TOTAL QUALITY ENVIRONMENTAL MANAGEMENT: A STUDY OF THE

RELATIONSHIP BETWEEN QUALITY PRACTICES AND

ENVIRONMENTAL PERFORMANCE OF THE

STANDARD AND POOR 500 COMPANIES

DISSERTATION

Presented to the Graduate Council of tbe

University of North Texas in Partial

Fulfillment of the Requirements

For the Degree of

DOCTOR OF PHILOSOPHY

By

Sharynn Musick Tomlin, B.B .A . , M.B.A,

Denton, Texas

August, 1996

Tomlin, Sharynn Musick, Total Quality Management: A

study of the Relationship between Quality Practices and

Environmental Performance of the Standard and Poor 500

Companies. Doctor of Philosophy (Management), August, 1996.

Corporations facing escalating consumer demand for

higher product quality and foreign competitive threats, are

exploring additional approaches to improve their quality

practices. Simultaneously, increased global concern for the

environment, coupled with tougher environmental laws, have

forced organizations to recognize their ecological

responsibility. As organizations address both of these

dimensions, more effective ecomanagement (Stead & Stead,

1992; 1994) or total quality environmental management (TQEM)

practices are being sought.

Although some research has centered on ecological

issues and how they influence management decisions and

strategies (Buchholz, et al., 1992; Hoffman, et al., 1990;

Post, 1991), the body of literature is still being

developed. As Shrivastava (1995) indicates, research in

"how environments influence organizations, and how

organizations can procure, exploit, or compete for

resources" remains nebulous. Though the realm of quality

literature is better defined than the realm of ecomanagement

literature, the merging of the two dimensions is becoming

more prevalent.

Total quality environmental management provides a

framework for environmental management (Council on

Environmental Quality, 1993; Shrivastava & Hart, 1992) and

is recognized as a means of improving compliance and

reducing waste and pollution (IRRC, 1995). Though current

literature implies that a relationship exists between a

company's quality and environmental practices, research

revealed no empirical studies substantiating the

correlation.

This dissertation is devoted to both the quality

practices and the environmental performance of the Standard

& Poor 500 companies to determine if any relationship

existed. A literature search revealed eight factors

commonly used to measure organizational quality practices.

These factors were used to measure quality practices in the

respondent companies. The hypotheses formulated proposed

that a positive relationship existed between each of the

quality factors and two determinants of environmental

performance: emissions efficiency and compliance.

The Standard and Poor 500 companies were surveyed to

determine quality practices and correlated with the two

environmental indices provided by the Investor's

Responsibility Research Center (IRRC). Results suggested

that while there appeared to be a positive relationship

between compliance and certain quality factors, no positive

relationship existed between emissions efficiency and any of

the eight quality factors.

This study will contribute to the growing research on

the two issues of quality and the natural environment.

Future research should identify an overall measure of

organizational quality and determine if any ecological

relationships exist.

TOTAL QUALITY ENVIRONMENTAL MANAGEMENT: A STUDY OF THE

RELATIONSHIP BETWEEN QUALITY PRACTICES AND

ENVIRONMENTAL PERFORMANCE OF THE

STANDARD AND POOR 500 COMPANIES

DISSERTATION

Presented to the Graduate Council of tbe

University of North Texas in Partial

Fulfillment of the Requirements

For the Degree of

DOCTOR OF PHILOSOPHY

By

Sharynn Musick Tomlin, B.B .A . , M.B.A,

Denton, Texas

August, 1996

Copyright by

Sharynn Musick Tomlin

1996

i n

ACKNOWLEDGEMENTS

I would like to extend a sincere thank you to many

people who were involved in this endeavor. First, and

foremost, to Dr. Rose Knotts, scholar, mentor, and good

friend, without whose help this would not have been

possible. Second, to the members of my committee, Dr. Alan

Kvanli, Dr. Charles Bimmerle, and Dr. Steve Cobb whose

patience and faith was so important. Third, to other

friends and colleagues for their support. Lastly to my

family, Stuart, Les and Rebecca whose understanding was ever

present and will always remain the "wind beneath my wings."

IV

TABLE OP CONTENTS

CHAPTER 1 - INTRODUCTION 1 Definitions 9 Statement of Problem 10 Significance of Problem 12 Chapter Summary 17

CHAPTER 2 - LITERATURE REVIEW 18 Quality Defined 18 Strategic Importance of Quality 20 Evolution of Quality Philosophies 26 Quality Frameworks 29 Management Commitment to Quality 32 Role of the Quality Department 39 Training 43 Product Design .46 Supplier Quality 49 Process Management 53 Quality Data and Reporting 56 Employee Involvement 59 The State of the Environment 66 The Forces of Change 67 Environmental Emissions 71 Environmental Compliance 73 TQEM Frameworks 76

Quality Environmental Management (QEM) . . . . 76 Global Environmental Initiative (GEMI) . . . . 77

Results of TQEM 79 Measuring TQEM 81 Theoretical Model 85 Model Variables and Hypotheses 88 Chapter Summary 9 6

CHAPTER 3 - METHOD 97 Research Process 97 Sample and Instrument Selection 98 Instrument for Quality Practices 100

Reliability 101 Validity 102

Data Used for Environmental Performance 103 Design and Procedure 107 Statistical Power 109 Chapter Summary 112

CHAPTER 4 - DATA ANALYSIS AND RESULTS 113 Respondent Characteristics 113 Contextual Results 114 Demographics 115

Data Analysis 116 Hypotheses Related to Emissions Efficiency . . . . 118 Hypotheses Related to Compliance 119

Hypotheses 4, 6 & 14 119 Hypotheses 2, 8, 10, 12 & 16 120

Chapter Summary 123

CHAPTER 5 - DISCUSSION OF RESULTS 124 Discussion of Hypotheses 124 Hypotheses Related to Emissions Efficiency . . . . 124 Hypotheses Related to Compliance 126 Management Commitment and Compliance (H2) . . . . 127 Product/Service Design and Compliance (H8) . . . . 129 Supplier Quality and Compliance (H10) 130 Process Management and Compliance (H12) 131 Employee Relations and Compliance (H16) 132 Results Inconsistencies 132 Research Limitations 133

Construct Validity 134 Statistical Conclusion Validity 135 Rival Hypotheses 136

Contributions to Current Knowledge 136 Future Research 139 Chapter Summary 143

APPENDIX A APPENDIX B APPENDIX C APPENDIX D LIST OF REFERENCES 156

LIST OF FIGURES

Figure 2.1 - Relationship of Relative Quality on ROS and

ROI 24

Figure 2.2 - Deming Chain Reaction Theory 28

Figure 2.3 - Quality Department Organizational Chart . . 40

Figure 2.4 - Hybrid Quality Department 42

Figure 2.5 - Training-Benefit Cycle 44

Figure 2.6 - Process Redesign 55

Figure 2.7 - Escalation in Cost of Errors Down the Production Line 58

Figure 2.8 - A Model for Total Quality Environmental Management 86

Figure 3.1 - Correlation Research Process . . 98

LIST OP TABLES

Table l.l - Perspectives of Ecological Transformation in Industry 4

Table 2.1 - Effect of Market Share and Product Quality

on Return on Investment (ROI) 25

Table 2.2 - Evolution of Quality 27

Table 2.3 - Trends in Supplier Relationships 52

Table 2.4 - Traditional/TQM Approaches to Employee

Involvement €2

Table 2.5 - Summary of Literature Review 64

Table 2.6 - Measures of Environmental Results 82

Table 2.7 - Selected TQEM Measurement Systems 84

Table 3.1 - Reliability Coefficients for Critical Quality

Factors 102

Table 3.2 - Summary of Hypotheses and Statistical Tests ill

Table 4.1 - Summary of Contextual Factors 115

Table 4.2 - Respondent Profile 116

Table 4.3 - Descriptive Statistics and Intercorrelations 117

Table 4.4 - correlations Between Quality Factors and Emission Efficiency 119

Table 4.5 - Correlations Between Quality Factors and Compliance 121

Table 4.6 - Results of Hypotheses Tested . . . . . . . 122

CHAPTER 1

INTRODUCTION

Of the global management issues faced in the last

decade, few have caused as much concern as quality in

products and services. Vocal consumer demands for higher

product quality and foreign competitive threats have

persuaded firms to seek improvements, opposed to reliance on

protectionist measures, to shield their domestic markets.

Equally important, is the increasing concern for the

environment. Environmental resurgence swept through

boardrooms and was ignited by public demands and

governmental regulation. Environmental neglect has been

replaced by a new era of ecological awareness and induced

organizations to find a balance between economic and

eicological well-being to achieve sustainable growth.

Companies are seeking new strategies to address both issues.

Scholars recognizing the demise of American quality,

have presented a stark synopsis of the American competitive

position and warn businesses that they must make radical

quality changes if they hope to survive in the world

marketplace (Grayson and O'Dell, 1988; Thurow, 1987;

Milbergs, 1987). Grayson and O'Dell (1988; p. 80) predict

2

that America can become the "beneficiary of this new era of

global competition" only if it learns to use its assets more

effectively. Low quality inputs of capital, labor, manage-

ment, and labor-management relations were cited as the

culprits causing the decline of American quality. The

question "Can foreign firms compete with American quality"

becomes, "Can American firms compete with higher quality

foreign products?"

Rising competitive forces coupled with rising trade

deficits have forced American companies to improve product

quality and service. A 1988 study of U.S. based companies

identified quality as a necessary determinant of competi-

tiveness (Morrison, 1990) and a three year study of 596

manufacturing businesses found that almost every U.S.

manufacturer considered its ability to offer consistent

quality to be of the highest competitive importance (Ferdows

et al., 1986).

At the same time, organizations have been forced to

recognize their environmental responsibility as the world

appears to be consuming renewal resources faster than they

are replaced. Many organizations have recognized that

ecological problems cannot be understood in isolation.

These problems are interconnected and interdependent, and

require a new type of systemic, or ecological thinking to be

comprehended (Lutz, 1990). Callenback et al. (1993; p. 125)

believes this new thinking must be accompanied by "a shift

3

in values from expansion to conservation, from quantity to

quality, from domination to partnership." This transforma-

tion may change the basic economic foundations as known

today. Lutz (1992) proposed perspectives of ecological

change as shown in Table 1.1 as a means of envisioning how

industry might evolve. The ecological transition from an

industrial society necessitates a change from a hierarchi-

cally, environmentally reactive, economically oriented

mindset to an organic, proactive, environmentally oriented

means of sustainable development. Lutz (1992) identified

the organizational components, such as strategic structure,

processes, hierarchies, social groups, laws, life cycles,

€itc., that will be affected in this transformation. In each

of the three phases, he posits how these components change

to become more efficient through improved organizational

p>r act ices. He questions earlier irresponsible industrial

practices that produced pollution. In the second and third

phases, he outlines improved practices which can lead to

sound ecomanagement. Organizations that engage in programs

of ecomanagement will eventually witness a transformation of

industrial priorities based on sustainability, rather than

exponential growth (Callenback et al., 1993). Consumers,

government and industry are seeking ecologically sound

products, performance and practices that will not merely

satisfy, but proactively address the natural environment.

It is with this thought in mind that this study is written.

TABLE 1.1

PERSPECTIVES OF ECOLOGICAL TRANSFORMATION IN INDUSTRY

INDUSTRIAL SOCIETY SUPERINDUSTRIAL SOCIETY

POSTINDUSTRIAL SOCIETY

Patriarchal, hierarchic top-down structures

Change and break of roles, hierarchy confl icts

Flexible, network-1 ike models, functional leadership, synergism

Growth eqphoria Growth Un i t s Principle of sustainability

Quantitative f ix ing "Qualitative" growth Integrative growth

Environmental pol lut ion Environmental laws Environmental restoration

Consumption of nature Environmental compatibil ity tests

Creation of ecological systems

Exploitation of of raw materials

Recycling, savings Ar t i f i c ia l "natural products"

Refuse/waste problems "Intell igent11 closed systems

Nature-integrative processes

Material basic att i tude Saturation, stagnation

Postaaterial orientation

Proletarianization De-proletar1anlzat1on Cosmopolitan perspective

Formation of classes . Pluralism, confet t i society

Virtual communities

Social laws Welfare state Basic securing

Product orientation Experience orientation Insight orientation

Mechanistic models Cybernetic models Systemic nodeIs

Linear Idea of tUae Time fractions f I t x i b i U rat ion

Parallel time structure

Ter r i to r ia l expansion Globalization, planetariam

Worldwide regionalIzation

Source: lu tz , <"unleh: Bom Aktuell, 1992). Quoted in Emeat Callerback a t « l , I f f f l n n t f l m t , CCA: Mrrett-Koeliler Publishers, 1995.)

