Interrelation of Total Quality Management, Human Capital Training, and Organizational Performance

Interrelation of Total Quality Management, Human Capital Training, and Organizational Performance Ma. Luisa C. Porciuncula (mlcporciuncula@yahoo.com) College of Business and Administration and Accountancy Colegio de San Juan de Letran, Intramuros Manila, Philippines Leticia M. Del Rosario (leamalvar@yahoo.com) Colegio de San Juan de Letran, Intramuros Manila, Philippines Colegio de San Juan de Letran Abstract The study makes a positive contribution to existing TQM literature by providing empirical evidence that Total Quality Management (TQM), Human Capital Training (HCT) and Organizational Performance (OP) are significantly associated. Primary data has been collected from a sample of 100 full-time employees of Colegio de San Juan de Letran. A structured fivepoint Likert type questionnaire was designed and randomly administered. Statistical tests of correlation have been used in the data analysis. To test whether HCT significantly carriers the influence of TQM to OP, the Sobel test was employed. The results indicate that TQM practices predict OP, and HCT does mediate TQM and OP relationship but the influence is not significant. Keywords: Total Quality Management, Organizational Performance, Human Capital Training Introduction In view of the present educational thrust in keeping with scientific and technological advancement, management approaches adapt and keep with the changing times in order to meet the demands of the different stakeholders. The purposes of this study are to explore the relationship between the Total Quality Management (TQM), Human Capital Training (HCT) and Organizational Performance (OP) and to determine the extent of current quality management practices of the Colegio that will align with the quality management dimensions. Literature Review Total Quality Management According to Kumar et al. (2009), Total quality management is a philosophy that says that uniform commitment to quality in all areas of an organization promotes an organizational culture 1

that meets consumers' perceptions of quality while Prajogo and McDermott (2005) describe TQM as a management model with the ultimate goal of achieving and meeting customer needs and expectations within an organization. Since the early 1980 s TQM has been recognized as a competitive advantage for a firm s success (Kuei et al. 2001) Based on the synthesis of definitions, philosophies and principles, there are 7 major dimensions for TQM implementation adopted in this study. These elements are continuous improvement, leadership, involvement of people, process management, customer focus, factual approach to decision making and system approach management. Continuous improvement is a powerful tool in institutions and an important source of competitive advantage. It is derived from the Japanese term kaizen, meaning the ongoing improvement of products, services, or processes through incremental and breakthrough improvements. Leadership is a key driver for successful TQM efforts to improve man and machine, to improve quality, to increase output and simultaneously to bring pride of workmanship to people. Furthermore, it is not merely to find failures of men, but to remove the causes of failure to help people to do better job with less effort (Summers 2009). Involvement of People is the process of empowering members of an institution to make decisions and solve problems appropriate to their levels at the institution (Eng and Yusof 2003). Process approach is to make a product from a single process, which should be managed as an integrated whole. It includes preventive and proactive approaches to quality management (Kaynak 2003). Customer focus means producing and delivering products and services that fulfill customer s present and future needs and expectation exceeding in order to ensure longterm organizational success and survival. To achieve competitive advantage constant monitoring of customer s needs is vital responsive strategy (Khan 2011). Factual approach to decision making pertains to the principle of effective decisions based on the analysis of data and information. The types of information and how they are disseminated and aligned with organizational levels are equally vital to success (Evans and Lindsay 2012). System approach to decision making is identifying, understanding, and managing interrelated processes as a system contributes to the organization s effectiveness and efficiency in achieving its objectives (Evans 2008 cited in ISO 9000 QS). Organizations implement TQM by encouraging managers and employees to collaborate across functions and departments, as well as with customers and suppliers, to identify areas for improvement, no matter how small. Organizations shift responsibility for quality control from specialized departments to all employees Human Capital Training Human capital represents the individual knowledge embedded in the employees in an organization (Liu 2009). It includes various skill, knowledge and abilities possessed by employees for the sustainable development of the enterprises (Ding and Liu 2010). Employee training is seen as a vehicle for building competitive advantage by most companies. Apart from developing internal capabilities, which can be a factor of differentiation among companies, training has traditionally proved to strengthen the corporate culture and to increase motivation, job satisfaction and commitment (Galanaki 2008). Training allows both individual staff and the whole entity to attain maximum potential because it gives employees the ability to improve the way work is done (Downey-Ennis et al. 2004). 2

