athanasios hatzimanolis extending total quality management_ social responsibility and total expec

8/7/2019 ATHANASIOS HATZIMANOLIS Extending Total Quality Management_ Social Responsibility and Total Expec

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Extending Total Quality Management: Social Responsibility

and Total Expectations Management

Athanasios Hadjimanolis

Dr. Athanasios Hadjimanolis

Associate Professor

Business School

European University Cyprus

e-mail address: [email protected]


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Extending Total Quality Management: Social Responsibility

and Total Expectations Management

Abstract

The paper examines the central values and philosophy, as well as, the evolution of Total

Quality Management (TQM) and the possibility of its extension to Total Expectations

Management (TEM) a much broader management system that takes into account not only

the expectations and needs of customers, but also those of all other legitimate

stakeholders. TEM includes the various dimensions of corporate social responsibility

(environmental, ethical, and social) and their integration into a single management

system. The transformation of TQM, an important institution including organizations,

standards, and management models, is further examined in the context of the institutional

approach. The impact of new trends in global economy and the potential role of new

international standards, like ISO 26000, are also assessed. Potential barriers of applying

such an expanded management system in small firms in the context of a small peripheral

country are investigated through an illustrative SME case study.

Keywords: TQM, Corporate Social Responsibility, expectations, management


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1. Introduction

Total Quality Management (TQM) is today widely accepted as a philosophy for the

achievement of improved performance and competitiveness in a global market (Goetsch

and Davis, 2006). The ethical foundations and the basic principles and values of TQM

and its evolution over the last few decades have been widely debated in the literature

(Boje and Winsor, 1993, Rayborn and Payne, 1996). While TQM is widely appraised it

has also attracted criticism as another management fad failing to achieve in practice its

promised exaggerated benefits (Juran, 1993, Brown, 1993). Another line of criticism

focuses on its inadequacy to respond to current societal needs and trends and the social

responsibility of business (Hazlett et al, 2007).

The institutional approach to social responsibility is well established in the literature

(Campbell, 2007). TQM is not just management rhetoric or a set of methods and tools, it

can also be seen as an important relevant institutionalized field, since it includes

standards, organizations both state and private (e.g. quality assurance auditors and

certifying bodies, etc) and managerial practices and models (Mueller and Carter, 2005, p.

20). The question then is whether TQM is capable to transform in such a way that it will

accommodate the current requirements for more socially responsive businesses.

Institutions, even those including global standards, are probably different in different

countries due to cultural and social effects (Matten and Moon, 2008).


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The present paper considers the European context of social responsibility. The European

Union puts particular emphasis on sustainability. The latter concept has been extended

from the environmental sphere to include societal and equitable goals. The European

sustainable development strategy tries to integrate and reconcile the economic, social,

and environmental dimensions of sustainability (Delbard, 2008).

The main purpose of this paper is to propose a new management philosophy the Total

expectations management (TEM). This holistic approach includes the consideration of

the needs and expectations of not only customers, but also all other stakeholders that are

affected by the actions of the firm or affect the firm (Mc Adam and Leonard, 2003). It

extends the philosophy of total quality management to correspond to modern trends and

needs. The new approach is also consistent with the recent Corporate Social

Responsibility (CSR) research shift from why firms engage in CSR and what CSR is, to

how to formulate and especially implement CSR strategies (Basu and Palazzo, 2008).

The values and ethical principles of social responsibility, which form the foundation of

the new philosophy, are then briefly reviewed and compared to those of TQM (Hazlett et

al, 2007).

It is further examined, at the practical implementation level, whether TQM concepts,

models, and standards can be used as a basis for TEM by extending their scope or

whether a completely new approach would be necessary. Existing approaches like

integrated management standards and new developments as the introduction of the new

standard for corporate social responsibility (ISO 26000) are evaluated. Despite good


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intentions CSR strategy implementation can not be successful unless firms translate

vision into methods and tools and develop practical knowledge, by gradually building

socially responsive managerial skills and competences.

The feasibility of TEM and difficulties of its applicability are then examined in a specific

and demanding context that of a small peripheral country (Cyprus). An illustrative case

study of an SME is used for the evaluation of CSR barriers and enablers. Problems of

applicability are expected to be exacerbated in such an environment.