5

Responding to this challenge, the International Chamber

of Commerce (ICC) developed a Business Charter for

Sustainable Development that addresses issues such as

policy setting, systems and procedures, implementation, and

reporting. Today, more than 1,000 companies worldwide have

adopted the Charter with the goal of developing environ-

mental goals. Other initiatives, such as the U.S. Chemical

industry's Responsible Care program, are also getting more

attention in the movement toward environmentcil stewardship

(Thayer, 1992).

The trend toward corporate environmentalism may be

strongest overseas, where the European Community has called

for the establishment of voluntary environmental performance

programs throughout Western Europe. Like the ICC Business

Charter, the regulation would require benchmark environ-

mental audits and corporate efforts to raise environmental

standards above compliance level (Environment Today. 1992).

Historically, multinational corporations have been

viewed as part of the environmental problem in developing

countries. Within the last decade international pressures,

domestic pressures, and economic globalizations have

provided the impetus for improving environmental compliance

(Long, 1991; Greeno and Robinson, 1992? Wescott, 1992).

With the development of international standards for

environmental management, quality organizations are breaking

new ground. The International Standards Organization (ISO)

6

has established a taskforce to develop an environmental

standard that will be heavily based on the British Standard

Institute's environmental management standard, BS7750. On

March 23, 1993, a voluntary EC environmental management and

audit regulation was adopted to promote continuous improve-

ment in industrial environmental performance (Chynoweth and

Kirschner, 1993). Likewise, the U. S. American National

Standards Institute has also embarked on the development of

an environmental standard.

Central to the trade and environmental interaction is

the debate about what role the General Agreement on Tariffs

and Trade (GATT) should undertake. Though GATT is confront-

ing trade and environmental issues, it is on an "as needed"

basis with little consensus. Multinational organizations

addressed this issue at the 1991 Second World Industry

Conference on environmental management. The U. S. Council

for International Business believes that GATT's major

contribution to sustainable development can be achieved by

strengthening its ability to act as a "multilateral

discipline" that allows and encourages national

implementation of environmental policies (Gavin, 1992;

Sills, 1992) .

Additionally, the North American Free Trade Agreement

(NAFTA) has made significant inroads into harmonizing

bilateral environmental and trade issues. If NAFTA is

successful in bridging the environmental gap, it may serve

7

as the example of how industrialized countries can give less

developed countries assistance in taking control of their

own resources and moving their countries to produce less

pollution (Sills, 1992). Environmental degradation is

increasingly recognized as one of the most serious and

ubiquitous problems facing mankind. The absence of the

proper management of our precious resources, namely air,

waterways, the sea and land, is diminishing the capacity of

the environment to perform the indispensable service upon

which the quality and survival of human life is dependant

(Freeman et al., 1973).

Strong global competition, governmental intervention,

and public opinion have forced businesses to reassess both

issues. Strategic reevaluation has discovered there may be

a strong relationship between quality and environmental

performance and has given rise to a new strategic paradigm

called total quality environmental management (TQEM) (Clair,

Milliman and Mitroff, 1994; and Friedman, 1992).

While theorists believe that a logical and positive

association exists between quality and ecological

performance, few studies have examined the issue. Scholars

such as Stead and Stead (1994) and Godfrey (1993) have

questioned what factors are most critical to TQEM. Others

have noted that successful implementation of TQEM will

require significant organizational change to integrate both

quality and ecological practices (Bleakley, 1993; Milliman

8

and Clair, 1994; Post and Altman, 1992; Stead et al., 1992,

1994; Wells et al., 1992). While the literature on

organizational development and change is rich with research

to support such a reformation (Lewin, 1951; Goodman et al.,

1980; Daft, 1982; Miller and Friesen, 1984; Quinn, 1985;

Robbins, 1983, 1987, 1990; 1993), the relationship between

quality practices and environmental performance must first

be established. The purpose of this study is to explore

empirically the correlation of quality practices and

environmental performance and suggest its applicability as a

model for integrating the two fields.

This developing topic is replete with new terminology.

The following list of definitions should be used to clarify

and address existing and new terms used throughout this

study.

Definitions

Compliance - adhering to governmental laws and regulations regarding the impact of business on the natural environment.

Ecomanagement - a systemic view of how organizations should be operated to preserve the natural environment.

Emissions - includes a multitude of terms; waste, source pollution, pollutants and toxic emissions. Although total elimination is an admirable goal, achievement is not likely.

Environment - anything that surrounds or encompasses something else. Management literature often explains the term contextual environment (competition, political/legal, economy, technology), but for the purposes of this study, it will be used to refer to the natural environment, unless otherwise stated.

Environmental management - the process of planning, organizing, leading and controlling factors which affect the natural environment. The term ecomanagement is used is the more current academic literature, while environmental management is the preferred term in practitioner literature.

Environmental performance - is rated based on the decrease of toxic emissions and the compliance with governmental regulations.

Natural environment - the surrounding biophysical or natural environment of which humans and other living and nonliving entities are a part.

Sustainable competitiveness - similar to the term sustainable development, but used on the micro level as a means of attaining organizational effectiveness through ecologically safe behavior.

Sustainable development - a term popularized in an international report on the environment, Our Common Future. Defined as the process through which economic systems can meet existing human wants without destroying the resources future generations will need to meet their wants.

10

Statement of Problem

Institutional ecomanagement is rapidly developing

throughout the world. Total quality management (TQM) has

evolved to total quality environmental management (TQEM).

TQEM integrates environmental aspects of business with total

quality and blends environmental management into the

corporate business strategy. The compatibility of these two

concepts is evidenced by a recent study of 15 chemical

companies regarding management practices and environmental

risk (Winn & Roome, 1993). The study found that: (l)

economics (cost savings) drive environmental actions, (2)

companies with positive environmental records possess top

management commitment, written company environmental

policies, and statistical measurement and control systems,

and (3) facility audits which focus on continuous

improvement rather than rigorous inspection. These findings

reflect the basic precepts of TQEM.

If companies expect to achieve sustainable

competitiveness, they must improve quality. At; the same

time, environmentally responsible behavior requires

decreased wastes and compliance with stringent governmental

regulation. This paradox has prompted organizations to seek

new sustainable strategies. Specific to this study, the

problem remains how to measure quality, environmental

peiformance, and the association of the two issues.

11

In this study the relationship of effective quality

practices and environmental performance will be examined.

In general, the research question becomes: is there

correlation between quality practices and environmental

performance. More specifically, do companies that implement

quality practices experience lower toxic emissions and

higher compliance?

12

Significance of Problem

Organizations are learning that their ecological

management practices (ecomanagement) can have a large, often

enduring impact on corporate performance. In a recent

survey investors ranked environmental liability as the

highest priority item in making investment decisions

(GEMI/IRRC, 1992). Additionally, consumers are becoming

more environmentally conscious and demanding more socially

responsible products, such as recycled or green products.

Though the high costs of environmental compliance can

be substantial, non-compliance can be even costlier. For

example, the Superfund Act, as passed and later amended,

establishes the protocol for handling environmentally

hazardous situations. Liability imposed by the Act is

retroactive without limit, and company-owned contaminated

sites can be held accountable for 50 years. Potential

pollution liabilities may induce governmental scrutiny of

company balance sheets. The Environmental Protection Agency

(EPA) currently sends the Securities and Exchange Commission

(SEC) a list of companies with potential Superfund

liabilities. Securities reporting and information services,

such as Moody's Investors Service, require even more

stringent company information concerning environmental

compliance that could affect securities ratings (Bloom and

Morton, 1991). While significant, Superfund does not

consider air and liquid wastes attributed to routine

13

industrial operations. This type of pollution is only now

being addressed with pending legislation.

Businesses reap three basic benefits from TQEM: (1) an

alignment with business strategy, (2) measurable continuous

improvement, and (3) a customer and supplier alignment

(GEMI, 1991). First, total quality practices applied to

environmental management can become part of a company's

strategy: the same tools and strategy that apply to

production, sales, and distribution are applied to

environmental management. Second, the basis of total

quality is continuous improvement based on fundamental data-

based understanding of every process. Total quality

provides an understandable and documented guide to

environmental management. Third, alignment between

suppliers, customers and company, in concert with continuous

improvement, can foster environmental excellence. This

synergy could create a more efficient company committed to

providing environmentally sound products and services. As

Friedman (1992) recapitulated, a commitment to quality, both

in the production process and environment, is essential for

firms today.

One fact has emerged in the environmental era,

companies that reduce environmental damage invariably rank

among the best managed and highest quality organizations in

the world (Cairncross, 1993). In 1980, Xerox established

its commitment to the environment by creating a corporate

14

environmental health and safety department. This

environmental commitment resulted in Xerox Business Products

and Systems winning the 1989 Malcolm Baldrige National

Quality Award.

Arm & Hammer's commitment to the environment began at

the turn of the century when the company advocated using

recyclable packaging. In the late 1960's, sales of Arm &

Hammer skyrocketed when the company elected to manufacture

and market nonphosphate detergents. Today, the company's

detergent product is its biggest seller, and is number two

in the U.S. marketplace (Thomlison, 1992).

Dupont's TQEM program is evidenced by the company's

development of a "state-of-the-art" tetrahydrofuran plant in

Spain. It is expected that new technologies employed in the

plant will cut organic compound emissions by 99 percent.

While TQEM costs are not always easy to identify, Allied-

Signal has witnessed lowered costs "because accidents cost

money." The company has claimed a 10 percent annual

reduction in environmental incidents and a 50 to 60 percent

decrease in hazardous waste (Kirschner, 1992).

Other examples of companies that are applying TQM

practices to their environmental programs include Eastman

Kodak and 3M. Eastman Kodak has been able to eliminate more

than 500,000 pounds of waste material resulting in

substantial cost savings. At 3M, emissions to air, water,

and land was reduced by one billion pounds, saving about

15

$480 million in wasted materials and pollution control costs

(Willums & Goluke, 1992).

Cross fertilization of environmental and quality

programs has resulted in environmental leadership that

represents the application of TQEM principles. This cross

pollination is moving TQEM to a level of strategic planning

importance. First, TQM has enabled communication of

environmental management issues to top management in a less

technically oriented language. Second, TQM has demonstrated

to environmental management the importance of a customer

focus through cost savings and revenue increases. If the

trend continues, the environment could be managed as a

profit center. Lent and Wells (1992, p. 20) warn "This is

impossible until cost and revenue-related outcomes of

environmental performance are measured and linked."

Additionally, company alliances are forming to address

the issue of quality and the environment. One such

organization, Global Environmental Management Initiative

(GEMI), teaches organizations how to protect the environment

by using sound quality practices. GEMI is an alliance of

companies, mostly multinationals, formed in 1989 from a

group of 200 Business Roundtable CEOs. Today, GEMI includes

24 member companies and strives to make companies aware that

good environmental management and TQM contribute to

profitability.

16

The environment will become more of a dominant

corporate issue as the market and regulations become more

sophisticated. In a 1990 survey of major industrial

corporations, Deloitte & Touche found that 45 companies

surveyed saw the strategic importance of environmental

issues as critical. In addition to regulation, emerging

markets for environmental product quality, competitive

pressure, and global change remain strong driving forces.

17

Chanter Summary

Growing concern in both the domestic and global

marketplace has forced organizations to reconsider their

once ambivalent approach to issues of quality and the

natural environment. This chapter cited numerous examples

of how various companies are acknowledging their

responsibility to both issues. While the impact of

declining product quality certainly has been recognized and

casually addressed, businesses have been slow to adopt

environmentally sound principles of management. Research

has identified a need for empirical studies determining what

factors impact both issues and how the process of

integration can best be achieved. Organizations are

searching for a new way to effectively manage the

environment. Effective ecomanagement should consider the

integration of quality and environmental performance (TQEM).

