International Journal of Quality & Reliability Management

The impact of total quality management on service company performance:

evidence from Spain
Evangelos L. Psomas, Carmen Jaca,
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IJQRM
33,3
380
Received 16 July 2014
Revised 1 November 2014
Accepted 15 December 2014
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International Journal of Quality &
Reliability Management
Vol. 33 No. 3, 2016
pp. 380-398
© Emerald Group Publishing Limited
0265-671X
DOI 10.1108/IJQRM-07-2014-0090
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0265-671X.htm
QUALITY PAPER
The impact of total quality
management on service company
performance: evidence from Spain
Evangelos L. Psomas
Business Administration of Food and Agricultural Enterprises,
University of Patras, Agrinio, Greece, and
Carmen Jaca
Tecnun, Engineering School, University of Navarra, San Sebastian, Spain
Abstract
Purpose – The purpose of the paper is to explore the impact of total quality management (TQM)
factors on performance dimensions of service companies.
Design/methodology/approach – A research project was designed in the Spanish services sector.
Companies that had already participated in activities with regard to business excellence were randomly
selected and approached through a structured questionnaire, yielding a sample of 151 responding companies.
By analyzing TQM implementation and company performance through the exploratory factor analysis,
specific TQM factors and performance dimensions are extracted. The TQM factors that significantly
influence the performance dimensions are determined through multiple linear regression analyses.
Findings – According to the findings, the factors describing TQM implementation in service
companies concern quality practices of top management, employee quality management, process
management, employee knowledge and education and customer focus. Similarly, the performance
dimensions revealed concern financial performance, operational performance, customer satisfaction
and product/service quality performance. The TQM factors concerning customers, employees and top
management significantly affect the performance dimensions.
Research limitations/implications – The subjective data were collected from quality managers of
a small-sized sample of companies operating in a European Union country and belonging to different
services sub-sectors. Based on these limitations, future research studies are recommended.
Practical implications – By focussing on specific TQM factors, a service company can improve its
performance dimensions. In doing so, it can lay the foundations not only to survive but to be
competitive in the current global scenario that is characterized by an economic downturn.
Originality/value – This paper describes a reliable TQM model that can be implemented in the
services sector and a means by which a service company can improve its performance.
Keywords Total quality management, Spain, Company performance, Service companies
Paper type Research paper
Introduction
Early quality gurus recognized that both product and service “quality” create
competitive advantages for firms (Gupta et al., 2005). Nowadays, as competition
increases and radical changes occur in the business world, there is a need to understand
the term “quality” better (Boateng-Okrah and Fening, 2012). Understanding clearly
this term from the business perspective, is fundamental for companies to be successful
and become profitability leaders in the new global economy (Antony, 2013). More
specifically, top managers should understand and apply quality philosophies to
achieve high performance levels in products and processes and to face the challenges of
the new global competition (Boateng-Okrah and Fening, 2012). Quality management
 pays for manufacturing and service organizations and it is the adoption of quality Impact of TQM
principles that is beneficial (Ronnback and Witell, 2008). on service
A leading force in shaping and spreading quality management ideology and
practices in modern business management is total quality management (TQM)
company
(Boateng-Okrah and Fening, 2012). Irrespective of the industrial sector and product or performance
service portfolio, to be able to effectively practice TQM and achieve quality in the
modern era, quality should be seen as going beyond merely meeting requirements as 381
explained by Crosby or the fitness for use explanation of Juran. It should have
additional and important dimensions of customer satisfaction focus (both internal and
external), training, education and empowerment of employees (Mensah et al., 2012).
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TQM has been recognized as a competitive advantage for an organization’s success