Section 2 below presents the theory of TQM and the model of TEM. Section 3 discusses

the methodology. Section 4 considers the new societal and economic developments and

trends that underlie the need for extension of TQM and introduction of TEM. Section 5

considers the applicability of TEM in small countries and presents an SME case study.

Finally Section 6 presents the conclusions.

2. Theory of TQM and social responsibility

The quality movement started first with quality control that was focused on products and

expanded then to quality assurance with an emphasis on both products and processes. It

has gradually developed into total quality management at the end of the 1980s and then in

the 1990s covering the totality of a business or organization including products and


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processes (Mangelsdorf, 1999). At the same time the concepts of transparency and

responsibility of the third generation of TQM have emerged (Foster and Jonker, 2003).

The initial focus on the quality of outputs of a firm has expanded to the focus on

management of the entire organization. The concept of business excellence that affects all

aspects of business has emerged out of the total quality management philosophy

(Ghobadian et al, 2007, Robson and Mitchell, 2007).

An evolutionary process of the quality movement from a set of techniques for statistical

quality control to an ever wider consideration of quality management is clearly

discernible (Zbaracki, 1998). The latter includes operations of the business itself and all

other links of the supply chain starting from suppliers and including distributors and other

collaborators (Corbert and Klassen, 2006).

TQM can be seen as a set of practices, a philosophy and a set of values or as management

rhetoric. The emphasis in this paper is on philosophy and values with only passing

references to the other dimensions. The main values of TQM and its ethical basis are

usually deduced by reference to quality gurus like Deming, Juran, and Crosby (Hackman

and Wageman, 1995, McAdam and Leonard, 2003). TQM can be seen as an integrative

management system and a systemic change initiative, which extends the traditional focus

of firms to internal operations into an external focus on the needs and expectations of the

customer. The main values, beliefs and ethical principles of TQM, such as integrity of

products and mistake prevention are summarized below under three main headings, i.e.

product related, people related and system and society related (Table 1). The values show


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the strong ethical basis of TQM and its relationship to the democratic ideals of equality,

liberty, etc.

[Enter Table 1 about here]

Total quality management has received sharp criticism and was considered as an indirect

effort to resurrect the Taylor theory of management (Boje and Winsor, 1993). Its

emphasis on principles and values as mentioned above is criticized as part of its rhetoric

and a utopian description of an ideal environment (De Cock and Hipkin, 1997). The main

criticisms against TQM can be summarized as follows:

1. It is just another management fad

2. It has no universally accepted definition

3. It lacks an appropriate theory

4. It has failed in practice to deliver the promises

5. It increases the control of the firm on its employees with their conformance to

standard work instructions reducing their discretion, work planning and initiative.

6. It manipulates the social environment of the firm, while it misleads employees to

believe that they have self-control and have real authority

7. It tries to create internal and external uniformity by suppressing the diversity of

people.


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TQM is then far from a synonym of quality and success. Despite its rhetoric as a

management panacea there are many examples of TQM failure and problems of safety or

environmental pollution in firms that have adopted TQM related quality systems. The

difficulties of application and the long time required for implementation should not be

underestimated (Yong and Wilkinson, 1999).

There is today a discussion about the need for extended management models to include,

apart from quality, the various dimensions of corporate social responsibility, especially

the environmental one. The proposed new management model of total expectations

management (TEM) refers to a balanced approach to manage expectations of customers

and suppliers, but also all other relevant stakeholders. The concept and theory of

stakeholders and the corporate social responsibilities against the various groups of

stakeholders is briefly considered before the further explanation of TEM, its rationale,

and its relationship to TQM. The basic issue is whether TQM has been superseded and

can be replaced by a new model or it can serve as a foundation for a broader system

(McAdams and Leonard, 2004). Also whether TEM can develop into an operationally

useful management model and company management can balance the interests of

stakeholder groups and communicate effectively with them.

ISO 9000 certified firms, quality assurance organizations, consultants and academics and

the relevant TQM philosophy, methods, and tools they share and use can be seen as

forming an institutional field (Mueller and Carter, 2005). The concept of institutional

field is defined here as a system of interacting actors and their actions and relations


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(Davis and Marquis, 2005). The quality management field due to market pressures,

conceived in a broad sense, and social developments further described below is in a state

of flux. It is then the argument of this paper that TQM could be transformed into a new

field, i.e. Total Expectations Management adding new players and rules of the game,

but building on the existing foundations.

