pairs of constructs, the x 2 for the unconstrained model was significantly less than the x 2 for
the constrained model, as shown in Table 2.
4.2. Reliability and alidity of scales
Our focus was then turned to examine more
closely the reliability and validity of the scales. We
accepted the results of the confirmatory analysis and
left out the two plant performance indicators that
lacked convergent validity. We examined the internal
consistency of all three constructs first by a factor
analysis and, second, by reliability testing of Cronbachs alpha. Our approach hereafter was modeled
after Flynn et al. 1994. who used largely ex-

ploratory analysis to examine the scales. Bagozzi et

al. 1991. suggested that confirmatory analysis and
exploratory analysis can supplement each other.
As alluded to previously, several items were designed to be reverse-scored, and they were modified
accordingly before any scale analysis was done. For
example, the question item, quality data just to
show to the customers, was considered to reflect an
undesirable practice; therefore, to maintain the consistency with the other questions, its direction was
reversed. Appendix A provides a general description
of the final items used in the scales. A minus sign is
shown next to the items that had a reverse scaling.
Each of the scales associated with TQM practices,
plant performance, and customer satisfaction were
analyzed separately. All the indicators included
within each of the individual constructs were thought
to load together as one factor, so no varimax rotation
was needed during the factor analysis. Table 3 iden-

Table 3
Overall internal consistency of scales
Scale title

Number of respondents

Cronbachs alpha

Number of items in scale

Number of items deleted

TQM practices
Process quality
Human resource
Strategic quality planning
Information and analysis

310
279
304
250

0.69
0.78
0.92
0.71

5
7
8
7

1
2
0
1

Plant performance
Quality
Delivery
Cost

306
282
296

0.73
0.48
0.63

3
2
3

0
0
0

Customer satisfaction
Quality
Delivery
Cost

304
319
327

0.73
0.73
0.61

4
3
2

0
0
0

T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

67

Table 4
Internal consistency by ownership and industry
Scale title

Plant ownership
US

Industry
Non-US

Auto

Electronics

Metal stamping
and coating

TQM practices
Process quality
Human resource
Strategic quality planning
Information and analysis

264
235
259
213

0.67
0.75
0.92
0.69

37
37
36
31

0.77
0.88
0.91
0.80

111
98
109
101

0.72
0.79
0.91
0.77

99
90
98
76

0.71
0.78
0.91
0.67

78
73
79
58

0.55
0.78
0.93
0.64

Plant performance
Quality
Cost

263
255

0.72
0.61

38
35

0.81
0.48

116
111

0.75
0.62

95
94

0.70
0.68

77
73

0.73
0.55

Customer satisfaction
Quality
Delivery
Cost

264
274
280

0.73
0.74
0.61

34
38
39

0.68
0.54
0.48

106
117
114

0.68
0.73
0.50

98
97
105

0.67
0.76
0.72

80
84
87

0.80
0.64
0.60

tifies the number of respondents, alpha score, and the

number of items that loaded onto each scale. The
alpha scores ranged from 0.92 for TQM strategic
quality planning to 0.48 for delivery results. Although an alpha of 0.5 may be acceptable Hair et
al., 1995., following the practice of Flynn et al.
1994., an alpha of 0.6 and above was considered an
effective reliability level for judging a scale of this
type. Therefore, the delivery aspect of quality and
operational results construct with an alpha value of
0.48 was eliminated.

To further examine the scales we used, an additional analysis using Cronbachs alpha was completed through which we analyzed the scales internal consistency by ownership and industry of the
respondents see Table 4.. The industry types were
broken into three categories to reflect the identification provided by the plant managers when they
identified their core businesses. Metal stamping and
coating was an industry designation separated from
auto and electronics industries by the respondents.
This distinction was, therefore, carried over into the

Table 5
Factor analysis by scale
Scale title

Factor loadings
Item a1 Item a2

Item a3

Item a4

Item a5

2.28
2.37
5.11

0.52
0.75
0.77

0.84
0.78
0.83

0.66
0.76
0.87

0.64
0.79
0.74

0.68

2.14

0.72

0.78

0.70

Plant performance
Quality
1

1.96

0.78

0.85

0.79

Customer satisfaction
Quality
1
Delivery
1

2.23
1.95

0.73
0.80

0.76
0.84

0.72
0.78

TQM practices
Process quality
Human resource
Strategic quality
planning
Information and
analysis