since the 1980s (Boateng-Okrah and Fening, 2012). The credibility of TQM philosophy
is no longer an issue and cannot be questioned at all since it has been demonstrated in
various countries in the world that competitive advantages and performance benefits
can be created and sustained through the adoption of the TQM thinking (Zairi, 2013).
So, nowadays, many competitive organizations around the world implement TQM
to continuously ameliorate performance (Boateng-Okrah and Fening, 2012). More
specifically, the trend of TQM is strong in Europe, Japan, the USA, Australia and
elsewhere (Lam et al., 2012; Brown, 2013). It is worth noting that the influence of quality
management in Spain and more specifically in the northern part of this country has
been remarkable. Indeed, service industries in this region lead Europe in terms of
implementing the ISO 9001 standard and winning quality awards based on the
European Foundation of Quality Management (EFQM) framework (Heras et al., 2006).
According to Alonso-Almeida et al. (2013), Spain ranks third in the world (behind China
and Italy) in the number of ISO 9001 quality management certifications.
Based on the widespread adoption of TQM, “quality” has become very much front
page news in business publications and the consulting world. Publicity surrounding
organizations which successfully adopt quality management is widespread. Academics
have already started researching the quality management phenomenon, while journals
specifically devoted to it have also been launched (Brown, 2013). Although a panoply of
TQM research studies has been conducted worldwide so far and respective papers
have been published in academic journals, the extent to which there is a link between
TQM and improved organizational performance has been the subject of much debate in
the literature (Huq, 2005; Ronnback and Witell, 2008; Mensah et al., 2012; Sampaio et al.,
2012; Boulter et al., 2013). According to Boulter et al. (2013), compared to the USA, in
Europe there is little empirical-based research that establishes the link between TQM
and improved financial performance. Similarly, Ronnback and Witell (2008) and
Lam et al. (2012), state that little TQM research has been conducted so far on the
services sector regarding the linkages of TQM, market/customer orientation and
service quality. Bearing in mind this literature gap, it is necessary to continue studying
the relationships between TQM critical factors and the results that the companies
obtain (Calvo-Mora et al., 2014). Talib et al. (2013) also state that there is a need for a
deeper investigation of the relationship between TQM practices and performance from
the quality perspective of services industry. Future research should also consider
linking TQM factors to business performance with regard to financial results, customer
satisfaction and productivity in order to yield more invaluable TQM managerial and
theoretical implications in service companies (Lam et al., 2012). In line with the above
future research proposals, Kristianto et al. (2012), state that further research is needed
for service companies in order to study how the TQM approach can be used to achieve
 IJQRM customer satisfaction. Walker et al. (2006), highlight a research opportunity to explore
33,3 the relationships between the constructs that comprise the service-profit chain
framework, including the relationships between employees, customers and a service
organization’s financial and market performance.
Bearing in mind the above mentioned literature gap and future research directions,
many researchers worldwide have already studied the impact of TQM implementation on
382 company performance. For example, there are the studies of Fotopoulos and Psomas
(2010), Psomas and Fotopoulos (2010) and Psomas et al. (2014), which focus on the
manufacturing sector or on a specific manufacturing sub-sector such as the food sector.
By contrast, based on the suggestions of several authors, the present study focusses on the
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services sector, contributing, thus, to the literature. More specifically, it aims at determining
those TQM factors that mostly influence service company performance. Exploratory factor
analyses (EFA) are applied to extract the TQM factors and the performance dimensions,
while their relationships are determined through multiple linear regression analyses. From
a managerial perspective, the findings of the present study guide the services practitioners
to a better understanding of those TQM factors that optimize performance dimensions.
The rest of the paper is structured as follows. In the next part, the literature is
reviewed and specific research questions are formulated. This is followed by the
methodology and the results of the study. The results are then discussed and the
conclusions, the practical implications, the limitations of the study and future research
recommendations are finally presented.

Literature review and research questions

TQM in the services sector
Much has been written about what constitutes the basic ingredients or the
philosophical pillars of TQM. It means different things to different people and the
number and priority of the TQM elements vary from one author to another and their
importance might vary from one organization to another (Harrington et al., 2012;
Boulter et al., 2013). A service company has a quality profile built on a set of quality
principles. What varies is the quality principles that each company emphasizes and
fully adopts and what practices and techniques are most used to put the quality
principles into practice ( Johansson et al., 2013).
However, if there was a consensus among experts regarding what constitutes TQM, it
would include the following components: leadership and management commitment,
training, communication, teamwork, customer satisfaction focus, measurement of quality
data, continuous improvement, process improvement, focus on employees (empowerment)
and supplier involvement (Harrington et al., 2012). The major TQM factors extracted from
the literature are, according to Talib et al. (2011), top management commitment, customer
focus, training and education, continuous improvement and innovation, supplier
management and employee involvement. According to Mosadeghrad (2014), several
critical factors are essential if TQM is to be successfully implemented. These include top
management support, strategic quality planning, visionary leadership, quality structure,
effective management of human resources, training and education, employees’
involvement, teamwork, continuous improvement, customer-driven quality, suppliers’
partnership, management by fact to solve problems and a TQM culture.
Tsang and Antony (2001) analyze TQM practices in the UK services industry based
on the following critical factors: customer focus, continuous improvement, teamwork
and involvement, top management commitment, training and development, quality
systems and policies, supervisory leadership, communication within the company,
 supplier management, measurement and feedback and cultural change. Calvo-Mora Impact of TQM
et al. (2014), base their research in Spanish service companies on the most studied TQM on service
factors in the literature including leadership and top management commitment, strategic
planning, continuous improvement, customer focus, data-based management, human
company
resources management, process management and control and supplier management. performance
Karimi et al. (2014), study a predictor set of TQM factors in service companies including
leadership, strategic planning, customer and market focus, measurement and analysis, 383
knowledge management, human resource focus and process management.
From the above literature review it is apparent that TQM is a network of interdependent
elements namely, principles, critical factors, components or ingredients, while there is no
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unique model for a good TQM program. In order to develop a TQM model, based on the
goodness of the model fit to empirical data from service companies, the studies of
Fotopoulos and Psomas (2009) and Psomas and Fotopoulos (2010) are used as the basis for
the formulation of the theoretical framework of the present study. This framework includes
all the common TQM factors that run through the various definitions of TQM. These
factors are the following: leadership, strategic quality planning, employee management and
involvement, supplier management, customer focus, process management, continuous
improvement, information and analysis, and knowledge and education.
The studies of Lam et al. (2012), Boateng-Okrah and Fening (2012), Harrington et al.
(2012), Singh and Sushil (2013), Talib et al. (2013), Voon et al. (2014), Ebrahimi et al.
(2014), Calvo-Mora et al. (2014), Mosadeghrad (2014), Karimi et al. (2014) and Delic
et al. (2014) are used as the basis for drawing the measured variables (TQM practices) of
the TQM factors identified in the literature. So, the following research question is
formulated and examined through this study:
RQ1. What is the underlying structure (latent factors) of the TQM practices
implemented in service companies?