The purpose of this paper is to determine if companies that

have implemented TQM practices in their respective

organizations experience higher levels of environmental

performance. The following chapter will review the quality

and environmental literature separately and search for any

applicable frameworks to integrate the two subjects.

CHAPTER 2

LITERATURE REVIEW

This chapter will examine the literature from two broad

and diverse subjects. First the literature on quality will

be reviewed to determine a common definition, strategic

relevance, and chronological progression of the quality

field. The remainder of the quality review is organized

according to the quality dimensions (factors) most

representative in the literature and exemplified in the

Saraph (1989) study. Each quality practice was assessed

from both the theoretical and application perspective.

Second, the chapter presents the environmental literature to

ascertain the current state and importance of the ecological

performance of organizations. Third, examination will

identify any commonalities in the two fields and suggest a

framework for the research.

Quality Defined

The subject of quality is an issue of much interest

today and the search for a correct definition has been

somewhat elusive. According to Reeves and Bednar (1994)

terms as value (Abbott, 1955; Feigenbaum, 1951), conformance

to specifications (Gilmore, 1974; Levitt, 1972), conformance

18

19

to requirements or zero defects (Crosby, 1979), fitness for

use (Juran, 1974, 1988), and customer satisfaction

(Gronroos, 1983; Parasuraman et al., 1985). While each has

its own strengths and weaknesses, the definition of choice

is situational.

After many years of study, a standard definition of

quality was adopted by the American Society for Quality

Control and the American National Standards Institute. It

is defined as follows: "Quality: the totality of features

and characteristics of a product or service that bear on its

ability to satisfy stated or implied needs" (ANSI/ASQC,

1987). In a broader sense, the word "quality" is often

considered as a degree of excellence whereby products or

services may be ranked against others on a relative basis

for selected features and characteristics.

Garvin (1987) suggested a conceptual scheme of quality

in terms of manageable components or dimensions such as: (1)

performance - a product's primary operating characteristic,

(2) features - supplements to a product's basic functioning

characteristics, (3) reliability - a probability of not

malfunctioning in a specific time period, (4) conformance -

the degree to which a product's design and operating

characteristics meet established standards, (5) durability

-a measure of product life, (6) serviceability - the speed

and ease of repair, (7) aesthetics - how a product looks,

20

feels, tastes, and smells, and (8) perceived quality - as

seen by the customer.

After careful examination of the various definitions,

Groocock (1986) determined that quality is best defined as:

...the degree of conformance of all the relevant features and characteristics of the product to all of the aspects of a customer's need, limited by the price and delivery he or she will accept.

One facet reoccurs in many of the definitions: the

customer must define quality. The problems of correctly

identifying customers' perceptions of quality often result

in organizations inferring what customers expect during

product design (Reeves and Bednar, 1994).

Strategic Importance of Quality

Recent strategic management literature has witnessed a

transition from less dependence on external industry factors

to internal, firm-specific factors (Powell, 1995; Cool and

Schendel, 1988). According to Hart and Banbury (1994) and

Powell (1995) competitive factors such as culture (Barney,

1968; Fiol, 1991), organizational processes and capabilities

(Chakravarthy and Doz, 1992; Lawless et al., 1989; Senge,

1990; Stalk et al., 1992; Ulrich and Lake, 1990; Womack et

al., 1990), technological knowledge (Hall, 1992); and

learning (Garvin, 1993; Senge, 1990; Yukl; 1990) represent

only a few of the "within strategic group" factors (Cool and

Schendel, 1988).

21

During the same time, many prominent U.S. companies

have confirmed that quality has immense strategic value in

today's world marketplace. A 1987 Gallup poll indicated

that executives viewed quality improvement as the most

critical issues facing companies over the next few years

(Skrzycki, 1987). Success requires attention to quality-

related implications in the strategic decisions made by an

organization, and its integration into the overall company

strategy (Dean and Bowen, 1994).

Strategic planning is the long-term determination of

business policy and includes every organizational function.

Each functional area has an impact on quality; therefore,

quality is believed to be one of the most important issues

in strategic planning (Juran, 1989). A strategic focus on

quality will "generate growth, provide a competitive

advantage, and contribute to a firm's profitability" (Evans

& Lindsay, 1993). Recent findings revealed that 65 percent

of companies have adopted quality as a major goal and 80

percent of the Fortune 1,000 firms have activated quality

programs (American Society for Training and Development,

1991; Lawler et al., 1992).

In a study of 30 companies known to practice TQM,

results revealed: (1) flatter organizations with larger

spans of control, (2) increases in cross-functional problem-

solving teams, (3) decreases in size, as measured by the

number of employees, and increases measured by revenues, (4)

22

emphasis on group incentives, rather than individual

rewards, (5) more participative planning by lower level

employees, and (6) less rigid organizational boundaries

(Becker et al., 1994). Such change leads to a competitive

advantage unequaled by companies with less strategic focus

on quality issues (Belohlav, 1993). Several quality

advocates such as Schonberger (1992) have suggested that the

issue is more significant than strategy, "...(total quality)

can effectively govern much of what conventionally required

executive-level strategic planning" (Dean and Bowen, 1994).

For the past decade, Michael Porter has written

numerous books (1980, 1985, 1990) dealing with competitive

strategies. In his works, he emphasizes the problem of

declining product quality and its impact on America's

worldwide competitive position. Porter's analysis includes

the post-war history of the U.S., Japan, Sweden,

Switzerland, West Germany, Italy, South Korea, and Great

Britain and notes the deteriorating American position is

partly attributable to poor product quality.

The Japanese experience with quality and their

dominance in several world markets has caused major

industrialized nations to carefully re-examine their

worldwide quality standing. Although the Japanese

experience provides a striking example of the strategic

importance of quality, the evidence is somewhat

circumstantial. The PIMS results yield a clear picture of

23

strategic importance of quality. The Strategic Planning

Institute of Cambridge, Massachusetts found that in

researching business successes and failures, the effect of

relative quality influences return on investment, return on

sales and market share. Figure 2.1 shows the effect of

relative quality on return on investment (ROI) and return on

sales (ROS). It shows that businesses with superior quality

(in the top quintile) get an average ROI of 32 percent and

ROS of 13 percent. Businesses in the inferior quality

quintile have an average ROI of 12 percent and a ROS of 5

percent (Buzzell and Gale, 1987). Quantitatively, this

information expresses the same concept presented from the

Japanese experience; superior quality is a key parameter for

business prosperity.

24

FIGURE 2.1

RELATIONSHIP OF RELATIVE QUALITY ON ROS AND ROI

SOURCE: Buzzell, Robert D. and Bradley T. Gale. The PIMS Principles: Linking Strategy to Performance. (New York: The Free Press, 1987): p. 107.

Additionally, the PIMS results also suggest the

importance of relative quality and relative market share on

return on investments. Market share is often more widely

accepted as a gauge of business success. The PIMS data base

allows a comparison of both key factors and Table 2.1 shows

the results: relative quality has about the same weight as

market share in determining profitability. Regardless of

market share, quality can positively affect ROI.

It should also be noted that the validity of the PIMS

results should be scrutinized as there remains some question

as to the accuracy of the results. First, problems exist

25

regarding the PIMS methodology. Critics point out that the

businesses' quality assessments were reported by their own

managers, which provides questionable and possibly biased

data on the relative quality of their products. Another

objection to the PIMS methodology was that no precise

definition of quality and the methods used to measure it

were given. Additionally, with all cross-sectional results,

correlations between parameters can be shown, but cause-and-

effect relationships can only be inferred (Groocock, 1986).

TABLE 2.1

Effect of Market Share and Product Quality on Return on Investment (ROI)

RETURN ON INVESTMENT

Market Share Inferior Quality Average Quality Superior Quality

Under 12% 4.5% 10.4% 17 , .4% 12-26% 11.0 18.1 18, .1 Over 26% 19.5 21.9 28, .3

SOURCE: Schoeffler, Sidney, Robert D. Buzzell, and Donald F. Heany. "Impact of Strategic Planning on Profit Performance," Harvard Business Review (March-April, 1974): p. 41.

While the role of quality in strategy is clear, the

implementation of the strategies is not as well defined. As

noted by Dean and Bowen (1994) while strategy theorists have

not ignored the topic of implementation (Bourgeois and Brod-

win, 1984; Floyd and Wooldridge, 1992; Guth and Macmillan,

1986; Hrebeniak and Joyce, 1984; Skivington and Daft, 1991),

strategic processes improvement is somewhat lackluster.

26

Evolution of Quality Philosophies

Quality issues surfaced in factories that developed

following the Industrial Revolution. Production principles

and practices were non-standardized which resulted in vast

differences in both product standards and quality. Around

the turn of the century, Frederick Taylor developed his

system of scientific management that stressed productivity,

often at the expense of quality. Most quality issues

focused on the inspection stage after production, and top

management viewed quality as an additional cost, not as an

essential part of the product design. Following the second

world war, competitive conditions forced the United States

to assess their product quality and a number of pioneers

began exploring methodologies, theories and practical

techniques to improve quality. Table 2.2 summarizes the

characteristics of each evolutionary stage of quality. The

characteristics show a change in philosophy from quality as

an isolated activity to a systematic and functionally

inclusive process.

27

TABLE 2.2

EVOLUTION OF QUALITY

CHARACTERISTIC INSPECTION STATISTICAL QUALITY ASSURANCE

Primary concern Detection Control Coordination

View of quality Problems to be solved (reactive) Proactive problem solving

Emphasis Product uniformity Reduced inspection Entire production process, functional groups focus on failure prevention

Methods Gauging and measurement

Statistical tools and techniques

Programs and systems

Role of quality department Inspection,

sorting and grading

Troubleshooting and statistical methods

Qua Ii ty measurement, planning and design

AccountabiIity Inspection dept. Manufacturing and engineering

All departments, with top management involved

Orientation "inspects in" "controls in" "builds in"

SOURCE: Garvin, David. "History and Evolution of the Quality Movement," in Harry Costin, Readings Total Quality Management (Ft. Worth, TX: Dryden Press, 1994): p. 41.

The first documentation of the quality movement began

with the publication of Economic Control of Quality of

Manufactured Products by Walter Shewhart (1931). Shewhart

attempted to quantify scientifically the economic control of

quality by establishing limits at each production stage to

determine undesirable product quality variations.

Prediction of this variation was the key idea in Shewhart's

definition of control:

A phenomenon will be said to be controlled when, through the use of past experience, we can predict, at least within limits, how the phenomenon may be expected to vary in the future (1931).

28

The production process was considered in "statistical

control" when the output was determined only by common

causes. While Shewhart considered only the issue of quality

control in the production process, the importance of quality

soon evolved into a broader concept.

While Shewhart first introduced W. Edwards Deming to

statistical quality control in the 1930s, Deming's work

evolved into a distinct philosophy of how to measure,

manage, and improve quality. Deming claimed that higher

quality led to higher productivity, and in turn, long-term

competitive strength. The Deming chain reaction (Figure

2.2) theory illustrates this relationship.

FIGURE 2.2

DEMING CHAIN REACTION THEORY

Improve quality > Decrease costs >

Improve productivity---> Increase market share >

Stay in business > Provide more jobs

Deming's "14 Points" (Appendix A) suggest an all-or-

nothing system for achieving quality excellence (1990).

This holistic management philosophy gave birth to TQM.

Deming believed in systemically considering every

interaction between the various elements of the

organization. With this definition Ross (1993) identified

"subsystems" which included all the organization functions

29

in the life cycle of a product, such as design, planning,

production, distribution, and service, and suggested its

integration with the strategy, tools of quality, and

employee involvement.