No. of
factors

Eigen value

1
1
1

0.78

0.87

Item a6

Item a7

Item a8

0.75

0.80

0.74

68

TQM

Performance results

Customer satisfaction

Quality

Quality

Process quality

Human resource

Strategic quality planning

Information and analysis

TQM practices
Process quality
Human resource
Strategic quality planning
Information and analysis

y
0.56)))
0.53)))
0.38)))

y
0.60)))
0.53)))

y
0.66)))

Plant performance
Quality

0.13)

0.13)

0.090

0.13)

Customer satisfaction
Quality
Delivery

0.35)))
0.29)))

0.40)))
0.31)))

0.43)))
0.27)))

0.41)))
0.34)))

0.080
0.083

) p- 0.05.
)) p- 0.01.
))) p- 0.001.

y
0.52)))

Delivery

T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

Table 6
Correlation matrix for TQM, performance, and customer satisfaction

T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

analysis. If the resulting ownership and industry

alphas were not consistently above the 0.6 level,
demonstrating the validity and reliability of the scales
among the different subcategories of respondents, the
scale was dropped from further analysis.
The final scales and the strength of the factor
loading on to each dimension are provided in Table
5. The process quality factor included maintenance
issues, problem-solving activities, and usage of quality data. The human resources factor included the
items of rewards, training, idea generation, and feedback. The strategic quality planning factor was the
strongest in terms of indicators holding together,
which ranged from top management commitment
and mission to production layout issues. The information and analysis factor included the items involving data tracking, role of data in decision-making,
and plantcustomer interface. The cost and delivery
factors were dropped from the performance results.
Only indicators of quality results maintained their
measurement integrity external reject rate, internal
reject rate, and product downtime.. Also, the cost
factor was eliminated from the customer satisfaction
construct, but measurements of quality e.g., reliability, technical innovation. and delivery e.g., consistent delivery, short delivery lead times. were retained. The items that remained for further analysis
are italicized in Appendix A.
4.3. Relationships in the mediational model of TQM
Once the scales were determined as reliable and
valid, correlation coefficients for the TQM practices,
plant performance, and customer satisfaction measures were determined using the Pearson product
coefficients. Table 6 shows the resulting r and p
values based on a two-tailed t-test. All intracorrelations within the TQM practices and customer satisfaction constructs were significant at p s 0.01 level.
Because it had only one factor, there were no intracorrelations within the quality indicator of plant performance. All intercorrelations were positive, but not
all were significant.
Using this correlational table as input, a structural
model was run using LISREL 8.10. Because there
was only one indicator attached to plant performance
as shown in Table 6, the residual variance for that
indicator was fixed to zero to run the program. The

69

Fig. 2. Correlations within the mediational model of TQM.

LISREL estimations were completed after 24 iterations. Based on maximum likelihood estimations, the
linkages between TQM practices and plant performance and between TQM practices and customer
satisfaction showed significant t values at 2.50 and
6.52, respectively. However, the linkage between
plant performance and customer satisfaction was not
significant with a t value at 0.13. The correlations
among the three constructs are shown in Fig. 2. The
present model showed a good fitthe comparative
fit index CFI. of Bentler 1990. was 0.96, and the
Tucker and Lewis 1973. index TLI. was 0.94. The
x 2 statistic was 38.31 d.f.s 12, p - 0.001., which
failed to achieve non-significance. However, this is
not necessarily an indicator for poor fit, because
models with good fit are known to be falsely rejected
by x 2 tests due to bias stemming from either nonnormality or sample size or both Podsakoff and
MacKenzie, 1994; Rich, 1997.. In this regard, the
CFI and TLI are found to be resistant to this bias
Marsh et al., 1988., and since CFI and TLI are well
above the recommended level of 0.90, the model is
considered to be a reasonable representation of the
data Hair et al., 1995..