Service company performance from TQM implementation

The 1990s saw TQM as headline news in many countries. This has prompted academic
researchers to investigate claims of the benefits of adopting quality management
(Brown, 2013). Comparing the numerous pieces of literature available in this field of
study, the performance benefits of companies can be broadly categorized into four
main groups; financial and market benefits, organizational effectiveness, customer
satisfaction and employee satisfaction (Mensah et al., 2012).
Boateng-Okrah and Fening (2012) support the view that the aim of a business
implementing quality management is long-term profitability and earnings achieved
through satisfying customers and keeping production costs to a minimum. Harrington
et al. (2012), state that the aims of TQM are to achieve customer satisfaction, cost
effectiveness and defect free work through a relentless pursuit of the “war on waste.”
The customer will be satisfied only if the product/service has a very low rate of
defects (literally none or zero) and is competitive on price compared with offers from
other suppliers. Similarly, Mosadeghrad (2014), notes that the TQM benefits and
improvements come in the areas of fewer defects and errors, reduced waste, increased
sales, productivity, profit and market share, stronger relationships with suppliers and
increased employee and customer satisfaction. Bolboli and Reiche (2013), also state that
the successful implementation of TQM can lead to a wide range of performance benefits
for organizations including increased productivity, growth, efficiency and innovation,
reduced operational cost and increased market share and profits.
 IJQRM Talib et al. (2013), studying TQM implementation in service industries, evaluate quality
33,3 performance based on items dealing with product, processes and service quality, employee
service quality, employee satisfaction, customer satisfaction and supplier performance.
The questionnaire survey designed by Fraser et al. (2013) in order to examine TQM in
service managers is based on benefits (drawn from respective empirical studies) including
improved productivity, greater customer satisfaction, increased employee morale,
384 improved management-labor relations and higher overall performance.
According to Oakland (2011), evidence should be provided that the results
achieved from the implementation of TQM practices are tangible and sustained
(through soundly based, systematic and continuously improved business operations
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and activities). This evidence should not be limited to the operational, financial or
market results, which demonstrate the outcome of past performance. It should also
include results from other stakeholders that serve as leading indicators of future
financial/key performance results; measured excellence in customer satisfaction and
loyalty, people motivation and capability and the satisfaction of the wider community
(Oakland, 2011). The theoretical framework describing the TQM results used in the
present study follows the suggestion of Oakland (2011). Similarly, the studies of
Fotopoulos and Psomas (2009, 2010) are also based on the same theoretical basis
including all possible results achieved through TQM implementation.
The studies of Brah et al. (2002), Hassan and Kerr (2003), Kaynak (2003), Prajogo
(2005), Brah and Lim (2006), Kumar et al. (2009), Sit et al. (2011), Talib et al. (2013),
Fraser et al. (2013) and Karimi et al. (2014) are used as the basis for drawing the
measured variables of service company performance from TQM implementation. So,
the following research question is formulated and examined through this study:
RQ2. What is the underlying structure (latent factors/dimensions) of the performance
outcomes from TQM implementation in service companies?

The impact of TQM on service company performance

Whether TQM is viewed as a catalyst or a strategic resource, its impact on the
organization’s overall performance cannot be underestimated (Yunis et al., 2013). This is
evident in the abundant scholarly works that have focussed on the actual relationship
between the implementation of TQM and company performance. So, many researchers
and quality consultants assert that the proper implementation of TQM principles/
elements positively influences company performance in many dimensions (Mensah et al.,
2012). These dimensions concern organizational performance (Boateng-Okrah and Fening,
2012; Alidrisi and Mohamed, 2012; Zairi, 2013), quality performance (Talib et al., 2013),
market performance (Lam et al., 2012), operational performance (Boulter et al.,
2013), financial performance (Boulter et al., 2013), competitive performance (Zairi, 2013),
employee participation and morale (Fening et al., 2008; Kumar et al., 2009) and customer
satisfaction (Arasli, 2012; Antony, 2013; Liapis et al., 2013).
Moreover, authors such as Jang and Lin (2008) and Su et al. (2008) argue that,
regardless of whether the company produces services or goods, it is not the quality
management implementation alone which improves market performance but it is
rather the associated improvement of all aspects of the operational process. Improved
operational processes in turn reduces production costs, improves customer perception
of product/service quality and finally enhances market and financial performance.
According to Dimara et al. (2004), operational performance, product quality and market
share define a broad conceptualization of organizational performance that ultimately
 leads to the improvement of financial performance. Similarly, Barnes et al. (2004) Impact of TQM
mention that improved product/service quality leads to increased customer satisfaction on service
and consequently to increased market share and profitability.
However, the adoption of TQM practices is not always directly related to
company
performance outcomes such as financial performance, customer service and quality performance
performance (Prajogo and Sohal, 2004). In other words, different TQM practices affect
company performance in different levels of influence (Brah et al., 2000; Kaynak, 2003). 385
Given that the present study is an exploratory one, no specific TQM factors and
performance dimensions can be defined prior to analyzing the TQM practices
implemented and the performance benefits derived by the sample companies. Thus, the
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following research question is formulated:

RQ3. Does TQM, as expressed by its respective factors, influence service company
performance dimensions?