Organizational Performance Organizational performance is a comprehensive index reflecting the degree of realizing previously set goal (Wang and Shieh 2008). It is very significant to the study in effectiveness and efficiency of business operation. The authors believed that higher-educated, well-trained and competent employees would have more capacity to generate added value to the organizational performance. Theoretical Framework and Hypotheses Human Capital Training and Organizational Performance Human capital is any activity which improves the quality (productivity) of the workers, according to Ukenna et al. (2010). In the same line of thinking Indradevi (2010) added that human capital investment on training is imparted to employees increase the efficiency of employees in the form of employee capabilities which in turn increase the performance of the organization. Organizational performance is a comprehensive index reflecting the degree of realizing previously set goals (Wang and Shieh 2008). Tan and Lim (2012) noted that organizational commitment to employees moderates the relationship between formal training approaches and organizational performances, and the relationship is not significantly positive and stronger with the presence of this moderator. However, organizational commitment to employees moderates the relationship between informal training approaches and organizational performances, and the relationship is positive and stronger with the presence of this moderator. Paul and Anantharaman (2003) recognized that ownership influences financial performance indirectly and has a positive impact only on competence and has a negative influence on teamwork and no significant effect on organizational commitment and customer orientation. However, its overall effects on training enhance employee productivity. Shiryan et al., (2012) concluded that training outcomes improve firm performance depending on the nature of training outcomes and management involvement. The study of Edralin (2011) revealed that large companies strongly believe that training and development is a vital strategy in human resource management, which is one factor that stimulates innovation which in turn gains competitive advantage. Apart from this, it was found out that most companies invest in training whether for the employee s personal development or technical expertise improvement. These companies view training as a contributing factor to the over-all growth of an employee. As a result, it benefits the companies through their employees increased productivity. A study by Marimutho et al. (2009) concluded that the infusion of human capital investment in organizations promotes innovativeness and greater firm performance. This is supported by Sohail et al. (2011) when found a significant positive correlation between human capital investment training and development with firm s organization s performance. Empirical studies show that the use of training and development programmes is more common in companies with ISO certification than those without it (Renuka and Venkateshwara 2006). Based on the previous study, there is a positive link between human capital and 3

organizational performance but none of the studies reviewed the direct association of human capital training and total quality management. The following two hypotheses are posited: Hypothesis 1. There is no significant association between training (T) and total quality management (TQM). Hypothesis 2. There is no significant association between training (T) and organizational performance (OP). Total Quality Management and Organizational Performance Khan (2011) examined the impact of TQM on organizational performance, and investigates the moderating effect of managerial competencies on relationship of TQM and organizational performance. Based on the result of the study of Moballeghi (2011), TQM has a significantly positive effect on operational and business performance, employee relations and customer satisfaction. However, it appears that there are significant differences in the relationship between TQM and organizational performance across industry sectors. Joiner (2007) suggests co-worker and organization support moderated the relationship between TQM implementation and organization performance. On the other hand, Bahri (2012) indicates a strong influence between TQM practices and quality performance, but there was no significant difference in quality performance between organizations that with organizations adopting TQM practices in non-formal. The extent of practices implemented has a positive impact on organizational performance. On the contrary, the main findings of Pignanelli and Csillag (2008), reported that there was the lack of evidence of improved profitability in Brazilian companies that adopted TQM. This was supported by the study of Huai (2012) that TQM does not have positive impact on organizational performance. Even though the implementations of TQM practices have positive effect on business results, there is no guarantee that it will definitely and allows to produce superior performance. Accordingly, we formulate the third hypothesis: Hypothesis 3. There is no significant association between total quality management (TQM) and organizational performance (OP). Hypothesis 4. Human capital training does not mediate in the relationship between total Quality Management and Organizational performance. Based on the hypotheses formulated, the authors developed a framework on the relationship between TQM, Human Capital Training and Organizational Performance. The relationship is demonstrated in Figure 1. It can be gleaned from the figure a mediating effect of the HCT on the relationship between TQM and OP. In this study, the researchers hypothesized that organizational performance (OP) is affected by total quality management (TQM), in which some of the impact is mediated by human capital training (HCT). In order to determine if HCT possibly mediates between TQM and OP, the following conditions must be established: 1. TQM predicts OP 2. TQM predicts HCT 3. HCT predicts OP 4