Quality Frameworks

As the issue of quality has moved from the production

floor to strategic status, many models have been suggested

to integrate all organizational functions in achievement of

quality. Most of these frameworks, commonly referred to as

TQM, have suggested similar organizational elements where

quality activities/practices should be stressed. For

example, the Malcolm Baldrige criteria evaluate quality

practices in an organization based on: (1) executive

leadership, (2) management of process quality, (3)

information and analysis, (4) strategic quality planning,

(5) human resource development and management, (6) quality

and operation results, and (7) customer focus and

satisfaction. Others such as Crosby, 1980; Feigenbaum,

1982; Kathawala, 1989; Juran, 1986; Shetty, 1986; 1988 and

Taguchi, 1990 also suggested similar TQM characteristics.

The Malcolm Baldrige Award was established in 1987

after the 1983 White House Conference on Productivity

recommended the establishment of an award similar to the

Japan's Deming Prize. Its purpose is to stimulate quality

improvement in American products and services, to recognize

those companies that strive for improvement, to establish

30

quality guidelines and criteria, and to provide information

to American businesses on how to improve quality as

practiced by the winning enterprises. As a self-assessment

tool, the award provides companies with an objective

evaluation of their quality programs and helps managers

understand the difference between excellence and mediocrity.

The award was never intended to be a measure of the overall

health of a company. It does not measures financial

performance, innovation, long-term planning or environmental

issues that are all vital for prosperity in the coming

decade (Evans and Lindsay, 1993).

The Federal Quality Institute award parallels the

Baldrige Award and provides governmental entities a means to

benchmark progress in quality. The awards are based on

evaluative factors: (1) top management leadership and

support, (2) strategic planning, (3) customer focus, (4)

employee training and recognition, (5) employee involvement

and teamwork, (6) measurement and analysis, (7) quality

assurance, and (8) quality and productivity improvement.

A number of scholars have recently identified similar

evaluative approaches. Dean and Bowen (1994) used

leadership, information, human resources management

(employee involvement), training, strategic focus, process

management and customer satisfaction as quality dimensions.

Spencer (1994) focused on the importance of management

leadership, employee involvement, process design and

31

supplier as quality components. Additionally, Anderson et

al. (1994) identified leadership, internal cooperation from

employees, external cooperation from suppliers, process

management, continuous improvement and customer satisfaction

as necessary elements of quality management. Furthermore,

in a research study of automated manufacturing technology,

just-in-time and total quality, Snell and Dean (1994)

measured total quality by using statements to determine

management commitment, supplier quality, information,

strategy, process management, employee involvement and

empowerment, and training. In a 1995 study, Powell reviewed

the relevance of TQM as a competitive advantage and used

executive commitment, quality philosophy, customer

requirements, supplier relationships, benchmarking, training

organizational design, employee empowerment, zero-defects,

flexible manufacturing, process improvement and measurement

as quality factors.

After extensive review of the current research, Saraph

et al. (1989) found eight categories of quality factors: (1)

top management leadership - participation of top management

in quality improvement efforts and realization of

quality/cost relationship, (2) role of quality department -

coordination between quality departments and other

functional areas of the organization, (3) training -

provisions for quality-related training for all employees,

(4) product/service design - total involvement of all

32

departments in product redesign and clarity of specifica-

tions, (5) supplier quality management - supplier/customer

interdependence with fewer suppliers, and involvement in the

quality processes of the organization, (6) process

management - clear process design with greater emphasis on

statistical control and less reliance on inspection after

the process, (7) quality data and reporting - measurement

and evaluation of quality, and (8) employee relations -

active employee participation in quality-related decisions

and commensurate incentives.

Further review found ample research on each individual

factor of quality from both traditional management theory

and the burgeoning field of quality management. As these

eight elements appear to represent most of the TQM litera-

ture, each factor is reviewed to determine its applicability

as a component of quality.

Management Commitment to Quality

Quality depends on the correct combination of

leadership style, subordinate characteristics and situation

(Evans and Lindsay, 1993). Though numerous leadership

theories have been proposed to explain different management

styles and characteristics (Bennis and Nanus, 1985; Fiedler,

1967; 1976; House and Dessler, 1974; Hotter, 1990;

Mintzberg," 1989; Stogdill, 1959; Tannenbaum and Schmidt,

1958; Vroom and Yetton, 1973), Scholtes (1988) identified

leadership characteristics specific to quality management.

33

Many researchers have identified the importance of

management commitment to quality (Sheety, 1993/1994;

Waldman, 1993) and noted its similarity to transformational

leadership theory (Bass, 1985; Burns, 1978; Tichy and

Devanna, 1986; Ulrich, 1984). The role of leadership in

the quality implementation process is debated by theorists

and researchers. Leadership seeks to influence behaviors in

a way that inspires improvement (Senge, 1990; Yukl, 1989).

While transactional leadership, stressing contingent

reinforcement theory, has been extensively explored (House

and Mitchell, 1974; Locke, Latham and Erez, 1988; Podsakoff

et al., 1982), others (Deming, 1986; Walton, 1986) have

cautiously noted its overreliance on short-term perspectives

(Waldman, 1994). Consistent with the organismic model of

organizations (Beer, 1981; Burns and Stalker, 1961),

visionary leadership encourages transformation (change) to

realign strategies with the environment (Tushman and

Romanelli, 1985; 1986). Transformational leadership

espouses self-efficacy by involvement in the process of

improvement (Bass, 1985; Eden, 1984; Gist, 1987) and as

Scholtes (1988) noted, "empathetic, facilitative leadership

behavior is essential to ensure persistent efforts"

(Waldman, 1994). Research has shown positive effects on

subordinates' and performance resulting from

transformational leadership (House, 1977; Conger and

Kanungo, 1987; Bass, 1985).

34

Waldman (1994) noted that TQM scholars have likewise

supported similar leadership styles (Deming, 1986; Juran,

1989; Sashkin and Kiser, 1993). Deming (1982) believed that

constancy of purpose serves as a means to intrinsically

motivate employees by creating joy, pride, happiness and

learning for all employees. Leadership, knowledge,

statistical methodologies, understanding and correcting

sources of variation, and continuous quality improvements

are the basis for Deming's philosophy. While the "14

Points" describe the transformation process needed to create

a quality organization, it is the workers that make it a

reality (Bowles and Hammond, 1991). Deming (1982) stressed

top management responsibility for quality improvement and

radical new management practices, such as eliminating

numerical goals and quotas (Point 11), removing barriers to

pride of work (Point 12) and driving out fear (Point 8).

Juran (1974) proposed a change in quality thinking that

included all levels of the managerial hierarchy. While

Deming speaks of quality in terms of statistics, Juran

speaks of quality in the language of dollars, and stresses

both the management and technical aspects of quality

management (1981a; 1981b). Juran focuses on three major

quality processes, called the "quality trilogy": quality

planning preparing to meet quality goals, quality

control meeting quality goals during operations, and

quality improvement achieving new levels of performance

35

(1970; 1986). Juran supports his philosophy with numerous

comparative cases of Japanese and American companies using

the same technology, materials, processes, etc., but with

Japanese companies far surpassing their American

counterparts due to the quality improvements utilized at

their respective companies (1981). While many facets of

Juran's work are similar to Demings', the focus on top

management commitment, need for improvement, use of quality

control, and training are common to both philosophies (Evans

and Lindsay, 1993).

Feigenbaum (1951; 1986) stated that thriving companies

have balanced their strategies and economic environment by

recognizing the powerful leverage between customer

satisfaction and low costs. He noted that the more

successful quality programs are characterized by

"systemically institutionalized" quality leadership, and

"customer-oriented" quality processes that best utilize the

human resources of knowledge, skill and attitude of the

employees. The Japanese adopted Feigenbaum's concept and

renamed it "company-wide quality control." In doing so, the

Japanese have been able to compete effectively in the world

marketplace. Juran (1988) and Reiker (1983) both noted that

Japanese companies emphasize total quality control at every

level within the company so that strategic objectives are

better implemented, and specifically cited total commitment

to quality issues by top management. Regardless of how

36

Japan's quality achievement is defined, their dominance in

the marketplace is unquestionable. Ross (1986; 1992) also

suggests that companies must envision quality as the "weapon

for the future" and to elicit first the total commitment of

leadership. Similarly, Crosby (1979) proposed that quality

is a deliberate management action, and is well known for his

people-oriented approach to quality management. In direct

contrast to Deming and Juran, Crosby believes that the

cultural and behavioral aspects of high quality should be

rewarded and places more emphasis on management and

organizational processes in changing behaviors than

statistical techniques. Crosby's outline for effective

quality management is detailed in his 14 step "zero-defect"

program (Appendix A). Unlike Juran and Deming, Crosby

advocates a behavioral approach which is based on corporate

cultural change implemented by management and organizational

processes.

Leonard and Sasser (1982) suggested utilizing "levers"

to improve quality management. They proposed that top

management support quality as a strategic issue, identify

quality components, and involve everyone in the organization

in quality related issues. Additionally, they stressed

measurement of quality, employee training and managers with

a commitment to organizational quality (Saraph, 1989).

There are numerous examples of organizations with

strong quality management. In a study of Toyota Motor

37

Company, Mondon (1982) examined the company efforts of

quality management. Specifically, he cited the company's

systematic integration of quality throughout the company,

quality professionals, supplier involvement, process re-

engineering, top management involvement and timely, but

tested new product development. Peters and Waterman (1982)

found that the best managed and most profitable companies

emphasized product and service quality. Their research

found that companies such as Hewlett-Packard, IBM, Marriott,

Procter & Gamble, Johnson & Johnson, Maytag, Merck, and Walt

Disney who stress quality invariably rank in the top of

their respective industries. Rankings were based on

financial criteria such as compound asset growth, compound

equity growth, average ratio of market value to book value,

average return on capital, average return on equity, and

average return on sales.

David Garvin (1987) recognized a recent shift in top

management perspectives. CEOs were linking quality with

profitability and relating it with the strategic planning

process. To achieve quality objectives, companies are

making an organization-wide commitment to quality that ties

quality control to other basic business objectives.

Organizations such as Hewlett-Packard, Xerox and Corning

Glass are excellent examples of companies that have linked

quality with organizational strategies (Garvin, 1988).

38

Goddard (1988) also advocated quality as a strategic

business tool and the improvement process as a permanent

part of the corporate culture. He supported the need for top

management commitment to quality by setting and enforcing

high quality standards; sharing responsibilities, goals and

problems through team building, empowerment, and incentives;

customer orientation through effective communication,

training and research of employees for a better

understanding of customer needs; and involvement of

suppliers progressively seeking higher standards of quality,

service and support.

Recent research has suggested that although the visible

commitment of management positively affects the success of

TQM, managers often face difficulties delegating

responsibilities to lower organizational levels (Hunter and

Beaumont, 1993). Sheety (1993/1994) submitted that managers

must be able to deal with the transformational change.

Whether the TQM transformation is incremental (Quinn,

1985) or quantum (Miller and Friesen, 1984), most management

literature has underscored the significance of management

leadership in times of organizational evolution (Hofer,

1980; Mintzberg, 1989, 1991; Starbuck et al., 1978; and

Tushman et al., 1986). While organization theory suggests

that radical change may encounter significant barriers

(Gersick, 1991; Hannan and Freeman, 1984), it is the role of

leadership to act as the initiator of change during the TQM

39

transformation. Research has shown that transformational,

radical change requires acceptance (Dewar and Dutton, 1986)

and sustained support (Ettlie et al., 1984) by top

management (Dixon et al., 1994).

Role of the Quality Department

Organizational structures serve as a design to manage

the composition of people and tasks required for an

organization to achieve its objectives (March and Simon,

1958; Thompson, 1967; Scott, 1987). Much has been written

concerning dimensions of structure (Khandwalla, 1977;

Lawrence and Lorsch, 1967; Pugh, Hickson, Hinings and

Turner, 1968, Child, 1972; Mintzberg, 1979; Walker and

Lorsch, 1968) and its relationship to various company

practices. Central to this discussion of the quality

department was a review of the literature concerning

organizational design or more specifically, departmentation.

The role of the quality department has undergone a

radical transformation since the early days of quality

assurance. The traditional departamention grouping of the

quality function has evolved from a mechanistic design to a

more fluid, flexible design. Feigenbaum (1983) developed a

structure including the quality department and suggested

minimum supervisor levels, broad spans of control and

alignment. Evans and Lindsay (1992; p. 189), expanding on

Feigenbaum's work developed an organizational chart

depicting the staff function of quality assurance

40

departments (Figure 2.3). A structural design with the

quality department being given the same level of importance

as other functional departments, once again reinforces the

strategic relevance of quality.