The Stakeholder Theory has been elaborated by Freeman (1984) and refers to internal

and external groups that are affected by or affect the corporation. Such groups are the

shareholders, the employees, customers, suppliers, local communities, and ecological

organizations. After the definition and classification of stakeholders for the specific firm

and the identification of their needs, the stakeholder assessment process tries to establish

their power, impact, and involvement level (Mitchell et al, 1997).

The corporate social responsibility (CSR) concept recognizes that firms apart from their

responsibility to produce profit for their shareholders they have responsibilities to their

stakeholders (Moir, 2001). The main dimensions of CSR include the environmental,

social, and economic aspects (McAdam and Leonard, 2003). Acceptance of CSR means

commitment to ethical and transparent business actions for the common good and

avoidance of harm to humans and nature (Campbell, 2007).

Total expectations management (TEM) aims to the satisfaction of wider stakeholder

groups by undertaking social responsibility and an effort for a convergence of interests,

which in TQM were only indirect targets (Foster and Jonker, 2003). TEM offers a holistic


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1. Incorporation of TEM philosophy in the strategy of the firm.

2. Identification of stakeholder groups and assessment of their needs and

expectations

3. Assessment of their power and impact on the decisions of the firm

4. Forecasting the impact on the operations of the firm by stakeholder group and

planning for increasing positive and reducing negative impacts

5. Making decisions for the level of engagement of stakeholder groups in the

decision process of the firm (consultation)

6. Management of relations and impacts

7. Developing suitable tools and methods for balancing the interests of the diverse

stakeholder groups

Problems may arise in the implementation of TEM due to the increased complexity that is

introduced and the potentially conflicting interests of stakeholder groups (e.g.

shareholders profit versus the cost of maintaining a clean environment for the community)

(Zwetsloot and Marrewijk, 2004). Trade-offs have then to be struck between conflicting

expectations and a balanced approach should be followed (Wood, 1991). There may also

be disagreement within the firm regarding the methods of achieving balance between

economic performance, satisfaction of stakeholders, and social responsibility. A detailed

consideration of the implementation aspects of stakeholder analysis and TEM

implementation is outside the scope of this paper. There are however relevant approaches

in the literature like the Miles framework (Miles 1987).


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An alternative approach, instead of the development of a new management system like

TEM, could be the integration of specific standards like ISO 9000 (quality standard), ISO

14000 (environmental standard), OHSAS 18001 (a standard for health and safety), and

SA 8000 or ISO 26000 (social responsibility standards) into an integrated management

system. Newer versions of these standards have a trend towards compatibility between

them, there are however major problems in the development of a universal system

(Karapetrovic, 2002). The additional problem is that an integrated system continues to

focus on customers and suppliers only and remains at the level of methodology rather

than philosophy of a holistic management system. TEM in contrast extends the focus on

the total value added chain and all stakeholder groups. The standards mentioned above

are, however, potentially useful as tools adaptable to the philosophy of satisfaction of

expectations.

The business excellence models like the European EFQM, which is based on the TQM

philosophy, have already integrated, even if partially so, the social dimension with the

criterion influence on society (Robson and Mitchell, 2007, Zwetsloot, 2004). There is

therefore a partial overlapping of the expanded TQM systems with the proposed new

management system that would facilitate the adoption of TEM.

The new developments that affect and shape the new approach of TEM are discussed in

Section 4 after a short discussion of methodology in the next section.


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3. Methodology

While the paper is mainly conceptual it also uses secondary sources to document the

current trends and developments that a modern management philosophy should address.

In addition it uses the case study method to examine the applicability of total expectations

management in an SME. The experiences of the particular firm with quality and

environmental management are examined and the barriers and enablers of applying

quality and environmental protection concepts analyzed in order to estimate the

difficulties of TEM application in SMEs.

The research design of the case study focuses mainly on a description of the actual

behavior of the firm, instead of sole perceptions of managers, especially actions going

beyond legal expectations according to the suggestions of Thompson and Smith (1991).