TOTAL QUALITY MANAGEMENT continuous improvement involvement of people leadership process approach customer focus factual approach to decision making system approach to management H1 Human Capital Training H4 H2 Organizational Performance H3 Figure 1 Research Model Methodology The study used a descriptive type of research that aims to determine the relationship among and between total quality management (TQM) practices, organizational performance (OP) and human capital training (HCT). The data for this study were collected from the full-time permanent employees composing administrators, teaching and non-teaching employees of Colegio de San Juan de Letran, Intramuros, Manila using a validated survey questionnaires. Out of 120 instruments distributed, 100 copies were retrieved. The questionnaire used valid scales for all variables under study. The survey questionnaire includes 49 questions to determine the level of implementation of total quality management, human capital training, and organizational performance. The researchers distributed the self-made survey questionnaires to the randomly selected respondents from different offices. The items were measured using a five-point Likert scale. The following were used to interpret the results: 1.00-1.79 = Not practiced/not at all effective/very poor, 1.80-2.59= Weak/Slightly effective/good, 2.60-3.39 = ly practiced/somewhat effective/average, 3.40 4.24= Highly practiced/very effective/good and 4.25 5.00=Very much practiced/highly effective/ very good. The instrument has undergone pre-testing to measure the reliability of the items. The Cronbach s alpha of 0.98 confirmed the high reliability of the instrument. Correlation analysis was also carried out to test the relationship between and among total quality management, organization performance, and human capital training while Sobel test was employed to validate the significance of the mediating influence of HCT on the relationship between TQM and OP. Results and Discussions Demographic profile The study was conducted to 100 respondents; 48 teaching personnel, 36 non-teaching personnel and 16 administrators of the Colegio, 1 st semester A.Y. 2012-2013. The study utilized the 5

descriptive survey method of research with the use of checklist questionnaire in gathering primary data. The summary results of the perception of respondents on TQM and its sub variables, training and organizational performance s shown in Table 1. Table 1 Descriptive Statistics of the Research Variables Mean Std. Deviation Interpretation Rank TQM Continuous Improvement 3.35 0.88 ly Practiced 1 Involvement of People 3.12 0.99 ly Practiced 4 Leadership 3.11 0.89 ly Practiced 5 Process Approach 2.88 0.99 ly Practiced 7 Customer Focus 3.21 0.92 ly Practiced 2 Factual Approach to Decision Making 3.07 0.92 ly Practiced 6 System Approach to Management 3.15 0.86 ly Practiced 3 HCT 3.08 0.939 ly effective OP 3.29.77 Average The results show the respondent s overall mean values of the extent of practice for the seven dimensions. The mean values range from 2.88 to 3.35, which correspond to a moderate level of practice. It can be seen that the two highest dimensions practiced by the respondents are Continuous Improvement (3.35) and Customer Focus (3.21). On the other hand, Factual Approach to decision making (3.07) and Process Approach (2.88) are the two least practiced factors. It indicates that Continuous Improvement is one of the highest elements in terms of the level of practice while Process Approach as revealed by the respondents as the least indicating factor in the extent of practice in the Colegio. On the overall, the respondents perception practice is at moderate level. The results show that there is still need for more efforts on improving the practices, especially the process approach and factual approach to decision making in order to strengthen the TQM practices. The overall mean of Human Capital Training (HCT) perceived by the respondents is 3.08 which suggest that HC training generally categorized as moderately effective. The same variable has the overall standard deviation of 0.939 variations, which indicates relatively larger deviation. This implies that the organization recognizes the effectiveness of training programs that could lead to increase firm productivity because employees who are appropriately trained can become effective employees to the Colegio. The overall perceptions of respondent towards Organizational Performance (OP) indicators have a mean value of 3.29 which indicates an average performance of the Colegio for the past in three years. This variable has the lowest overall standard deviation of 0.77 variations. Data analysis is carried on with the primary data collected from the respondents. It determines the association between TQM with that of training and organizational performance. The results at Table 2 indicate correlation matrix of total quality management, human capital training and organizational performance. 6