FIGURE 2.3

Quality Department Organizational Chart

CMExtcutttft Otfac*

Zny of Quality Assurance

~7

u i v

1 , - ~ 4 - — V V P of Quality V P of VP of * VP of

Assurance Operations Maftebng fnance

i—i—i i—i—i Other Other

—marfcat ing financial operations

\ N

v \

\

Manager ofQuaWy Control Y

Une Operations Managers

Y=L Staff

Operations Managers

\ \

rx' i i i i i •

Quality Engneenng Supervisor

IN Quality

Improvement Supervieor

i r

inspection Supervisor

i r

Incorwng Materials and

Tearing Supervisor

r Engineers, Technicians. and Specialists

Sow fcnes show formal authority reJatortsfxps Dotted lines show semrformaf advisory relations*-**.

Source: Reprinted by permission of Evans, James R. and William M. Lindsay, The Management and Control of Quality (Mn: West Publishing, 1993).

The organizational structure appears to follow the

traditional matrix design, showing cross-functional lines of

authority and teams (Ford and Randolph, 1992). Matrix

organizations have been widely used in quality-focused firms

(Ivancevich et al., 1994) and are applicable when

41

coordination is needed in complex and uncertain environments

(Lawrence, Kododny and Davis, 1977), and individual growth

and development is stressed (Starr, 1992).

A new genre of organizational designs appears to be

emerging. Multidivisional structures are characterized as

partially interdependent operating units, creative, high-

performance, and balanced in the vertical differentiation

continuum (Ouchi, 1987). Network organizations stress the

relational benefits between manufacturers, buyer, suppliers

and customers (Bush and Frohman, 1991; Kilman, 1990; Snow,

Miles and Coleman, 1992). Similar designs emphasizing

information technology (virtual structure) as the

integrating mechanism (Byrne, Brandt and Port, 1993), or

hubs supported by a network of suppliers, or modular design

(Tully, 1993), have been suggested as an appropriate design

for quality-centered organizations (Ivancevich et al.,

1994). Research has suggested that quality organizational

structures should allow employees to coordinate activities

without restrictions (Grant et al., 1994) and has

reconceptualized the structure as a "cluster organization"

(Mills, 1991). Other scholars have depicted the structure

as a horizontal design (Grant et al., 1994; Jacob, 1995) or

"spider web" (Ivancevich et al., 1994) with functional

specialists coordinating information and activities. The

quality department acting as the functional specialist could

then be diagramed as shown in Figure 2.4.

42

FIGURE 2.4

Hybrid Quality Department

Manufacturing Research

Quality Department

Suppliers Human Resources

Today, the quality department is viewed as both a

source, coordinator and dissimenator of information and as

such can influence top management (Floyd and Woodridge,

1992). As Crosby (1994) notes in his assessment of

organization, structure and quality, a system of information

processing is necessary to facilitate integration of the

three. It is suggested that the quality department would

act as the organizing unit for information regarding quality

issues, and as such is considered organizational capital

(Prescott and Visscher, 1980; Tomer, 1987; Lado and Wilson,

1994).

The quality department must maintain a highly visible

role to serve as an credible advocate and initiator of the

TQM change process. This trend changes the nature of the

43

quality professional needed in organizations. Though top

management commitment in the quality process cannot be

overstressed, it is the responsibility of the quality

professionals to operationalize TQM principles in their

organizations. They have learned to question sacred

assumptions and develop new and better ways to work.

Quality professionals are best suited to directing these

changes within the organization as they are familiar with

the process of paradigmatic change (Grant et al., 1994).

Training

Training can be defined as a planned learning

experience designed to bring about permanent change in an

individual's knowledge, attitudes, or skills (Campbell,

Dunnette, Lawler and Weick, 1970). During the TQM

transformation process, a supportive environment will

facilitate the training process (Bahn, 1973, Facteau et al.,

1995; Marx, 1982; Salinger, 1973), expedite learning,

behavior change (Tannenbaum et al., 1991) and job

improvements (Noe and Schmitt, 1986), and move the

organization toward systemic implementation. A report by

the M.I.T. Commission on Industrial Productivity noted that

the decline in U.S. productivity can be partly attributable

to the lack of workforce education and training (Berger et

al., 1989). The relationship between training and

productivity has been indirectly inferred from research

correlating training and wages (Brown, 1989; Lillard and

44

Tan, 1986; Lynch, 1992), and more directly approached in

recent studies (Bartel, 1994). While scholars have debated

the effectiveness of directed training programs (Baldwin,

and Ford, 1988; Campbell, 1971; Georgenson, 1982; Noe, 1986;

Wexley, 1984; Wexley and Baldwin, 1986), research has shown

a positive relationship between high levels of employee

training and productivity (MacDuffie and Kochan, 1991).

Training is a continuous cycle (Figure 2.5): increasing the

knowledge and skills of the employees, prepares the employee

to accept change (Steudel and Desruelle, 1992), changes

result in improved productivity and market share that

eventually affects future training efforts.

FIGURE 2.5

Training - Benefit Cycle

Training

Larger Market Change Acceptance Share

Improved / Productivity

Gharajedaghi and Ackoff (1984) noted that an emphasis

on learning through the development of all organizational

members is paramount (Spencer, 1994). Learning, has been

defined by a number of scholars (Anderson et al., 1994;

45

Argyris, 1977; Argyris and Schon, 1974; Fiol and Lyles,

1985; Huber, 1991; Levitt and March, 1988; and Stata, 1989),

and can be summarized as the organizational capability to

recognize and nurture the development of its skills, and

abilities through information, knowledge and experience, and

training. Recent research has noted that learning ensures

organizational survival (Garvin, 1993; Hayes et al., 1988;

Nonaka, 1991; Senge, 1990). Recent studies have noted the

compatibility of organizational learning and Deming's

philosophy (Brown and Duguid, 1991).

In the changing organizational environment, training

programs must be effectively designed and implemented. More

specifically, Snell and Dean (1992) found that integrated

systems (AMT, JIT and TQ) require greater "technical,

conceptual, analytical, and problem-solving skills than

older manufacturing methods (Helfgott, 1988; Kern and

Schumann, 1990; Schmenner, 1988; Wilkinson, 1983) and

represents a trend toward "upskilling" of workers through

comprehensive training (Kern and Schumann, 1990; Mortimer,

1985; Zuboff, 1988). Firms stressing comprehensive training

experienced more success with TQM systems (Lado and Wilson,

1994). Concurrently, Breeden (1992) and Gantner (1992)

found a lack of training in quality practices and

environmental education was one of the biggest

implementation obstacles.

46

The need for training is paramount for TQM and appears

to have the greatest impact when combined with other

practices such as measurement and reward systems (Benson,

1992). According to a 1991 study conducted by the

Conference Board, top companies typically address the

following quality topics in training: quality awareness,

measurement, process management, team building and quality

circles, customer needs, and statistical process control.

Researchers such as Deming (1982), Crosby (1979) and Juran

(1986) agreed that training is seminal to quality

improvement.

Feigenbaum (1951; 1986) suggested training as the best

means of institutionalizing total quality practices.

Ishikawa (1985), much like Feigenbaum, proposed total

quality control, implemented through extensive training and

the use of technical tools to track quality progress.

Ishikawa (1985) recognized two important concepts. First,

he noted the importance of customer focused quality, and

second, the need to integrate quality concepts in every

organizational function. He appears to have fused the major

issues presented by Deming, Juran and Feigenbaum and is

recognized worldwide as a major contributor to the field.

Product Design

Schumpeter (1934; 1942) noted in early studies that

innovation and entrepreneurship are the foundcition of

capitalism and emphasized that firms should produce new

47

products and services that fulfill customer needs (Lado and

Wilson, 1994). Concurrently, Barney (1986), Rumelt (1987),

Nelson (1991) and Nelson and Winter (1982) proposed that

firms who best fulfill these needs will survive. Superior

product design (quality) provides firms with an enviable

market position and customers are more willing to pay for

quality (Buzzell and Gale, 1987; Morrison, 1990; Phillips et

al., 1983; Reitsperger et al., 1993). Theories on dominant

orientation (Porter, 1980) and competitive preference

(Skinner, 1969; Wheelwright, 1984) consider product design a

strategic issue (Kim et al., 1992).

Fine (1986) referred to product design quality as the

features and other attributes that enhance the consumer's

utility (Ghose and Mukhopadhyay, 1993). Juran (1981)

speaks of "fitness for use," while Deming (1986) and Crosby

(1979) stress the need to comprehend customer needs in

product design. While the literature defining the interface

between design and customer requirements is plentiful

(Craig, and Hart, 1992; Crawford, 1984; Gupta and Wilemon,

1990; Hauser and Clausing, 1988; Pugh, 1990; Smith and

Reinertse, 1991; Urban and von Hippel, 1988; von Hippel,

1988), product design also has implications for process

management. Improving product design reduces variation and

detects quality problems during the design phase, rather

than in manufacturing, or also referred to as design for

manufacturability. While the customer expects a product or

48

service that best meets his/her needs, rarely are they

concerned with a company's process, training or corporate

culture.

Intense global competition now requires continuous

improvement in product design quality. The complexity and

proliferation of many products makes this a difficult task.

Juran and Gryna (1980) distinguished the differences between

traditional and complex (modern) products and the new

approaches to quality required for each. Additionally, they

considered other issues of design such as the relationship

of design to cost and manufacturability, and product

liability. Other scholars such as Daetz (1987) and Priest

(1988) gave clear guidelines for the product design

improvement process.

Researchers have underscored the importance that

departments play in the design process (Ghose and

Mukhopadhyay, 1993; Steudel and Desruelle, 1992). One means

for achieving functional cohesion in the design phase has

been through concurrent engineering. Concurrent engineering

is a process involving all major functions of an

organization working together to move a product from

conception to commercialization (Evans and Lindsay, 1993).

Additionally, multifunctional teams help to remove

organizational barriers between departments and reduce

product development time. Other cohesion methods, such as

parallel processing, explore the benefits of

49

intraorganizational and interorganizational integration of

core competencies, particularly in the product design

process (Clark, 1989; Schonberger, 1990; Taylor, 1993).

Global competition has also affected the product design

element. Organizations hoping to effectively compete must

adhere to rigid standards in product design known as the ISO

9000 standards. The ISO 9000 is a series of quality

assurance guidelines developed in 1987 by the International

Organization for Standardization and is gaining worldwide

acceptance. Today, 89 countries accept the ISO 9000 (Pitts,

1992), and over 25,000 European companies are certified

(Quality Alert Institute, 1992). North America lags with

only 400 company ISO certifications (Burrows, 1992), and

Canada trailing with only 200 certified companies (Pitts,

1992; Eckstein and Balakrishnan, 1993). Organizations

failing to recognize global quality standards encounter

marketing difficulty in the world marketplace, while those

stressing certification gain faster acceptance (Morrison,

1990).

Supplier Quality

Historically, customer-supplier relationships have been

more adversarial than cooperative (Tenner and DeToro, 1992).

Long-term, collaborative relationships with suppliers are

contrary to traditional U.S. practice (Lyons et al., 1990;

Helper, 1991; Cusumano and Takeishi, 1991) and formally were

thought to expose the buyer to opportunistic suppliers

50

(Ricardson, 1993; Williamson, 1988). Research has

documented the power-dependence relationship (Blau, 1964;

Crozier, 1964; Emerson, 1962; Hickson et al.f 1971; Pfeffer

and Salancik, 1978; Provan et al., 1980; and Skinner et al.,

1987) as an explanation of the adversarial relationship.

Organization-supplier relationships are elucidated by a

number of organizational theories (Anderson et al., 1994;

Dean and Evans, 1994). The resource dependence perspective

(RDP) (Pfeffer and Salanick, 1978) stresses the mutual, yet

external, emphasis on the external sources (suppliers).