The author worked in this firm for several years till the end of September of 2004 (with

an additional six months period as a consultant) and had a first hand experience of its

activities and strategies. The account of the activities based on participant observation

provides a unique longitudinal type research over the about 10 years period under

consideration (1996-2005). Internal documents, correspondence with suppliers and

customers, and discussions with key managers with a semi-structured approach were also

used to document relevant attitudes and behavior. Information from the web site of the


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firm was additionally obtained regarding its environmental and health and safety policy

and measures.

4. New developments reflecting TEM

The current economic context of increased competitor pressure due to globalization

makes the discussion of total expectations management (TEM) especially relevant. The

potential effect of the recent financial and economic crisis is, however, beyond the scope

of this paper.

The major trends that affect and shape the new approach (TEM) are summarized below in

Table 2. Environmental degradation and climatic change have led to an increased societal

concern. ISO 14001 a widely recognized and reputable environmental standard covers the

environmental dimension of social responsibility and was officially adopted by ISO in

1996. It is a voluntary international standard that refers to the structure, application, and

maintenance of a typical environmental system. One of its disadvantages is that it does

not contain environmental performance measurements. There are substantial similarities

between ISO 9001 and ISO 14001 in their new versions (Jorgensen et al, 2006).

ISO 26000 is a guiding tool for a balanced assessment of multiple stakeholders and is

expected to become a reliable and widely acceptable international standard. The process

of its development started in 2005 (Castka and Balzarova, 2007). It is expected to be

introduced as a voluntary standard in 2010 and it is not designed for certification.


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The brief survey of new trends suggests that the proposed total expectations management

model reflects the new trends and is a response to them, it also promotes the self control

of firms with good conduct codes and corresponds to the new role of a firm responsible

to state and society. While the above discussion has presented the normative aspects of

TEM the next section considers the potential difficulties and barriers of its application in

the specific context of a small country.

5. Applicability of TEM in small countries and SMEs

5.1 The case of Cyprus

The social and cultural environment of a country affects its management systems and the

practices of corporate social responsibility (Frynas, 2006). The introduction of a new

management philosophy, as a radical change, can not succeed without its simultaneous

adaptation to the local social and cultural institutions. There is a current need to re-focus

CSR away from multinational enterprises and USA to European countries most of them

having a high proportion of SMEs. The cumulative effect of SMEs on the environment

and society in general is substantial (Perrini, 2006).

Some of the main issues that have to be taken into account in the application of a new

management system as TEM and which could form potential barriers to its application in


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a country like Cyprus are summarized in Table 3. In Cyprus the vast majority of firms are

SMEs and most of them family firms using traditional management methods. Delegation

of authority, team work, and encouraging initiative among employees are rather limited.

There are also institutional gaps and deficiencies at the state level. The nature of SMEs

with the lack of adequate resources and management knowledge and the conservatism

that they usually exhibit increase the obstacles of the introduction of new management

systems (Castka et al, 2004b).

An important point to be emphasized is that in a small country like Cyprus SMEs are not

invisible, as it is usually assumed for small firms, but may be leaders in their sector and

well-known to the media and the public and not just the local community. Some of the

current practices and values of Cyprus culture (e.g. the centrality and authority of

management) are therefore probably not congruent with the values and philosophy of

TEM (for example its emphasis on the system, rather than particular parts, and collective

efforts) and may present barriers to its successful implementation.


CSR is a relatively new concept in Cyprus first introduced by banks and other large firms.

A recent survey in Cyprus carried out by the Cyprus Employers and Industrialists

Organization (CEIO), between March and May 2007, among executives of 384 firms

(most of them SMEs) of all industrial sectors (but mainly manufacturing and construction)

has tried to find their views on corporate social responsibility and good practices for its


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promotion. The majority of the respondents know the concept, but this knowledge was

not found to be related to gender, education, or position in the firm. Information about

CSR comes mainly from the press and 70% of the respondents consider that their firm

has partially or to a large extent adopted CSR practices (CEIO, 2008). Most firms offer

flexible working hours, and promote flexible employment forms, but have not adopted

plans for balancing personal and professional life or facilities for employee child care.

Regarding CSR practices corporate philanthropy and sponsorship of sports activities or

cultural events are the main ones used.