5. Discussion
These results offer general support for our propositions. As shown in Fig. 2, all correlations among
the three constructs in the model are positive. TQM
practices are significantly correlated at the 0.05 level

70

T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

with customer satisfaction with the correlation of

0.63. TQM practices are significantly correlated also
with plant performance at the 0.05 level, although at
a considerably weaker correlation of 0.15. However,
the link between plant performance and customer
satisfaction shows a correlation of 0.10, but it failed
to show significance at the 0.05 level. Although the
correlations are all positive, different strengths of
correlations appear among the constructs.
Therefore, the results substantiate the suspected
TQM paradox regarding the relations among TQM
practices, plant performance, and customer satisfaction. We offer the following explanation as the primary reason for this paradox: Manufacturing plants
are as much an entity of performance that seeks
quality and efficiency as an entity of institutionalization and political dynamics that seeks legitimacy and
goodwill of the customers. We explicate this point in
the remainder of this paper.
Consider the two correlations involving TQM
practices. They suggest that TQM practices have a
positive impact on customer satisfaction and plant
performance; however, there is a rather large discrepancy in the magnitude of correlations between
these two relationships. What are the causes of such
differences in the relationships among the constructs?
A few authors e.g., Choi and Wasti, 1995; Neal
and Tromley, 1995. pointed out that many manufacturing plants had to implement TQM practices because their industrial customers explicitly demanded
them to do so. This view is entirely consistent with
the supply chain management literature that suggests
industrial customers as the driver of quality dissemination across the supply chain Ellram, 1991; Bamford, 1994; Raia, 1994; Purchasing, 1995.. If so,
from the plant managers perspective, the most immediate objective is to satisfy their industrial customers by complying with what they ask for. Therefore, when these managers implement TQM practices that are promoted by their customers, they
perceive what they are doing is more directly related
to the customer satisfaction than to the plants performance.
This type of phenomenon can be studied further
through an institutional perspective that has roots
in sociology and organization theory e.g., Meyer
and Rowan, 1977; DiMaggio and Powell, 1983;

Zucker, 1987; Scott and Meyer, 1994.. According to

the institutional theory, organizations are dependent
on external constituencies e.g., customers. for resources. In order to ensure the continued flow of the
needed resources e.g., orders., organizations conform to the wishes of the external constituencies
e.g., implementing TQM practices.. It is believed
that this type of conformance leads to increased
goodwill and legitimacy with external constituencies
and, thus, ensures the organizations long-term survival Meyer and Rowan, 1977; DiMaggio and Powell, 1983.. However, an organizations internal goal
for performance e.g., meeting productivity targets.
and external demands for conformance e.g., implementing quality practices. may initially conflict; for
instance, generating statistical process control SPC.
data may actually slow down the production line. As
a defense mechanism to overcome the conflict, the
managers will try to loosely couple Meyer and
Rowan, 1977. the activities of the technical core
i.e., production activities on plant floor. and the
administrative actions i.e., compiling and sending
SPC data to the customer.. In other words, the
activities of the technical core and the administrative
level are treated, at least initially, as independent
components of management.
The plant manager may eventually see the benefits of requested quality practices e.g., SPC. to the
plant performance but will continue to perceive that
the primary objective of implementing the requested
quality practices was to satisfy the customer. Suppose a customer asks a plant to implement SPC, so
the plant manager sends the workers to the training
course and installs the computer system to collect
and display SPC data. Independent of how well SPC
has been integrated into production and how well it
is being used to control quality during production,
the customer observes the implementation of SPC
the relevant equipment and the data displayed on
screen during visits to the supplier plant. In the eyes
of the customer, the supplier plant has complied the
request; therefore, the customer is satisfied the strong
correlation between TQM practices and customer
satisfaction.. The plant manager considers some benefits of SPC; for example, the quality control technicians have more data available for troubleshooting
purposes the significant but weaker correlation between TQM practices and plant performance..

T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

Once TQM practices are implemented e.g., suggestion programs, quality circles, display of before
and after pictures of improvements., they are conducive to direct observations during plant visits by
customers. However, performance results such as
internal or external reject rates must be accumulated
over a period of time, and it may be that what is
more visually immediate to the customers has a more
direct impact on their level of satisfaction. Therefore,
as evidenced in our data i.e., plant managers perceived lack of relationship between plant performance and customer satisfaction., plant managers
may perceive customer satisfaction is driven less by
their performance results than by their conformance
to the customers requests. At the same time, the
plant managers know that if they did not have the
required performance they would jeopardize the
long-term relationships with the present customers.
This observation brings us to the last linkage that
was not statistically significantthe relationship between the plant performance and customer satisfaction. Given that there is a loose coupling between
what plants do to increase plant performance and
what they do to satisfy the customer, as argued
above, the plant manager would have difficulty seeing the immediate relationship between plant performance and customer satisfaction. After all, customers seem to take satisfaction from seeing the
plants conform to their requeststhe implementation of TQM practices. In other words, the part of
plant performance improvement that is gained
through the implementation of TQM practices is
thought to lead to little impact on customer satisfaction. Statistically speaking, the variance of plant
performance that is explained by the TQM practices
shows a statistically insignificant level of explained
variance for customer satisfaction.
In summary, the institutional interpretation of the
results offer insights into the paradoxical dynamics
of TQM practices in plants. Powerful institutional
actors such as industrial customers promote TQM
practices, and their actions are sanctioned and reinforced by the professional societies, universities, and
governmental units. Consequently, plant managers
succumb to this pressure and call for compliance.
Plants duplicate the TQM practices, what institutional theorists call legitimated elements, into their
structures. This act of conformance leads to customer