Methodology
Questionnaire development
The answers to the above research questions are given through a research study conducted
in the services sector. By comprehensively reviewing the current literature, a questionnaire
survey instrument was designed describing TQM implementation and service company
performance. Academics and practitioners were invited to revise and improve the initial
version of the questionnaire. In addition, a pilot study was conducted in a sample of ten
service companies in order to check the clarity and the content validity of the questionnaire
items (Stouthuysen et al., 2012). Thus, a final version of the questionnaire was formulated
consisting of questions regarding the company profile, the TQM practices companies adopt
and the respective performance benefits they derive. The respondents were asked to indicate
the extent to which they agreed or disagreed with these statements using a seven-point
Likert scale (1 represented “strongly disagree” and 7 represented “strongly agree”).

Sample
The service companies operating in northern Spain constitute a suitable research sample
for studying TQM, given that many of these companies have adopted the EFQM model
as a framework for the development of total quality (Heras-Saizarbitoria et al., 2011).
So, the criterion for selecting the companies that would participate in the present research
study, was their location in the geographical region of northern Spain. Euskalit,
a non-profit Spanish organization, provides a list of service companies from northern
Spain that have been implementing improvement methodologies in an effort to achieve
the business excellence level (Euskalit, 2013). A sample of 800 service companies from
northern Spain was selected from those recorded in the data base of Euskalit. The simple
sampling procedure was used for this purpose. The questionnaire was addressed to the
quality managers of all these service companies through e-mail. In order to increase the
response rate, follow-up reminder e-mails were sent after the initial e-mailing (Singh,
2008). This resulted in 151 completed questionnaires being received, which represents
a response rate of 18.9 percent. This is considered acceptable given the response rate of
similar studies (Prajogo et al., 2008; Karapetrovic et al., 2010; Agarwal and Selen, 2011).
Non-response bias is a common concern in empirical studies using the survey
method (Ou et al., 2010). Given that the responses were returned within a 16-week
period, the early and late responding companies were compared in terms of the
number of their employees ( χ2 test) and the questionnaire items (one-way ANOVA).
 IJQRM The comparison was based on the assumption that the opinions of late responding
33,3 companies are representative of the opinions of non-responding ones (Singh et al., 2011;
Kim et al., 2012). No statistically significant differences were found. Furthermore, several
non-responding companies stated, when contacted, that the major reason for them not
participating in the research project was “lack of time,” “company policy of not disclosing
information” and the fact that they were “not interested” (Singh et al., 2011). So, from the
386 above it is apparent that non-response bias is not a cause for concern in this study.
Since the data set was drawn from a single respondent in each company, common
method variance needs to be checked to ensure that the data have no major problem
with regard to this issue (Kim, 2009; Prajogo and McDermott, 2011). So, in order to
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check whether common method bias exists, we performed the Harmon’s one-factor test
in the model of the TQM factors and performance dimensions using the exploratory
approach (Kim, 2009). This method produced poor results as indicated by the low
percentage of the variance extracted (below 25 percent), while many items suffered
from poor factor loadings, which fell below 0.4. Thus, from the above we conclude that
common method variance is not a major concern in this study.

Data analysis
EFA is applied using the principal component factor extraction method and the
orthogonal varimax rotation method in order to extract the latent factors of TQM and
service company performance (Sadikoglu and Zehir, 2010; Gunday et al., 2011).
Reliability analysis is also applied evaluating the Cronbach’s α coefficients of all the
latent factors (Sadikoglu and Zehir, 2010). The relationships between the TQM factors
and the performance dimensions are examined through multiple linear regression
analyses (Psomas and Fotopoulos, 2010). The studies of Psomas et al. (2013, 2014) also
use the data analysis approach used in the present study.

Results
The company profile
The majority of the responding service companies (73 percent) are small and medium
sized enterprises (SMEs), employing fewer than 250 employees. Τhey can be further
categorized as follows: 8.8 percent as micro enterprises (o ten employees), 21.2 percent
as small enterprises (10-50 employees), 43 percent as medium enterprises (50-250
employees), and 27 percent as non-SMEs ( W250 employees). Several services
sub-sectors are represented in the research sample including education, healthcare,
wholesale/distribution, retail, banking/finance, consultancy, communications,
insurance, public administration, food and beverage catering. It is worth noting that
half of the responding service companies have been certified according to ISO 9001,
27 percent according to ISO 14001 and 18 percent according to ISO 18001. Moreover,
8 percent of the sample companies have been awarded by the Euskalit organization
based on the EFQM model assessment, while 53 percent have received either the Gold
(over 500 points achieved in the EFQM assessment) or the Silver Quality Award (over
400 points). Finally, 95 percent of the quality managers are at least university
graduates, while 70 percent have more than 15 years’ experience in the services sector.