This is a major departure from the TQM philosophy as

supplier/buyer relationships are considered mutually

beneficial, while, from the RDP perspective are an issue of

control. The ecology viewpoint submits that survival is

achieved through collaboration (Benson, 1975; Morgan, 1986).

From the economic perspective, transaction cost theory

suggests organization/supplier arrangements are based on the

lowest cost (Donaldson, 1990; Walker and Poppo, 1991;

Williamson, 1985).

Numerous researchers believe that companies should

establish the same productive relationships with suppliers

as they do with customers. Studies have illustrated the

benefits accruing from cooperative arrangements (Bradach and

Eccles, 1989; Frey and Schlosser, 1993; Hahn, Kim and Kim,

1986; Lascelles and Dale, 1989). These collaborative, long-

term relationships have been referred to as relational

51

contracts (MacNeil, 1980) and bilateral or hybrid governance

structures (Williamson, 1985; 1991). Provan and Gassen-

heimer (1994) said that relational contracting/exchange

provided organizational theorists an opportunity to examine

resource-based dependencies and power. Skinner et al.,

(1987) noted the need for reduced power structures with

long-term arrangements.

Deming (1989) perceived the supplier relcttionship as an

extension of the teamwork principle, a recognition of each

member's needs, and sole sourcing to minimize total costs

(transaction costs). Juran (1989) contrasted the two

relationships (Table 2.3) and stressed the importance of

collaboration.

52

TABLE 2.3

TRENDS IN SUPPLIER RELATIONSHIPS

ELEMENT ADVERSARY CONCEPT TEAMWORK CONCEPT

Number of suppliers Multiple Few; often single

Duration of contracts Annual 3+ years

Quality criteria Conformance to specs Fitness for use

Survey emphasis Procedures, data systems

Process capability; quality improvements

Quality planning Separate Joint

Collaboration Guarded disclosure Mutual trust; assistance

SOURCE: Adapted from Juran, J. M. Juran on Leadership for Quality: An Executive Handbook (New York: Macmillian, 1989) .

Juran suggests that organizations adopt a teamwork

approach to supplier management. He stressed fewer

suppliers, longer term commitments, quality based on fitness

for use, continuous improvement, and joint collaborative

decision making. Juran's summary of the collaborative

concept is a fair representation of the TQM philosophy

regarding supplier relationships. Richardson (1993) noted

further that supplier relationships were organizational

investments and included selection of suppliers based on

quality of inputs, training and technology transfer,

involvement of suppliers in process and product design, and

monitoring of supplier performance.

53

Process Management

The elements of process management include research and

development, statistical process control, and continuous

improvement. Concepts such as efficiency/flexibility (Hayes

and Wheelwright, 1979; 1984; Slack, 1983) and economies of

scale and scope (Cohen and Lee, 1985; Goldhar and Jelinek,

1983) are closely associated to process management.

A major impetus for process quality began shortly after

the Industrial Revolution when interchangeable parts and

specialization of labor required more attention to product

detail, and quality. Shewhart (1934) designed the first

version of statistical quality control to present

statistical tools for evaluating production and quality

improvement. According to Shewhart, process management was

achieved by using the "Plan-Do-Check-Act" cycle. In this

approach: (1) management identifies organizational goals

(plan), (2) identification and analysis of process variables

(do and check), and (3) correction, improvement and

evaluation of process (act). The process is then repeated

to pursue continuous improvement. This cycle is now closely

associated with Deming's philosophy of quality improvement.

For an elaboration of this approach see Moen and Nolan

(1987) .

While Deming advocates the comprehensive use of

statistics in controlling quality, statistical thinking is

only a portion of the modern Deming philosophy. The use of

54

systematic measurement as a means of quality assurance and

continuous improvement has been supported by most primary

contributors to the field (Deming, 1982, 1986; Juran, 1974;

Juran and Gyrna, 1980; Feigenbaum, 1951; Wadsworth et al.,

1986; Ishikawa, 1985; Taguchi, 1990). As noted by Anderson

et al. (1994) continuous improvement results from the

accumulated benefits resulting from deceases in

manufacturing costs and is supported by the literature on

learning curves (Cochran, 1968; Dutton et al., 1984; Muth,

1986; Wright, 1936; Yelle, 1979).

The concept of process management also has given rise

to a new stream of literature concerning reengineering and

benchmarking. Just as the positive association between the

basic elements of process management and quality have been

documented (Dondero, 1991; Oakland and Followell, 1990;

Rucinski, 1991; Sower, 1990), so have the improvements

accruing from process redesign or reengineering (Hammer and

Champy, 1993). Hammer (1990) defined reengineering as "the

use of modern information technology to radically redesign

business processes." While some have argued that

reengineering and continuous improvement may be at opposite

ends (Dixon et al., 1994), well-known quality scholars

envision them as compatible concepts, with the major

departure being that continuous improvement implies

incremental changes, whereas reengineering suggests a great

magnitude of process change. Based on the work of Professor

55

Asbjorn Aune of Norway (1991), the importance of process

redesign to quality improvement is depicted in Figure 2.6.

FIGURE 2.6

PROCESS REDESIGN

Resources

Customer

expectations Process

Product

service

Quality

Conformance to expectations

Source: Reprinted by permission of Evans, James R. and William M. Lindsay, The Management and Control of Quality (Mn: West Publishing, 1993).

Customer expectations demand attention to quality, and

thereby affect the process of transforming resources into a

product or service that conforms to their expectations. The

process becomes the link between customer product demands

and the product delivered.

Benchmarking is a means for improving competitive

performance by forcing documentation of the work process.

Kearns (1990) defined benchmarking as "the continuous

process of measuring products, services, and practices

against the toughest competitors or... industry leaders." A

firm strives to improve products and processes by

56

identifying the best-in-class practices or processes (Camp,

1989; Pryor, 1986; 1989; Tucker et al., 1987). As

demonstrated, process management, incremental improvement,

reengineering and benchmarking are well grounded in the TQM

change literature.

Quality Data and Reporting

Management theorists have accumulated an extensive

database devoted to the need for information and its impact

on organizational effectiveness (Daft and Weick, 1984;

Galbraith, 1977; Thomas et al., 1993). Relevant information

provides a competitive advantage to organizations over their

competitors (Porter, 1989; Porter and Miller, 1985;

Montanari et al., 1990). Data and reporting encompasses the

collection and use of information to improve quality and

customer satisfaction. The Malcolm Baldrige Award Criteria

labels it, "Decision making based on fact" (Dean and Bowen,

1994).

Research has shown that organizational performance

improves by providing goal and feedback information to

organizational members (Hackman and Oldham, 1980; Locke et

al., 1981) and is useful in employee behavior modification

(Daniel and Reithsperger, 1991) when properly disseminated

to employees, customers and suppliers (Tamuz and Sitkin,

1993; Sitkin et al., 1994). Scholars have documented the

positive effect of information on learning facilitation

(Ashford and Cummings, 1984; Banker et al., 1991; Ilgen et

57

al., 1979; Foster and Horngren, 1987). In a recent

conference Peter Drucker (1995) noted that organizations are

learning the redesign process of not only downsizing,

outsourcing, and reengineering, but fundamental changes in

how information is used.

Most TQM scholars have observed the importance of

quality and the communication of this informcttion throughout

the organization. Feigenbaum (1951) was the first to

develop a quality cost classification. He categorized costs

as: (1) prevention costs expended to prevent nonconforming

products from occurring, (2) appraisal costs expended on

maintaining quality through measurement and inspection, (3)

internal failure costs occurring and found prior to customer

delivery, and (4) external failure costs occurring after

delivery to customer. Experts contend that costs of

prevention, inspection and failure can equal 2 0 to 25

percent of operating costs in manufacturing organization,

and up to 30 percent in service organizations (Ross, 1993).

Using Feigenbaum's classification, analysts argue

quality and cost are inversely related. Poor conformance

can lead to large failure costs (Garvin, 1988). In general,

higher failure costs are incurred as the product approaches

completion. Richard Anderson of Hewlett-Packard, noted:

The earlier you detect and prevent a defect the more you can save...Indeed if a $5,000 computer has to be repair in the field, the expense may exceed the manufacturing cost (Main, 1980).

58

Cole (1983) illustrated this concept graphically in

Figure 2.7. According to General Electric Company data,

error costs rise in magnitude each step along the production

line. A simple error would cost $.003 if discover during

supplier inspection, in contrast, to $300.00 if found after

the product has reached the customer.

FIGURE 2.7

ESCALATION IN COST OF ERRORS DOWN THE PRODUCTION LINE

$300

$30

$3

$.03 $J0

$.003*

JL Sqaplfat fnrwnfru Pyhri im Subprodoct fospectka bopectkn Test Cost* Coab Component J1XC!m

UMO

*Eatfm*t«d oost p«r defect per product

Fiul Rsoduct TotCoak

Product Scrvloe Costs

SOURCE: Cole, Robert E. "How to Gain the Competitive Edge: Improving Product Quality Through Continuous Feedback.H Management Review (October, 1989): p. 10.

Traditional measurements of quality costs do not

include the impact of lost sales and market share due to

poor quality. As Dr. Deming acknowledges, these costs are

"unknown and unknowable," and it is reasonable to suspect

59

that they may actually exceed the traditional four

categories of quality costs (Ernest & Young, 1990). For

quality data and information to be utilized efficiently,

training and education of employees must be stressed.

Employee Involvement

Various theories have been proposed to interpret issues

of employee participation (Pateman, 1970; Strauss and

Rosenstein, 1970; Walker, 1974; Greenberg, 1975), the impact

on worker satisfaction (Cotton et al., 1988; Morse and

Reimer, 1956), group cohesion and commitment (Strauss, 1963;

Lowin, 1968; Lawler and Hackman, 1969), and productivity

(Coch and French, 1948; Morse and Reimer, 1956). The

business press has documented the benefits accruing to

participatory practices (Bernstein, 1993; Bluestone and

Bluestone, 1992; Hoerr, 1989; Katzenback and Smith, 1993;

Peterson, 1991). The efficacy of participation has been

highly debated in the management literature (Ferris and

Wagner, 1985; Locke and Schweiger, 1979; Schweiger and

Leana, 1986; Yukl, 1989) and still remains the subject of

much research (Wagner, 1994).

The TQM philosophy has altered the traditional

adversarial relationship between management and employees.

The controlled relationship has been replaced by mutual

trust, respect and accountability. The TQM approach to

employee involvement is similar to the organizational

behavior theories hypothesized by Argyris (1964), Likert

60

(1967) and McGregor (1960). Their theories are based on the

recognition of human resources and economic needs, and are

consistent with theories of work motivation, such as job

characteristics theory (Hackman and Oldham, 1980), acquired

needs theory (McClelland, 1971; McClelland and Boyatzis,

1982) and goal-setting theory (Locke, 1976). Human growth

and development theorists have argued that intrinsic

motivation resulting from job redesign strategies (autonomy,

job enrichment, employee-centered decision making and

participation) has generated higher organizational

commitment (Dachler and Wilpert, 1978), another TQM tenet.

Pasmore et al. (1982) predicted that quality, rather

than quantity, was the result of job autonomy and variety

(empowerment)(Dean and Bowen, 1994). A 1992 study found

that about 4 0 percent of U.S. corporations support employee

involvement through empowerment (Lawler et al., 1992).

Recent academic research has explored the effects of

empowerment (Conger and Kanungo, 1988; Thomas and Velthouse,

1990), including higher quality and customer satisfaction,

greater workforce satisfaction, and continuous improvement

(Lawler et al., 1992). Other research has documented that

employee involvement practices, such as power sharing,

knowledge, information and rewards, can produce higher

performance (Lawler, 1992; Ledford and Mohrman, 1993) and

possibly higher returns on sales and investment (Denison,

61

1990; Lawler, Mohrman and Ledford, 1992; Mitchell, Lewin and

Lawler, 1990).

Effective teams are critical for TQM implementation and

are a subset of the organizational behavior/social

psychology research of groups (Dean and Evans, 1994).

Organizational behaviorists have also studied specific

groups, such as self-managed teams, cross-functional teams,

and quality circles to determine their effect (Trist and

Bamforth, 1952; McCann and Galbraith, 1981). Quality

information processors such as quality councils and quality

action teams have demonstrated their ability to integrate

quality issues through cross functional means (Crosby, 1979;

Deming, 1982; Juran, 1986; Leonard & Sasser, 1982; Mondon,

1982) .