71

satisfaction, but it has less direct impact on plant

performance. However, the plant may gain performance benefits, albeit haphazardly, when their implementation fortuitously matches the technical
needs of the plant. In other words, because such
changes were not driven by the internal needs justified by the technical reasoning but by external needs
justified by the institutional reasoning, their impact
on the plant performance will occur on a hit-or-miss
basis.
This observation may offer one explanation for
why some organizations TQM initiatives may have
led to failures, as discussed in the early part of this
paper. If we accept the argument that the dissemination of TQM practices followed institutional dynamics and the impact of TQM practices on the plant
performance occurred haphazardly, it is not surprising that some firms may have benefited from TQM
practices and some firms have not. We are not
suggesting here that TQM may be harmful for the
organization in some cases; we are arguing, however, that part of the reason why some firms have not
reaped the benefits of TQM practices is because the
motivation for implementing TQM was external or
institutional, and they have not been able to apply
the TQM practices to their operations on the shop
floor or technical core Meyer and Rowan, 1977..
In this paper, we have described an empirical
examination of the relations among the key constructs of TQM and presented an institutional argument for the results. The underlying assumption
behind this argument is that the industrial customers
have been the most salient source behind the said
institutionalization process. We believe this is a reasonable assumption that follows from the literature;
however, we understand that the degree of customers
promotion of TQM practices may vary from one
situation to another, and there are other institutional
actors in the environment government, professional
organizations, etc.., a point illustrated further in the
section on future research.
A source of potential weakness of this paper is the
perceptual measures of plant quality performance
and customer satisfaction. Most firms now collect
performance data, and it may be possible to gain
more objective measures from plants. Customer satisfaction data also would be more reliable if it came
from the customers rather than plant managers who

72

T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

cater to those customers. However, firms are typically reluctant to disclose exact figures of their performance data, but plant managers are well acquainted with the performance data and could give
us an accurate assessment. Also, it would have been
a daunting task to track down and receive feedback
from the customers of hundreds of plants. For any
study, there is a trade-off between the sample size
and obtainment of objective performance results and
customer satisfaction data e.g., the larger the sample, the more difficult it would be to receive customer satisfaction data from the matching customer
firms.. We balanced this trade-off by using plant
managers as respondents because they would be the
most familiar with both performance data and customer satisfaction.
The potentially damaging weakness is the issue of
the common method variance Avolio et al., 1991.
in our case, data for all three constructs came from
one respondent. Contending with the common methods variance was a conscious choice on our part,
because we had to consider the trade-off between the
number of plants we surveyed versus getting multiple respondents from each plant. Given the constraint, we felt that plant managers would be the
correct people to inform us about all three constructs
TQM practices, plant performance, and customer
satisfaction. However, when we received the data,
we had to examine the effects of common method
variance. The confirmatory analysis gave us a strong
result validating the independence of the three constructs. Therefore, although we did not solve the
problem of the common method variance, we were
reasonably confident that all three constructs were
independent of one another. From the onset, our
intent was to explore the topic in an uncharted area
and to examine the puzzling relationships among
TQM practices, plant performance, and customer
satisfaction. Even with the stated weaknesses, we
believed that we gained a glimpse of the dynamics
that are described confusingly in the literature.
We have only scratched the surface of the complex dynamics of institutionally driven quality initiatives. As discussed in Section 6, our results have
implications for other externally driven programs,
such as ISO 9000. Research conclusions, consistent
with our findings, are beginning to appear in publications. For instance, Terziovski et al. 1997. failed to

find a significant effect of ISO 9000 on organizational performance. Then, what should the management do? How could the management internalize this
type of externally driven changes to reap the potential performance benefits? Or do we just have to bite
the bullet and concede that the benefits of these
externally driven programs end at the institutional
level and have little to no consequences on plant
performance?