5.2. SME Case-study

Alpha Chemicals (disguised name) is a medium size family-owned firm (with around 80

employees) in the chemical sector. Due to space limitations only some of its activities

related to quality and environmental issues are considered here. The firm is active in both

local and export markets. It is used here as an exemplar case in the sense that it has

been a pioneer in Cyprus for quality and environmental issues.

It has adopted quality management systems in 1996 as one of a handful of firms in

Cyprus certifying with ISO 9000 at that time. It was among the first to build an on-line

database for all ISO documents making their updating much easier. The firm provided

external training for its personnel, e.g. training for internal auditors.


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The main motives for the introduction of the ISO 9000 system were external pressures

from customers (multinational enterprises [MNEs] which had contract manufacturing

agreements with Alpha for the Middle East Market) and a desire to build reputation and

image in local and export markets. Similarly these MNEs recommended strict health and

safety measures for safeguarding the health of employees during manufacturing of

contract products and environmental protection measures.

Alpha a leader in its sector has a high visibility in the local market. The nature of the

sector and its potential adverse impact on both employee health and the environment

were also important factors in the adoption of quality and especially environmental

standards, although environmental regulations during the nineties were not yet costly in

terms of non-compliance (fines etc.) The company installed systems for health and safety

of the personnel and pollution abatement equipment like ventilation, air filters, solvent

vapor treatment systems, etc. It even earned an award as responsible employer for its

health and safety measures. There was, however, no long term environmental policy as

part of strategic planning, but rather an ad hoc project by project approach.

Government was an important stakeholder for the company due to its power to affect the

firm for the following reasons:

Most products have to be registered with a Government department before

marketing.


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The company was anxious about getting a government permit to expand the

factory.

Fast residential development in the area had led to close distance of the factory

from the nearest houses, which could affect the decision for granting expansion

permit in case of environmental problems.

The institutional context shaped the sensitivity of Alpha towards environmental issues.

There was minimal environmental legislation until the end of nineteen eighties. The

situation changed rapidly in the nineteen nineties with the introduction and gradual

enforcement of detailed environmental legislation. At about the same time (mid nineties)

the company started to upgrade its environmental protection systems. In recent years and

especially since the year 2000 the harmonization with EU legislation and the stricter

enforcement of legislation has forced even laggard firms to comply with it.

The company has also placed significant emphasis on product safety aspects for its

customers. It has changed the composition or completely withdrawn products, which

although available for many years in the market, were presenting risks in their use by

customers (farmers) especially when they were neglecting safety precautions in their use.

It was also involved in an innovative collaborative research project for the development

of water based products to replace environmentally polluting solvent-based ones.

Alpha had the necessary scientific personnel and the sources of information. Actually the

multinational firms that had contract manufacturing agreements with Alpha and were also


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the suppliers of raw materials provided information in terms of detailed guidelines,

answers to technical questions by e-mail or phone and exchange of tacit knowledge

during the local visits of experts.

The background of the owner-manager, who has a degree in Chemistry, and his

experience in industry has played a key role in developing quality and environmental

policies. The role of one of the owners sons, who was persuaded about the value of

quality policies and became a champion of quality systems within the firm, was also

instrumental in the fast adoption of the ISO 9000 system.

The company after introducing ISO 9000 quality systems and getting experience in their

use was considering at the end of nineteen nineties the adoption of ISO 14001

environmental standards. Excessive attention of the top management group to everyday

problems and operational issues and the unexpected problems during the adoption of an

enterprise resource planning (ERP) system led to the postponement of the adoption of the

environmental standard and is still today a project under consideration.

5.3. Discussion

The case illustrates the adoption of quality systems due to external pressures (by major

international customers) and the introduction of environmental protection and health and

safety measures due to the anticipation of forthcoming environmental legislation and as

part of a risk management process. At the same time the company realized the need to


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create good relationships with particularly powerful external stakeholders like the

government and large suppliers and customers. It can be said that its attitude was more

calculated out of self-interest rather than originating from social motivations. The state

has thus a particular role as regulator and facilitator to encourage SMEs to engage in CSR

activities. The above findings agree with those of Russo and Tencati, 2008, p.1) that

SMEs have informal CSR strategies and are attempting to secure their license to operate

in the communities.