Numerous quality researchers have defended the

consequences of employee participation in the quality

process (Crosby, 1979; Deming, 1982; Garvin, 1984; Ishikawa,

1976; Juran, 1986; Ross, 1993). Some consider Ishikawa to

be the original mentor of employee participation and quality

circles (Saraph et al., 1989). O'Dell (1986) envisioned a

change in employee relations from traditional to TQM and

formulated the two diverse approaches in Table 2.4.

62

TABLE 2.4

TRADITIONAL/TQM APPROACHES TO EMPLOYEES

TQM APPROACH TRADITIONAL APPROACH

Philosophy Shared responsibiIi ty,commi tment Fair day's work

Objectives Increased quality, productivity Increased productivity

Focus Quality is primary, continuous improvement

Quality is secondary

Information Shared, open books Limited, shared on as needed basis

Employee Involvement

Extensive, cross functional, self-managed teams

Functionally defined

Educat i on and Training

Multiple skill training, SPC On-the job training

Source: Adapted from Carta O'Dell, "Sharing the Productivity Payoff." Productivity Brief 24. American Productivity arid Quality Center(Houston,Texas) in William B. Werther et al., Productivity Through People (St.Paulf MN: West Publishing, 1986: p. 336,

O'Dell showed that the traditional approach of mandated

work, emphasis of productivity over quality, lack of full

information, and myopic training, has been replaced with

shared responsibility, information, and education to stress

the importance of quality and improvement. Employee rela-

tions should demonstrate an open, communicative environment

that stresses education and participation with commitment at

every organizational level. TQM implementation needs the

cooperation of employees, and as scholars have demon-

strated, act as change enablers (Child, 1972; Kikulis et

al., 1995; Kotter and Schlesinger, 1979; Laughlin, 1991;

Starbuck et al., 1978). Internal collaboration between

employees and the organization creates environments condu-

cive to change (Shaw, 1958), and as stated by Anderson et

63

al., (1994) "superior achievement" (Johnson and Johnson,

1989).

Literature review shows ample research regarding the

eight quality factors. Management commitment, quality

departments, training, product/service design, process

management, data reporting and information, supplier quality

and employee relations as required elements of TQM have been

well documented from both the theoretical and application

perspective. A summary of the contributing scholars is

represented in Table 2.5. The next section will review the

environmental literature to determine the current

environmental practices, association with quality issues,

and integrative frameworks.

64

TABLE 2.5

SUMMARY OF TQM LITERATURE REVIEW

Quality Factor Theoretical Support Specific to Quality

Management Commitment

Bass (1985) Burns, 1978 Tichy & Devanna (1986) Ulrich (1984)

House & Mitchell (1974) Locke, et al. (1988) Podsakoff et al. (1982) Senge (1990) Tushman & Romanelli (1985)

Scholtes (1988)

Shetty (1993/1994) Daldman (1994) Deming (1982) Juran (1989) Sashkin & Kiser (1993 Feigenbaum (1951; 1986) Ross (1986; 1992) Leonard & Sasser (1982) Garvin (1987)

Quality Department

Training

Product Design

Supplier Quality

Ford & Randolph (1992) Lawrence et al. (1977) Ouchi (1987) Bush & Frohman (1991) Kilman (1990) Snow et at. (1992) Tully, (1993) Byrne, et al. (1993)

Brown (1989) Li Hard & Tan (1986) Lynch (1992) Bartel (1994) MacDuffie & Kochan (1991) Gharajedaghi & Ackoff (1984) Garvin (1993) Hayes et al. (1988) Nonaka (1991) Campbell et al. (1970) Bahn (1973) Facteau et at. (1995) Marx (1982) Salinger (1973) Tannenbaum et al. (1991) Noe & Schmitt (1986)

Schumpeter (1934; 1942) Barney (1986) Rumelt (1987) Nelson (1991) Nelson et at. (1982) Buzzell & Gale (1987) Morrison (1990) Phillips et al. (1983) Reitsperger et al. Porter (1980) Skinner (1969) Wheelwright (1984)

Tenner & DeToro (1992) Blau (1964) Crozier (1964) Emerson (1962) Hickson et al. (1971) Pfeffer & Salancik (1978) Provan et al. (1980, 1994) Skinner et al. (1987)

Feigenbaum (1983) Evan & Lindsay (1993) Ivancevich et at. (1994) Grant, et al. (1994) Mitts (1991) Jacob (1995) Crosby (1994)

Garvin (1993) Senge (1990) Snell & Dean, 1992 Helfgott, 1988 Kern & Schumann, 1990 Schmenner, 1988 Wilkinson, 1983 Mortimer, 1985 Zoboff, 1988 Lado & Wilson, 1994 Breeden, 1992 Gantner, 1992 Deming, 1982 Juran, 1986 Crosby, 1979 Feigenbaum, 1951, 1986 Steudel. & Desruelle, 1992 Ishikawa, 1990

Lado & Wilson, 1994 Deming, 1982 Juran, 1986 Crosby, 1979 Juran & Gryna, 1980 Daetz, 1987 Priest, 1988 Evans & Lindsay, 1993 Clark, 1989 Schonberger, 1990 Taylor, 1993

Chakravarty & Ghose, 1992

Deming, 1989 Juran, 1989 Richardson, 1993 Crosby, 1979

65

Process Management

Quality Data & Reporting

Employee Involvement

Benson <1975) Morgan (1986) Donaldson (1990) Walker & Poppo (1991) Williamson (1985, 1991) Bradach & Eccles (1989) Frey & Schlosser (1993) Hahn et ai. (1986) Lascelles & Dale (1989) MacNeil (1980)

Flyrin et al. (1993) Hayes & Wheelwright (1979; 1984) Slack (1983) Cohen & Lee (1985) Goldhar & Jelinek (1983) Cochran (1968) Dutton et al. (1984) Muth (1986) Wright (1936) Yelle (1979)

Daft & Weick (1984) Galbraith (1977) Thomas et al. (1993) Hackman & Oldham (1980) Locke et al. (1981) Daniel & Reithsperger (1991) Tamuz & Sitkin (1993) Sitkin (1994) Ashford & Cummings (1984) Ilgen et al. (1979) Foster & Horngren (1987)

Dachler & Wilpert (1978) Pateman (1970) Strauss & Rosenstein (1970) Walker (1974) Greenberg (1975) Cotton et al. (1988) Morse & Reimer (1956) Strauss (1963) Lowin (1968) Lawler & Hackman (1969) Bernstein (1993) Bluestone & Bluestone (1992) Hoerr (1989) Katzenback & Smith (1993) Peterson (1991) Argyris (1964) Likert (1967) McGregor (1960) Trist & Bamforth (1952) McCann & Galbraith (1981) Hackman & Oldham (1980) McClelland (1971) McClelland & Boyatzis (1982) Locke (1968)

Ross,, 1994 Shewhart, 1934 Anderson et al., 1994 Deming, 1982; 1986 Juran, 1974 Moen & Nolan, 1987 Dondero, 1991 Oakland & Followell, 1990 Rue i risk i, 1991 Sower, 1990 Hammer & Champy, 1993 Kearns, 1990

Dean & Bowen, 1994 Drucker, 1995 Feigenbaum, 1951 Deming, 1982; 1986 Juran, 1974 Crosby, 1979 Garvin, 1988 Ernest & Young, 1990 Banker et al. (1991)

Pasmore et al., 1982 Dean & Bowen, 1994 Lawler et al., 1992 Conger & Kanungo, 1988 Thomas & VeIthouse, 1990 Ledford & Mohrman, 1993 Denison, 1990 Mitchell, et al., 1990 Dean & Evans, 1994 Crosby, 1979 Deming, 1982 Juran, 1974; 1986 Leonard & Sasser, 1982 Mondon, 1982 Garvin, 1984 Ishikawa, 1976 Ross, 1993 O'Dell, 1986

66

The State of the Environment

In the recent decades, organizations have found

themselves faced with the consequences of their behavior and

accountable for their corporate social performance (Greening

and Gray, 1994). Stakeholders are now demanding corporate

stewardship in an ever expanding array of issues (Chase,

1977; 1984; Jones, 1983; Wartick and Rude, 1986).

Identifying current and future areas of social concern, such

as efficient use of resources in an environmentally

responsible manner (sustainable development), enables an

organization to determine the consequences of their actions

(Jones, 1983; Ansoff, 1980). Firms are beginning to examine

their organizational processes and policies to ascertain how

they should address certain social issues (Brown, 1979;

Chase, 1977; 1984; Ewing, 1987; Marcus and Irion, 1987; Post

et al., 1982; Wartick and Rude, 1986). Given the recent

proliferation of environmental actions that have produced

destructive results, organizations are seeking new processes

to improve their ecomanagement practices.

Scholars such as Barbour (1980), Buttell & Larson

(1980), Cotgrove (1982), Fox (1990), Marx (1970), McConnell

(1971), Naess (1989), O'Briant (1974), O'Riordan (1981),

Passmore (1980), and Rifkin (1983) have documented the

evolution of environmentalism (Milliman et al., 1994). Less

than 20 years ago, environmental issues were extraneous to

most Americans. Today, Americans are more aware of

67

environmental conditions and less ecologically myopic.

Public concern for pollution has led to a greater skepticism

about the competence of the scientific community and social

responsiveness of businesses to the environment.

Organizations are being compelled by regulatory, market and

social forces to adopt an ecophilosophy (Post and Altman,

1992; Stead and Stead, 1992; 1994). Post and Altman (1992;

1994) have proposed that organizational ecomanagement must

include a change in current environmental practices.

The Forces of Change

The environmental momentum is creating a global change

in the way business operates. This ecological awakening was

precipitated by a number of collaborating forces which

created an awareness of quality and environmental relation-

ships. Poor ecological performance, customer expectations,

new stakeholders, and emerging global standards are obliging

industry to scrutinize their environmental performance.

Governmental regulation and standards are exerting

industrial pressures to reduce environmental pollution 50

percent by the year 2000 (President's Commission on

Environmental Quality, 1993).

Past violations prompted environmental lobbyists and

public opinion to lobby for environmental legislation that

restricts business operations. The Environment Defense Fund

worked with the EPA to draft the Clean Air Act. The fund

responsible to funding pollution clean-ups, called Superfund

68

resulted in higher environmental spending. The EPA and

corporate polluters have spent $9 billion cleaning up 1,222

sites on the National Priority list. The Justice Department

is becoming more aggressive in pursuing environmental

polluters, returning 134 indictments for violations. More

than half of those convicted, were given prison sentences

and are serving jail sentences. The EPA collected $15

million from Texas Eastern, the largest penalty ever

assessed.

Sanctions for management are included in the

environmental legislation. CEOs face financial and personal

liability for corporate environmental violations (Chief

Executive. 1989). The threat of legal and financial

liability has prompted many boards to form active board-

level committees to monitor environmental conditions. For

example, DuPont has a board-level committee to administer

environmental policies and restructure its environmental

operating management closer to the company's business units

(Baker, 1993).

Because of public opinion and recent legislation,

organizations are realizing the impact of emerging and

surrogate stakeholders. These stakeholders include

employees, trade associations, environmental groups,

customers, the future generations, the world population and

the world biosphere (Deloitte and Touche, 1992). Emerging

69

stakeholders are becoming increasingly vocal in exacting

industrial environmental responsibility.

Customer expectations concerning industry and the

environment appears more pronounced than ever before. The

latest figures show that 14 percent of the American

population is actively involved with green organizations.

Public opinion is behind the activists (The Economist.

October 20, 1990). A 1989 survey reported 77 percent of

Americans said that a company environmental reputation

affected their purchase habits, 89 percent said they were

concerned about the environmental impact of products

purchased; and 78 percent said they were willing to pay more

for recyclable or biodegradable packaging (Rosendahl, 1990).