Table 2 Correlation Matrix HCT OP Coeff. p-value VI Coeff. p-value TQM 0.662 0.000 0.644 0.000 Continuous Improvement 0.562 0.000 0.492 0.000 Involvement of People 0.553 0.000 0.562 0.000 Leadership 0.606 0.000 0.591 0.000 Process Approach 0.568 0.000 0.547 0.000 Customer Focus 0.567 0.000 0.58 0.000 Factual Approach 0.586 0.000 0.622 0.000 System Approach 0.631 0.000 0.601 0.000 HC Training 1 --- 0.602 0.000 OP 0.602 0.000 1 --- VI Hypothesis 1. There is no significant association between training and TQM. Based on the Table 2 with r-value of.662, there is moderate correlation between TQM and training. The p-value of 0.000 means that there is significant association between independent variable TQM and dependent variable training. Hypothesis 2. There is no significant association between OP and training. With the r-value of.602, it is inferred that there is a moderate correlation between training and organizational performance. However, it was evident that the p-value of 0.000, says that there is a significant association between training and organizational performance as indicated in the Table 2. Hypothesis 3. There is no significant association between Organizational performance and Total Quality Management. With the r-value of.644 as shown on table 3, it is inferred that there is a moderate correlation between organizational performance and TQM and that the p-value of 0.000 shows that the degree of association is significant. Hypothesis 4. Human capital training does not mediate in the relationship between Total Quality Management and Organizational performance. The link between each variable is significant. These are reflected in the table above. Thus, all three assumptions for a possible mediating effect of HCT on the relationship between TQM and OP are met. To test whether HCT significantly carries the influence of TQM to OP, the Sobel test was employed. The test-statistic for the Sobel test is 0.52, with an associated p-value of 0.60 which does not fall under the established alpha of 0.05. Thus, the association between TQM and OP is not increased significantly by the increasing HCT. 7

Conclusion The objective of the study is to examine the interrelationship between total quality management, human capital training and organizational performance in Colegio de San Juan de Letran. The study makes a positive contribution to existing TQM literature by providing empirical evidence that Total Quality Management, Training and Organizational Performance are significantly associated. The study had shown the TQM practices are applied at a moderate level. The study indicates that the elements are practiced at different level within the medium range. The results have shown that the institution has still room for improvement in the level of practices in two dimensions such as the Process Approach and Factual Approach to Decision Making. Specifically, the need to create well-established planning systems for strategy development and deployment, including measurement, feedback and review; quality review of areas needing documentation and regular review of procedures in the process approach dimension; quality evaluations to serve as important aid for management to identify effective and efficient tools in data gathering and analysis to measure customer satisfaction and acting of the result continuous improvement of the delivery of service. Feedback received from internal and external customers should be used to initiate process. In addition, the Colegio needs to give more emphasis in its practice of benchmarking that can reveal information on the current performance levels and this may later serve as baseline to compare with future benchmarking experiences. The Colegio may organize a Company Quality Circle Committee which will handle the necessary preparations for the implementation of the TQM system. Quality on system may include the following: 1. Quality Manual gives the overall quality policy describing the quality system of the organization. 2. Documented Quality System Procedure sets out how a function is to be carried out and who is responsible for each part of it. It specifies way to perform sequence of activities and decisions. 3. Work Instructions a detailed step-by-step method in performing such functions or tasks to ensure that a job is done in a precise manner. 4. Quality Records indicates accurate records must be available at any given time to record compliance to demonstrate that the procedure has or has not been followed. Likewise, this documented information can be used for inquiry or as a reference for future benchmarking of the organization. 5. Quality Review a management review which is emphasized by self-adjusting nature of total quality system. 6. Documentation incorporate all corrective measures that are implemented to ensure the efficiency of the system. 7. Colegio may apply for ISO 9001 (quality management system standards) certification or seek the help of an International Organization for Standardization (ISO) certifying body to adopt an internationally recognized series of quality standards. This strategy can help the institution use a framework for the quality management system under the guidance of the external quality assurance auditors. In addition, ISO certification can also gain international recognition that can facilitate the Colegio s ongoing implementation of accreditation and university status. 8

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