EFA
The TQM practices and the performance outcomes from TQM implementation are used
as measured variables of respective EFA. The result is the establishment of five latent
TQM factors and four latent factors that describe performance dimensions.
 The extracted TQM factors are explained using the measured variable loadings Impact of TQM
and can be labeled as follows: quality practices of top management, employee quality on service
management, process management, employee knowledge and education and customer
focus (Table I). Similarly, the extracted performance dimensions are explained using
company
the measured variable loadings and can be labeled as follows: financial performance, performance
operational performance, customer satisfaction, and product/service quality
performance (Table II). 387
All the factor loadings of the items subjected to EFA are greater than 0.5. Thus, the
squared factor loadings indicate that a satisfactory proportion of measured variance is
explained by the respective latent factor extracted through the EFA. Although factor
loadings of ±0.30 to ±0.40 are minimally acceptable in EFA, values greater than ±0.50
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are generally considered necessary for practical significance (Hair et al., 2005).
Moreover, loadings of ±0.45 are considered statistically significant for sample sizes of
around 150 (Hair et al., 2005). Given that the sample size in this study is 151, it is
apparent that the factor loadings, resulting from EFA, are practically and statistically
significant. The Cronbach’s α coefficients of the TQM factors and performance
dimensions are well above 0.7, exceeding the minimum threshold level of 0.7 (Oliveira
and Roth, 2012). Therefore, the selected items reliably estimate the latent factors.

The impact of the TQM factors on the performance dimensions

Having as a dependent variable each of the four performance dimensions revealed,
four multiple linear regression analyses are conducted. Based on the sum of the
respective measured items, summated scales are calculated for each independent and
dependent variable (latent factors) of the regression analyses. Using the standardized
and studentized residuals, the assumptions required for each regression analysis are
tested and more specifically the linearity, homoscedasticity, independence and
normality. Based on the recommendations of Hair et al. (2005), specific tests are applied
for each assumption to check for violations. According to the results, these
assumptions are not violated and this is the case for each regression analysis. Finally,
the multi-collinearity among the independent variables of each regression analysis is
checked and not confirmed.
According to the results of the first regression analysis, “operational performance”
( p-value ¼ 0.00 and adjusted R2 ¼ 0.386) is affected by two out of the five TQM
factors, namely “employee knowledge and education” ( p ¼ 0.001, β standardized
coefficient ¼ 0.311) and “customer focus” ( p ¼ 0.006, β standardized coefficient ¼ 0.308).
Investigating the impact of the five TQM factors and “operational performance” on
“product/service quality performance,” the findings show ( p-value ¼ 0.00 and adjusted
R2 ¼ 0.528) the statistical significant impact of the following latent factors: “customer
focus” ( p ¼ 0.00, β standardized coefficient ¼ 0.36), “employee knowledge and education”
( p ¼ 0.00, β standardized coefficient ¼ 0.317) and “operational performance” ( p ¼ 0.009,
β standardized coefficient ¼ 0.193). The third regression analysis examines the impact of
the five TQM factors, “product/service quality performance” and “operational
performance” on “customer satisfaction.” According to the findings ( p-value ¼ 0.00
and adjusted R2 ¼ 0.599), “customer satisfaction” is significantly affected by
“product/service quality performance” ( p ¼ 0.001, β standardized coefficient ¼ 0.266),
quality practices of top management ( p ¼ 0.001, β standardized coefficient ¼ 0.238)
and “customer focus” ( p ¼ 0.032, β standardized coefficient ¼ 0.208). Finally, the
fourth regression model examines the impact of the five TQM factors and
the three performance dimensions on “financial performance.” This model shows that
 IJQRM Kaiser-Meyer-Olkin ¼ 0.948 Factor loadings
33,3 Measured variables F1 F2 F3 F4 F5

Top management sets the quality issues on the

agenda of the managers’ meetings 0.800
Top management actively participates in quality
improvement efforts 0.790
388 Top management supports the quality
improvement efforts by providing resources 0.759
Top management gives priority to process and
product/service quality 0.728
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Top management gives the authority to employees