6. Implications for future research

This study revealed that the implementation of
TQM practices in manufacturing plants has been
geared more for customer satisfaction than for plant
performance. This observation renders support for
the institutional argument and suggests that there is a
loose coupling Meyer and Rowan, 1977. taking
place on the shop floor. At least theoretically, this
type of loosely coupled state represents a wasteful
practiceit is wasteful to implement TQM practices
mainly for show or to please the customer. We must
question, then, what the managers of manufacturing
plants and the industrial customers can do to minimize the expenditure of precious corporate resources
that have unclear implications for plant performance.
Furthermore, the future researchers should consider
the organizational dynamics of initiatives that are
similar to TQM, for example, ISO 9000 or QS 9000.
These initiatives are unilaterally imposed on the
companies by strong institutional pressures. Will we
observe similar loose coupling in these instances?
Research evidence already suggests in the affirmative Terziovski et al., 1997.. Then, what would be
the efficiency implications of such initiatives?
Related to the organizational implications of institutionally induced changes is the question of the
degree of institutionalization process. How many
TQM practices are implemented because of customer
requests, and who else in the environment beside
customers can promote TQM practices? It is certainly possible that a. the implementation of TQM
can follow a technical process based on internal
reasons rather than institutional reasons and b. the
pressure can come not only from the industrial customers but also from professional organizations and
the mass media. In the future, researchers could

T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

investigate how different environmental technical

and institutional. pressures impinge on manufacturing plants and relate the organizational consequences. Also, since an institutional environment can
be viewed as being fragmented DiMaggio, 1988., it
would be interesting to investigate the different sectors of institutional fields that have promoted TQM
practices and their impact on TQM practices in plant
operations.
We believe the implementation of TQM practices
and the impact that these practices have on plant
performance entail a dynamic process. First, as was
argued, plants may discover over time the benefits of
externally induced changes and, thus, reduce the
degree of loose coupling that existed initially. In
future studies that investigates the impact of TQM
on performance and customer satisfaction, we would
need to include time into our model. For instance,
the mapping of the life cycle of TQM implementation can be a useful focus, and testing time as a
moderating as opposed to mediating. variable between TQM practices and customer satisfaction can
also yield interesting results. In particular, during the
early phase of the TQM implementation, outcome
measures plant performance and customer satisfaction. and TQM practices will interact heavily while
plant managers and workers follow a learning curve.
Therefore, the performance data and customer satisfaction data collected during this period may be very
noisy. One way to overcome the impact of the noise
would be to consider more direct measurement of
plant performance and customer satisfaction rather
than a perceptual measurement.

Appendix A. List of indicators included in the

survey
A.1. TQM practices
A.1.1. Process quality
Worker inolement in machine maintenance)
Problem-soling by workers
Continuous improement
Reactive maintenance by mechanics y.))
Problem soling primarily by technical people
(y)
Quality data just to show to customers (y)

A.1.2. Human resources

Reward for quality
New skill acquisition
Rewards based on seniority y.
Improement suggestions
Timely feedback on suggestions
Profit sharing program
Team-based rewards
Performance data shared with workers
Financial data shared with workers
A.1.3. Strategic quality planning
Quality as top priority
Top management commitment
Long-term focus
Production layout according to strategic goals
Organization support for quality
Understanding of mission and ision
Objecties for quality performance
Intermediate goals
A.1.4. Information and analysis
Workers use of statistical process control
SPC data used for machine maintenance
Tolerance specifications driving the production
Easy access to company database
Factual decision making
Customer input on quality improements
Tracking and analyzing customer satisfaction
Target-based quality
A.2. Plant performance
A.2.1. Quality
Production down time (y)
External reject (y)
Internal reject (y)
A.2.2. Deliery
On-time delivery
Flow time y.
Machine cycle time y.
A.2.3. Cost
Costs per units produced y.
Work-in-process inventory y.
Weeks of raw materials supply y.
Inventory turnover ratio

73

74

T.Y. Choi, K. Ebochr Journal of Operations Management 17 (1998) 5975

A.3. Customer Satisfaction

A.3.1. Quality
Product reliability
Technical innoation
Rapid design change
Conformance to specifications
A.3.2. Cost
Cost-reduction capability
Low price for customer
A.3.3. Deliery
Consistent deliery
Short deliery lead time
Rapid olume changes
)Italics are the indicators that remained after
validity and reliability tests and, therefore, were used
in the final analysis.
))Indicators with y. signify reverse scaling.

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