SCDL MBA PROJECT-A COMPARISON OF QUALITY MANAGEMENT IN VARIOUS CATEGORIES OF SMALL SERVICE BUSINESSES

ABSTRACT

This paper compares managerial perceptions of total quality management (TQM) practices in different types of small businesses in the service sector.  It is based on a survey of small service organizations in northeastern Indiana.  While firms in all categories studied indicated that their top management was committed to TQM, they were lacking in actual implementation.  Similarities, differences, and implications in the responses from the different types of businesses are discussed.

INTRODUCTION

            This paper presents a comparison of managerial perceptions of total quality management (TQM) practices in three types of small businesses in the service sector—food services, financial services and services whose direct recipients are people.  The paper is based on the results of a survey of small firms in these three types of service businesses.  TQM implementation, quality tools used, successes, failures, benefits, and problems encountered in these businesses are discussed.  Similarities and differences in the responses of the firms in the three categories are discussed as well as the unique nature of each category. 

            Most of the large manufacturing firms have adopted TQM programs in order to be competitive in the global marketplace.  Literature regarding quality management in the service sector if quite recent and, further, restricted to large service-oriented organizations.  Studies about the status of TQM in small service firms are few and far between.  Complaints about the deterioration of both quality and customer service have become quite common.

Small business firms today employ more people than big firms. For instance McDonalds’ franchises are collectively the largest employer in the U.S. Quality in small businesses attracts as much attention as is the case in large organizations. For instance, the International Standards organization (ISO) has publications addressing the implementation of ISO 9001-based quality management systems for small organizations (International Standards Organization, 2002). This is even reflected in the Malcolm Baldridge National Quality Awards – out of the 49 organizations applying for the 2002 awards, only 8 were large manufacturers. The rest were: 3 service, 10 educational, 17 health care, and 11 small business firms (Baldridge Process News, 2002).  There is still a dearth of material in the literature regarding the status of total quality management in small firms particularly in the service sector.  This study seeks to establish the

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extent to which TQM has been deployed in small firms in food service, financial services, and services directed at people.

SERVICE INDUSTRIES IN THE STUDY

As already mentioned this study focuses on three categories of small businesses in the service sector. In this section, we discuss the characteristics of these categories of services—food service, financial services, and services directed at people.

            There is no indication that the food service sector has been subjected to the same intensity of global competitive pressures as many other service industries.  If anything, it seems that it is U.S. business that is taking the fight in this area to the global scene.

            The nature of the food service industry touches very directly on the immediate health of people. This uniqueness may account for the closer scrutiny and monitoring that the industry attracts from local, state, and federal health agencies to ensure that certain standards that would otherwise have been voluntary in other sectors are observed.

            Like other service industries, the food service sector is a major employer and contributor to gross domestic product in the U.S. and other advanced economies. It is not surprising that organizations in this industry have been studied extensively in the production and operations management field especially with respect to the adaptation and application of techniques utilized in the manufacturing field. Despite the heavy attention that operations management researchers have paid to firms such as McDonalds, Burger King and others, the literature regarding the status of total quality management in the food service sector is sparse.

            Increasing market deregulation and extensive breakdown of governmental barriers by international agreements have created a global highly competitive environment in such cross-border sectors as financial services (Longco and Cox, 1997). It is averred that these pressures later spilled over to other service sectors on the domestic front with the focus shifting from price to both price and quality (Singh and Deshmukh, 1999). The financial services category is becoming increasingly important in the service sector economy.

Poor quality is very expensive for any business. This cost can be even more onerous for service firms given the proclivity of people to sue and/or recount their good or bad service experiences to friends, family and colleagues. This penalizes the “offending” service firm on multiple fronts – loss of repeat business, unfavorable word of mouth, and a costly legal battle on its hands. The stakes are especially high where the service act is directed at people’s bodies and minds for instance health care, food services, and beauty salons. Medical malpractice suits, litigation against restaurants, and liability suits for negligence in settings such as beauty salons are commonplace and quite often do lead to bankruptcies. Hence quality and its deployment in services directed at people is even more crucial than in other types of services.

           

This study includes organizations rendering services directly to people regardless of whether or not the nature of the service act is tangible or intangible. A beauty salon performs a tangible action directed at a customer’s body whereas the service act performed by a school is an intangible one directed at a student’s mind. This category of service firms is unique since the organization is not isolated from the customer – the latter must physically be present throughout the service act, unlike other sectors such as manufacturing (Fitzsimmons and Fitzsimmons, 2004). This intensive interaction between the service organization and the customer in person has profound quality implications for the organization. Ensuring quality and consistency in the service offering is a lot harder to achieve than in other sectors.

           

A comparison of managerial perceptions regarding the implementation of quality management in the abovementioned types of services would be very interesting. The next section describes the research methodology used and the survey instrument developed. The demographic breakdown of the respondents is also included.

RESEARCH METHODOLOGY

            We adopted the commonly used definition of a small business as one having 500 or fewer employees.  We developed a survey instrument that included a definition of total quality management. The first part of the instrument had demographic items but respondents did not have to identify themselves. This was followed by a definition of TQM as “a business strategy encompassing the entire organization to provide goods/services that completely satisfy the customer” and 29 Likert-scaled statements covering the areas mentioned above with 1 = strongly agree, 2 = agree, 3 = neutral, 4 = disagree, and 5 = strongly disagree.

            Small businesses in northeastern Indiana were included in the samples. They were selected from the yellow pages. After verifying that the organization met study criteria and was willing to participate, a questionnaire was sent to the manager of the firm along with a stamped, addressed return envelope. There was telephone follow-up. Firms were offered the opportunity to complete the questionnaire through an interview.

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