The main concerns and strategies of the firm were two of the three suggested strategies

by Hart (1995), i.e. pollution prevention and product stewardship (especially diminishing

the adverse impact of products in use). The third strategy according to Hart (1995), i.e.

the sustainable development strategy manifested in the mission of the firm is not explicit

in this case. The company has used its network of suppliers and customers, especially

MNEs, as source of knowledge. This is considered as typical for SMEs involved in CSR

activities (Ortiz-Avram and Kuehne, 2008). This finding agrees with the social capital

approach to the corporate social responsibility, since the cumulative effect of these

relationships over the years and the trust developed between members of the network

forms a stock of social capital for the firm (Perrini, 2006, Spence and Schmidpeter,

2003). The problem of the multi-stakeholder approach that the case illustrates is that

dealing with separate stakeholders one by one for evaluation of their power, saliency, and

urgency is just not practical or even feasible and SMEs consider simultaneously the

effects of their activities on multiple important stakeholders.


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Operational priorities are paramount in small firms and frequently take precedence over

strategic issues as shown by the delay in introduction of ISO 14001, although there is also

the possibility that the firm is still uncertain about the benefits of the system (over the

existing situation) versus its costs.

6. Conclusions

The current demanding business environment of the globalization era requires a new

management philosophy focusing on social responsibility and the expectations of the

many internal and external stakeholders. The philosophy of total expectations

management (TEM) has been proposed as the most suitable one for todays business. The

new approach is compatible with TQM as discussed above. It can be considered as an

expansion of the TQM philosophy and TEM could develop through a transformation of

the institutionalized field of total quality management. The new approach will build on

the tradition of TQM and business excellence models. The methods, tools, and standards

of TQM can serve as useful blueprints for development of TEM implementation tools.

Voluntary standards, complemented by government legislation, form probably the way

forward for CSR. Global standards may facilitate convergence of CSR practices on an

international scale. There is, however, some skepticism whether global standards are the

best solution for CSR strategy development and implementation in small firms. The

proposition of this paper, based on the literature review and the results of the case study,

is that after accepting the philosophy of expectations management, SMEs can then


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develop their own approach to its implementation. They should be encouraged and

motivated by the state and other actors (non-governmental organizations, trade

associations, etc.) to start behaving responsibly, even in an informal way.

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Table 1 Principles and values of TQM

Product related People related System and Society related

No defects Meaning of work Management by fact: relyingon scientific method and

rationality

Integrity of products and

services

Service to people Business excellence

Mistake prevention Personality

development

High moral behavior

Focus on operation

processes

Empowerment of

employees

External focus/

Focus on customer

Considering mistakes aslearning opportunities

EffectiveCommunication

Human dignity and welfare

Optimal use of resources Leadership Transparency

Performance improvement Teamwork Reliability/Trust

Change in processes No fear Discipline

Pro-activeness Continuous improvement and

innovation

Source: Prepared by the author on the basis of literature sources (e.g. Rayborn and

Payne, 1996, De Cock and Hipkin, 1997).


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Table 2 Major trends that affect and shape the new approach (TEM)

Trend Examples

Increased demands /requirements of

stakeholders

Investor driven CRS initiatives (social

investmentCustomer requirements

Emerging institutional pressures New legislation/EU directives

Integration moves Integration of ISO 9000 and ISO 14000,

ISO 26000, etc into an integrated system

Changing public priorities/expectations Mass media, ecological organizations

New international initiatives/Global

standards

U.N. Global Compact, SA 8000, ISO

26000/Certified accountability systems

Business excellence models European (EFQM), American (Baldridge),

Japanese Deming Prize

Source: Prepared by the author on the basis of literature sources (e.g. Castka andalzarova, 2007, Waddock, 2008)


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Table 3 Main potential barriers to TEM implementation

Issue Actual situation

Cultural compatibility Compatibility between Cyprus culture andthe underlying values of TQM and TEM

Current stage of diffusion of ISO standards

In Cyprus/TQM practice

Relatively low diffusion of TQM and

environmental standards in the context of

Cyprus

Resources, time and efforts required Limited resources and managerial time of

SMEs

Strategic implications for firms Flexibility reduction due to delays in

decision making /Increasing complexity of

decisions

Source: Prepared by the author

athanasios hatzimanolis extending total quality management_ social responsibility and total expec

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