to manage quality problems 0.662
The quality policy is taken into consideration in
strategic planning 0.641
The quality objectives are being set based on
customer needs and requirements 0.612
Employees who improve quality are awarded 0.792
Employees are evaluated 0.774
Employees are motivated to improve their
performance 0.731
Data are collected from employees regarding their
satisfaction and suggestions for improvements 0.603
Employees take initiatives 0.560
Quality data are taken into consideration from
employees during their daily work 0.504
Process and product nonconformities are detected
through internal audits 0.810
Process quality data are recorded and analyzed 0.708
The critical processes are determined-evaluated 0.697
The points/places where time is lost are detected to
minimize the cost of the internal processes 0.673
All employees are provided with work instructions 0.657
Specific organizational structure has been
formulated to support quality improvement 0.626
Educational programs are evaluated 0.779
The employees have knowledge and know-how 0.771
The employees are educated in subjects with
regard to their specialty and daily work 0.737
Educational subjects are absorbed by employees 0.700
Resources are provided for educational reasons 0.676
Customers are encouraged to submit complaints
and proposals for quality improvement 0.778
Customers’ complaints, satisfaction level and
proposals for quality improvement are selected 0.754
Customers’ needs, requirements, desires and
expectations are recorded and analyzed 0.659
The company’s managers and employees are in
close contact with customers 0.557
Table I. Eigenvalue 18.33 1.97 1.54 1.20 1.06
Exploratory factor Comulative variance % 55.55 61.51 66.18 69.81 73.03
analysis of the TQM Cronbach α 0.942 0.920 0.919 0.899 0.921
practices in service Notes: F1, quality practices of top management; F2, employee quality management; F3, process
companies management; F4, employee knowledge and education; F5, customer focus
 Kaiser-Meyer-Olkin ¼ 0.861 Factor loadings
Impact of TQM
Measured variables R1 R2 R3 R4 on service
company
The company’s net profit 0.931
The company’s profitability 0.912 performance
The company’s cash flow from operations 0.790
The company’s penetration/access in domestic and foreign markets 0.734
The company’s financial indexes 0.706 389
The company’s sales increase 0.700
The company’s productivity 0.857
The company’s effectiveness 0.843
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The company’s efficiency 0.756

Customer satisfaction from products 0.846
Customer retention and loyalty 0.804
Customer satisfaction from after sales services 0.703
The reliability of the products provided (the maintenance of the quality
characteristics over a long period of time) 0.868
The conformance of the products to customer specifications 0.756
The predominance of the company’s products in relation to the
products of its major competitors 0.598 Table II.
Eigenvalue 6.56 2.76 1.26 1.01 Exploratory factor
Comulative variance % 43.73 62.11 70.51 76.11 analysis of service
Cronbach α 0.903 0.878 0.831 0.823 company
Notes: R1, financial performance; R2, operational performance; R3, customer satisfaction; R4, product/ performance
service quality performance outcomes

( p-value ¼ 0.00 and adjusted R2 ¼ 0.202) “financial performance” is significantly

affected by “operational performance” ( p ¼ 0.002, β standardized coefficient ¼ 0.311) and
“employee quality management” ( p ¼ 0.026, β standardized coefficient ¼ 0.302).

