BSC and TQM

 

One of the administrative science domains that feed Performance Management as a discipline is the quality movement (Brudan, 2010). Consequently, Total Quality Management (TQM) has had a significant impact on the approach to management since its conceptualization and promotion in the 1980s (Andersen et al, 2004). TQM as defined by Hoque (2000) is a set of management concepts and tools that aims to involve both managers and ordinary employees to yield continuous performance improvement.

 

Anderson et al (2004) refer to TQM and associated quality management tools as means to improve growth, profitability and customer satisfaction. Among the most successful and used management tools associated with TQM, mentioned by the scholars are Six Sigma, Malcolm Baldrige National excellence model, EFQM excellence model, ISO standards or the Hoshin Kanri methodology.

 

Despite their popularity and success, Anderson et al (2004), citing Harari (1993) point to the fact that only between one fifth and one third of the TQM associated initiatives in Europe and USA brought significant improvements in quality, productivity, competitiveness or financial return. One of the major biases identified as a possible cause for the poor TQM results is the poor linkage between quality and strategic control methods. (Anderson et al, 2004)

 

In this context, Anderson et al (2004) suggest that the successful application of total quality management to the organizational context through one of its associated tools can be significantly strengthened when combined with a strategic performance management framework, such as the Balanced Scorecard.

 

Hoque (2002) reinforce the linkage between TQM and Balanced Scorecard, acknowledging that by using a Balanced Scorecard approach, organizations that failed in their TQM initiatives can get back on track by borrowing insights from the BSC approach. The researcher considers that by connecting the TQM related performance metrics to the organizational strategy through the use of the Balanced Scorecard the success of the TQM initiatives and programs can be considerably strengthen.

 

Key TQM – related activities

TQM – related performance metrics

    BSC dimensions

Executive commitment and management competence

  • Employee opinion survey
  • Employee satisfaction
  • New techniques introduction compared with competitors
  • Learning & growth
  • Internal business processes
  • Learning & growth
  • Internal processes

Customer relationships

  • Customer satisfaction survey
  • Customer acquisition rate
  • Customer retention
  • Industry market share
  • Customer complaints
  • Warranty repair cost
  • Customer
  • Financial
  • Customer
  • Financial

Supplier relationships

  • Supplier satisfaction survey
  • Supplier retention rate
  • Internal business processes
  • Internal processes

Benchmarking

  • Labour efficiency compared with competitors
  • Rework / scrap rate
  • Cost of quality
  • Return on investment
  • Internal business processes
  • Financial
  • Internal processes
  • Financial

Employee rating

  • Employee satisfaction survey
  • Employee capabilities
  • Spending levels for employee development and training
  • Learning & growth
  • Learning & growth

Open, less bureaucratic culture and employee empowerment

  • Customer satisfaction survey
  • Employee satisfaction survey
  • The degree of decentralization in corporate governance
  • Customer
  • Learning & growth
  • Customer
  • Learning & growth

Monitoring quality programs (Zero defects culture)

  • Incidence of product defects
  • Material and labour efficiency variances
  • Percent shipments returned due to poor quality
  • Warranty repair cost
  • Internal business processes
  • Customer
  • Internal processes
  • Customer

Internal business process improvement and manufacturing innovation

  • Investment in high technology
  • Introduction of new management system
  • Sales growth
  • Internal business processes
  • Financial
  • Internal processes
  • Financial

 Source: adpated from Hoque, 2000

 

References

  • Andersen, H., V., Lawrie, G. & Savic, N. (2004), Effective quality management through third-generation balanced scorecard, International Journal of Productivity and Performance Management, Vol. 53, No. 7, pp. 634-645.
  • Brudan, A. (2010), Plan-Do-Check-Act (PDCA) / Plan-Do-Study-Act (PDSA), Philosophy and Performance Management, smartkpis.com Performance Architect update 21/2010, available at: http://www.smartkpis.com/blog/2010/05/28/plan-do-check-act-pdca-plan-do-study-act-pdsa-philosophy-and-performance-management/.
  • Hoque, Z. (2000), Total quality management and the Balanced Scorecard approach: a critical analysis of their potential relationships and directions for research, Critical Perspectives on Accounting (2003), Vol. 14, pp. 553-566.

BSC system : BSC and other concepts

 

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