Discussion
The present study findings reflect the small-medium size of the Spanish service
companies (based on the number of employees) even though large-sized companies are
well represented in the sample of the responding companies. This is also reflected in the
studies of Trigueros Pina and Sansalvador Selles (2008), Santos-Vijande and Alvarez-
Gonzalez (2009) and Karapetrovic et al. (2010) in Spanish service companies. Thus, it is
apparent that SMEs dominate in the Spanish services sector. However, not only in Spain
but in many other European Union countries, the dominant entrepreneurial structure in
the services sector is mainly composed of SMEs (Rubio-Andrada et al., 2011).
The analysis of the TQM practices service companies implement reveals a
noticeable characteristic element. This becomes evident taking into consideration the
labels of the latent TQM factors extracted. More specifically, the common characteristic
of almost all of the TQM factors (namely quality practices of top management,
employee quality management, process management, employee knowledge and
education and customer focus), is the human aspect. In other words, the top
management team members, employees and customers constitute the basis upon which
the service companies build the total quality framework. So, in the internal business
environment, top management and employees guide the implementation of TQM. This
means that all the main components-factors of TQM such as strategic planning,
supplier management, process management, information and analysis, continuous
 IJQRM improvement and human resource development can be implemented successfully
33,3 based on the will, know-how and capability of the top management team and the
employees. On the other hand, customers are also guides of TQM, even though they
belong to the external business environment. This means that for the successful
implementation of the TQM components-factors, customer needs, requirements, desires
and expectations should always be taken into consideration.
390 Comparing the results of the present study carried out in the services sector with the
results of similar studies in the manufacturing sector, some noteworthy points are
revealed. More specifically, the TQM factors extracted in the studies of Fotopoulos and
Psomas (2010) and Psomas and Fotopoulos (2010) are almost the same as the TQM factors
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extracted in the present study. In other words, the TQM models developed in the services
and manufacturing sector in the Spanish and Greek business environments, respectively,
consist of almost the same factors. This may provide an indication for further validating
in future the TQM models developed in both business sectors.
The results of the present study in the services sector are consistent with those
of Huq (2005), according to which, shifting to a TQM paradigm in the service
environment, requires a new administration perspective in which the company is
viewed as an open system where participative management is emphasized, strategic
leadership is advocated and explicit focus on external and internal customers is
required. Similarly, the conceptual TQM model developed by Gupta et al. (2005),
is based on three constructs: leadership, organizational culture and employee commitment,
which are very important in achieving total quality service objectives. The group of TQM
factors revealed through the present study is in line with the respective group of factors
described in the study of Calvo-Mora et al. (2014) in Spanish service companies. Similarly,
the quality culture of the Basque Country Quality Award winners studied by
Zarraga-Rodriguez and Alvarez (2013) is based on the human aspect of management such
as leadership, involvement, teamwork, communication and consensus. In the above
mentioned studies including the present one, the groups of TQM factors correspond to
those that the literature which specializes in TQM calls social or soft factors.
The nature of the performance dimensions revealed through the present study is
also worth discussing. The operational performance of a company, product/service
quality, financial performance and customer satisfaction are the main areas to benefit
from the total quality approach. Both the internal and the external business
environment are reflected in these performance dimensions. However, it should be
noted that, performance dimensions describing the benefits derived by employees and
top management are missing from the categories of the TQM benefits concerning the
internal environment of the sample companies. Similarly, as far as the external
business environment is concerned, performance dimensions with regard to the society
in which the company operates and the broad market place are also missing. These
missing categories of benefits may be regarded by the sample companies not as direct
benefits but as indirect ones which need more time and years of experience on the TQM
journey in order to become apparent. That is why only direct benefits such as those
concerning a company’s product/service, operations, customers and financial situation
are mostly evident.
It is worth noting that the performance dimensions describing the TQM benefits
revealed in the studies of Fotopoulos and Psomas (2010) and Psomas and Fotopoulos
(2010) are almost the same as the respective performance dimensions revealed in
the present study. This means that the models of the TQM benefits developed in the
services and manufacturing sector in the Spanish and Greek business environments,
 respectively, have many common dimensions. This is also an indication for the need to Impact of TQM
further validate in future the models of the TQM benefits in both business sectors. on service
In line with the present study, Jimenez-Jimenez and Martinez-Costa (2009), studying
Spanish organizations including service companies, do not mention performance
company
outcomes from TQM concerning employees and society. Similarly, Santos-Vijande and performance
Alvarez-Gonzalez (2009), do not mention society benefits, but consider employees as
recipients of benefits from TQM implementation. 391
Based on the latent factors extracted through the present study, significant
relationships are revealed. These relationships show the most significant TQM
contributors to the improvement of service company performance. Even though five
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factors constitute the pillars of the TQM model service companies adopt, not all of them
contribute equally to the achievement of significant business benefits. Operational
performance and product/service quality are related only to the degree to which
company employees have knowledge and education and to the degree to which the
company is customer oriented. This means that by educating the employees and taking
into consideration customer requirements (in formulating the procedures and providing
the services), two major parameters of company performance are significantly
improved. In other words, by enhancing the value of the internal and external
customers, service companies derive benefits in terms of their internal operation and
the quality of services. Moreover, in view of the improved product/service quality and
company customer orientation, customers are not merely satisfied but actually
delighted. In other words, the quality services that the customers receive and the fact
that the customers feel that they constitute the center of company processes are two
major enablers that enhance customer satisfaction. However, according to the results,
the quality practices of the top management team also contribute to customer
satisfaction. It seems that the customers, in their contact with the internal business
environment, notice in some way the quality initiatives of top management. This fact
also contributes to increased customer satisfaction. Finally, as far as the financial
outcomes are concerned, they mostly depend on the quality way the company manages
its human resources and on the degree to which its operational performance is
improved. So, it is surprising that, among the TQM factors revealed, only employee
quality management directly influences the financial benefits. This is in line with
the findings of Davis (2006), according to which, a service-profit chain revelation is
that organizations that wish to be successful in financial terms, should not, contrary
to common thinking, focus on profits. Instead, organizations should focus on the
enablers of profit known as business inputs: staff and the resources they require to do
their jobs.
From the above discussion it is apparent that some TQM factors are more
significant than others in improving a performance dimension of a service company.
Moreover, it is worth noting that each performance dimension (except for financial
performance) is affected by two out of the five TQM factors revealed, while only one
TQM factor seems to influence financial performance. The fact that the number of the
TQM factors that have a significant impact on each performance dimension is limited
to two factors, may help a service company concentrate its efforts on specific quality
initiatives in order to enhance the benefits derived from TQM implementation. This is
an issue that distinguishes the present study from similar studies in the service
business environment. Not only are specific categories of TQM practices revealed,
making the road to business excellence smoother, but also those TQM factors are
determined that contribute the most to the optimization of company performance.
 IJQRM The main TQM contributors to service company performance concern, according to
33,3 the present study findings, customers, employees and the top management team.
Similarly, Davis (2006) notes that any profit-driven company can realize considerable
financial benefits by implementing initiatives which strengthen the links in the service-
profit chain, meaning the links between employees and customers. Moreover, the
service-profit chain heightens the value of promoting cooperative efforts between
392 employees and employers (Lau, 2000). The importance of linking the top management
team, employees and customers in improving business results is also highlighted in the
study of Cheung and To (2010). By approaching frontline employees of local and
international banks of Macao (a Special Administrative Region of the People’s Republic
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of China) and their corresponding customers, Cheung and To (2010) confirm that
management commitment to service quality does not produce positive organizational
outcomes, unless it is linked with effective employee involvement in serving customers.
Similarly, Alidrisi and Mohamed (2012) and Yunis et al. (2013), state that the soft
elements of TQM concerning the human aspect significantly affect organizational
performance. The findings of the present study are in line with the respective findings
of the study of Talib et al. (2013) in Indian service companies. Even though both studies
concentrate on different TQM factors, they show their correlation with quality
performance. Talib et al. (2013), show that quality culture is perceived as the dominant
TQM factor influencing quality performance. Factors such as quality systems, training
and education, teamwork and benchmarking also show a positive relationship with
quality performance. The significant role of customer focus in formulating and
implementing a TQM approach and moreover in enhancing company performance
outcomes, as revealed in the present study, is also demonstrated in the study of Lam
et al. (2012) in the Malaysian service industry. In other words, they support the market/
customer orientation of a service company implementing TQM and the influence of
customer focus on service quality improvement.

Conclusions
A review of the literature reveals a gap with regard to TQM implementation in the
services sector and more specifically with regard to the impact of TQM on company
performance outcomes. Based on this gap, many researchers suggest continuing to
study on a longitudinal basis the performance areas which are actually affected by
TQM practices. This stimulated the authors of the present study to focus on this
research area. The service companies operating in northern Spain which are mature in
quality management practices constitute a suitable research sample by which to decode
the TQM concept and to determine specific TQM factors that influence performance
dimensions. In doing so, the present study contributes to the literature.
The main components that formulate the TQM model and significantly influence
service company performance are those concerning the human aspect of not only the
internal but the external business environment. Employees, the top management team
and customers seem to be the center of the total quality approach and the means by which
performance benefits are derived. In other words, the TQM model the service companies
adopt is based on employees’ education, knowledge and management, customer
orientation and the quality initiatives of top management. These specific TQM factors
influence service company performance dimensions the most. It is worth noting that each
performance dimension examined is influenced by a limited number of TQM factors. More
specifically, operational performance, product/service quality and customer satisfaction
are affected only by two out of the five TQM factors revealed, while financial performance
 is affected by only one TQM factor. So, in order for a service company to maximize its Impact of TQM
performance outcomes from TQM implementation, it needs to focus only on two TQM on service
factors at most. This finding makes the road to business excellence smooth and
sustainable and enhances the contribution and the value of the present study.
company
performance
Practical implications
Based on the present study findings, significant practical implications are revealed. 393
The fact that the TQM concept is decoded yielding specific components (TQM factors)
makes a service company’s understanding of TQM clear and its efforts to establish
a TQM approach more robust. Moreover, by determining the significant relationships
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among the TQM factors and performance dimensions, it is apparent what a service
company should specifically focus on in order to improve its performance outcomes from
TQM. The fact that specific performance dimensions are significantly influenced by
a limited number of TQM factors, further helps a service company to concentrate more on
those TQM factors that enhance company performance the most. The need of a service
company to survive in the current global scenario that is characterized by an economic
downturn enhances the value of the practical implications of the present study.

Limitations and future research recommendations

The present study has some limitations. So, the findings should be carefully considered
when generalizing. The small research sample of the service companies does not allow
the application of more advanced statistical techniques such as structural equation
modeling. The fact that the sample companies belong to different services sub-sectors
and operate in a part of a European country limits the generalizability of the present
study findings. Furthermore, it is worth noting that the data do not constitute objective
but subjective business evidence collected from the quality managers. In order to
delimit these study’s characteristics, future research studies should be carried out
worldwide. This could help to confirm the present study’s findings in the services
sector. It is also strongly suggested that the TQM model (comprising of TQM factors
and benefits) developed through the present study be validated in all business sectors.
This can be achieved through testing the goodness of fit of the suggested model to
empirical data from specific services and manufacturing sub-sectors. In doing so, the
generalizability of the TQM model would be enhanced. Identifying the differences
between the ISO 9001 certified companies and the non-certified with regard to adopting
the TQM factors and achieving the respective results, is also a future research direction.

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About the authors

Dr Evangelos L. Psomas is a Lecturer of Total Quality Management in the Department of
Business Administration of Food and Agricultural Enterprises at the University of Patras.
He received a PhD in Total Quality Management at the University of Ioannina, Greece, in
2008. He has dealt with issues of management and marketing and has worked as a Teaching
Assistant at the University of Ioannina and Technological Educational Institute of Epirus.
His research interests include: total quality management, quality assurance, food safety
management, human resource management, supply chain management, agribusiness and food
marketing. Dr Evangelos L. Psomas is the corresponding author and can be contacted at:
epsomas@cc.uoi.gr
Dr Carmen Jaca is a Researcher and a Lecturer of Quality Management, Business
Administration and Operations Management at Tecnun, Engineering School, University of
Navarra, Spain. She holds an MSc Degree in Industrial Engineering and received her PhD in
Industrial Engineering from the University of Navarra. She works as a Researcher in the
Management Department, collaborating in projects related with continuous improvement, lean
and quality. She has been worked in different industrial metallurgical companies as a Quality
Manager during more than ten years. During this period, she was also involved in different tasks
related with environmental and safety management. She is collaborating with Volkswagen
Navarra as an Auditor of its ISO 9001 quality system.

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