As governmental regulations become more stringent and

proactive, Winsemium and Guntram, (1992) believe that

companies should develop environmental initiatives that

satisfy three criteria: effectiveness (contributing to

improving the environment); efficiency (improving the

environment in the most cost efficient manner); and equity

(burden sharing and fairness). Consumers may not be so

altruistic. A recent McKinsey survey (1991) showed that

approximately one-half of the respondents felt a 50 percent

reduction was realistic. Many respondents expressed caution

about the impact on efficiency and equity and the company's

ability to pass increased costs to the market.

70

Organizations are faced with becoming environmentally

ware of their actions and strategically responsive (Ayres,

1989; Cairncross, 1991; Frosch and Gallopoulos; 1989;

Gladwin, 1993; Hooper and Rocca, 1991; Kiernan, 1992;

Kleiner, 1991; Post, 1991; Shrivastava, 1991; Stead and

Stead; 1992; Stokker, 1992; Throop et al., 1993; and

Wheeler, 1992). The concept of corporate environmental

management emerged in the 1970s as Congress required new

technological standards under the Clean Water Act and

subsequently added air and hazardous wastes under the

Resource Conservation and Recovery Act. The following years

were witness to the exponential growth of environmental

laws, resulting in massive economic and administrative

compliance. Organizations began to inclusively institute

environmental practices to reduce pollution and improve

compliance. Today, organizations are beginning to envision

environmental performance as a competitive advantage (Lent

and Well, 1992).

While the ecological consequences of unrestricted

operations are no longer tolerated, organizations must be

able to correctly identify, measure and correct potential

pollution problems. Currently few standards exist to

measure companies' environmental performance. Organizations

in the United States appear to be precariously balanced

between two realizations: one concerning scientific data

and technology relating to environmental degradation, and he

71

second concerning the legal and institutional solutions to

these problems (Rosenbaum, 1991). Summarily, emissions must

be controlled in order to preserve the biosphere, and

regulations controlling environmental actions must be

observed. Ecologically proactive organizations use multiple

measures to assess their environmental performance. Two

measures of environmental performance were utilized in

thistudy: emissions efficiency and compliance, and a

cursory review of each is presented.

Environmental Emissions

The coming decade will present three ecological issues

that will alter how businesses impact on the environment:

global climate warming, acid precipitation and ozone

depletion. In 1988, James E. Hansen, director of NASA's

Goddard Institute for Space Studies, testified to the Senate

Energy and Natural Resources Committee that it was "99

percent certain" that the climatic warming of that years was

due to global warming (New York Times, June 24, 1988).

Global warming predictions are based on data concerning the

amount of carbon dioxide released in the atmosphere. While

most carbon dioxide releases were attributed to the burning

of fossil fuel, in the last several decades, deforestation

is estimated to have caused an additional 12 to 50 percent

of emissions (Postel, 1986).

The costs to reduce carbon dioxide emissions in the

U.S. are immense. One EPA economist has estimated that the

72

replacement cost for beach erosion caused by rising oceans

could easily reach the $10 to $50 billion range (New York

Times. June 26, 1988). Businesses are faced with a

perplexing paradox: reducing environmental pollutants, but

still remaining competitive in the marketplace.

The second major environmental impact concerns acid

precipitation. The most common cause of acid precipitation

is sulfur and nitrogen oxide emissions from fossil fuel and

metal smelting. Scientists have found that while some acid

precipitation occurs naturally, industrialized nations

register ten to thirty times more acidicity (Postel, 1984).

Most of the increased emissions are attributed to the

growing use of fossil fuel combustion by electric utilities

and industry. The United States is the world leader in the

discharge of acid emissions at the rate of 41 metric tons of

nitrogen and sulfur oxides annually (Rosenbaum, 1991).

Since 1974, scientists have been warning that the

tropospheric ozone layer is being rapidly thinned by the use

of chloroflurorcarbons (CFCs) and halons. These pollutants

are used primarily as refrigerants and propellants,

styrofoam products, and solvents for computer circuits.

Once again industry faces an economic/environment choice:

continue to use a potentially damaging chemical, or

replacement of CFCs by a substitute which has only proven to

be less reliable and costlier. The industry cost of $27

billion for phasing out CFCs is modest compared to the $6.5

73

trillion saved from averted cancer deaths, crop damage, and

fish depletions (New York Times, September 21, 1988).

In addition to the ecological issues, another problem

remains: the lack of sound research on environmental

quality. According to Rosenbaum (1991) "Almost all current

evaluations of environmental quality are compromised in some

way by missing data, constricted time frames, and

incompatible measurements." While the government has

mandated that various governmental agencies be held

responsible for data regarding the environment, it is the

responsibility of industry to become proactive and socially

responsible in providing data and research about the

interaction of industry and the environment.

Environmental Compliance

There is a growing consensus that fundamental changes

are needed in the existing environmental regulations. While

evidence suggests that environmental legislation has result-

ed in health and recreation improvements and a reduction in

biosphere degradation, the associated cost to business has

been staggering (Carlton and Perloff, 1990). A 1991 survey

found that environmental compliance amounts to approximately

2 percent of sales (Newman and Breeden, 1992) and as high as

3 to 4 percent in selected industries (Greeno and Robinson,

1992). Additionally, recent research has determined that

environmental regulations may obstruct new businesses from

entry into a number of industries (Dean and Brown, 1995).

74

Dissatisfaction with the existing institutional

approaches to environmental management has also spurred a

movement toward reform. New tactical and strategic

alliances are being formed to address environmental problems

and to search for methods of pollution prevention.

Additionally, organizations have slowly come to realize that

environmental impact extends far beyond their domestic

boundaries and should be more globally responsible. Global

warming, destruction of the ozone layer, losses of rain

forests, acid rain, and pollution of the oceans are problems

that affect all countries. Furthermore, the once ambivalent

public now appears to be more proactive concerning

environmental matters. In mid-1989, a New York Times/CBS

News poll, asked a sample of the American public to state

whether it agreed with the following statement: "Protecting

the environment is so important that requirements and

standards cannot be too high, and continuing environmental

improvements must be made regardless of cost." The results

were startling: almost 80 percent of the respondents

agreed. Numerous studies suggest that majorities,

regardless of socioeconomic status, support environmental

standards and programs to protect our ecology (Dunlap, 1989;

Gillroy and Shapiro, 1986).

Corporate strategic planning should acknowledge the

impact of business on the environment. Organizations should

adopt risk avoidance strategies, capitalize on

, 75

opportunities, and fulfill social responsibilities (Goldman

and Mackenzie, 1991). In the coming decade, companies will

fare better by cooperating in the enactment of environmental

laws and by taking steps to monitor manufacturing and other

processes to prevent further harm to the environment,

thereby fostering an environmental stewardship philosophy

(Cook, 1990; Kirkpatrick, 1990).

Dealing with the environmental problems will require

extensive, and proactive decision making in government

policies, individual ethics and corporate behavior. While in

the past ecological considerations have often been viewed as

an economic obstacle, today, environmentalists and

industrialists are working in concert to create mutually

acceptable strategies for sustainable development. For

example, organizations such as Monsanto and General Motors

have integrated public issues management with corporate

strategic planning to move into what is known as "The

Advanced Industrial Society" (Marx, 1986; Kimball, 1988).

Future research should consider how organizations can

respond better by identifying relationships between quality

practices and environmental performance. Frameworks for

integrating the two areas will be examined in the next

section.

76

TOEM Frameworks

Numerous frameworks for the integration of TQM and

environmental management have been suggested. W. Edwards

Demings7 14 Points provide a relevant example of how quality

management principles can be applied to the environment

(Appendix B).Most of the following programs are used for

benchmark improvement and are based on the TQM frameworks

reviewed earlier.

Quality Environmental Management (OEM^

Another framework for pollution prevention was proposed

by the President's Council for Environmental Quality. The

underlying belief behind the Quality Environmental

Management (QEM) initiative was that TQM and QEM are

synonymous same coin. The TQM methodologies used to detect

and eliminate product imperfections or service deficiencies

are the same systematic approaches and tools needed to

reduce environmental emissions and pollution. The QEM

framework for pollution preventions proposes the following

continuous improvement process:

• Management commitment

• Quality action teams

• Training

• Determine environmental impact

• Select improvement projects

• Implement improvement projects

77

• Measure results

• Standardize the improvements.

Results have shown that TQM and pollution prevention

are complementary concepts. The nucleus of TQM is the

systematic analysis of processes or services by empowered,

cross-functional, multi-disciplinary teams. The same

components are necessary pollution prevention processes.

Emission or waste reduction opportunities are most

beneficial when groups of employees with diverse skills and

experience are empowered to identify sources of pollution

and make innovative, cost-effective recommendations for

addressing problems.

Additionally, pollution prevention can be achieved

without large capital investments. Small and large

organizations alike are equally able to benefit from

skillful application of TQM in pursuit of pollution

prevention. Success often depends as much on the creativity

and energy of the employees involved as on the amount of

capital expenditures.

Global Environmental Management Initiative (GEMI)

The Global Environmental Management Initiative (GEMI)

is generally credited with being the first organization to

consolidate environmental management with TQM. GEMI has

proposed methods of applying TQM to corporate environmental

strategies as follows: (1) Customer identification - total

quality is based the assumption that the customer is always

78

right. In fact quality is defined by what the customer

wants, (2) Continuous improvement - the systematic, ongoing

effort to improve business processes, continuous improvement

changes the entire corporate perspective, (3) Do the right

thing first - the recognition and elimination of

environmental problems before they occur. Focusing employee

attention on the causes of environmental problems instead of

the symptoms can reduce the cost of waste disposal,

government reporting and crisis control. In environmental

management, quality costs are those generating wastes that

add nothing to or may reduce the value of your product or

service to your customer, and (4) Take a systems approach

to work. In a well organized system, all the functions work

together to support each other and achieve the desired

objective.

In a well-organized system, all the components (functions) work together to support each other. In a system that is well-led and managed, everybody wins. If by bad management the components become competitive, the system is destroyed. Everybody loses.

W. Edwards Deming (1986)

Using the guidelines provided by the ICC Business

Charter, GEMI has developed an Environmental Self-Assessment

Program (ESAP) as a method for aligning management systems

and environmental management. The assessment helps

companies understand their annual environmental performance,

initiate continuous improvements and achieve environmental

79

priorities. While these programs are not identical, they

present certain similarities, and symbolize many of the same

dimensions as the TQM frameworks examined in an earlier

section.

Results of TOEM

While the application of TQM as a means of pollution

prevention is a relatively new approach, many companies have

achieved significant results. TQM has enabled Union Pacific

Railroad to take charge of its risks and establish a notable

environmental record. Fewer spills and less waste have

reduced liabilities, lowered operating costs and improved

profitability (Fischetti, 1994).

Results from the Quality Environmental Management

Subcommittee report of the President's Commission on

Environmental Quality (1993) yielded remarkable results.

Eleven diverse companies reported the applicability of TQM

for improving environmental management. AT&T Network

Systems utilized quality principles to reduce toxic air

emissions, with an approximate annual savings of $200,000.

Likewise, Chevron, Dow Chemical, DuPont, Ford, GE Medical

Systems, International Paper, Merck, 3M, Procter & Gamble

and U.S. Generating Company reported improvements in

environmental quality by using TQM principles.

While some have suggested that environmentalism and

economic prosperity are at two ends of the ecological

spectrum, others have argued their compatibility. Michael

80

Porter (1991) stated that the world has finally realized the

relationship between environmental protection and economic

growth. Countries that have adopted strict environmental

regulations are still world leaders in export and trade.

Regulations are encouraging innovation in design and

producing cleaner, more efficient products. Porter further

adds that the United States can improve their competitive

edge by continuing to reinforce the idea of sustainable

development (Business and the Environment. 1992).

Further reinforcement of TQEM was presented by

Silverstein (1990).who argues that society need not make a

choice between triJ environment and economic development. He

cites the decline of "high polluting" industries and the

strong performance of publicly traded environmentally sound

companies. Because organizations are driven by economic

concerns, determining the cost of environmental quality can

benchmark or measure environmental quality improvements.

Management will find that as the levels of environmental

quality and regulatory compliance increase, the cost of

environmental quality may decrease. This inverse

relationship is a persuasive tool in helping management

understand the importance of using TQM to improvement

environmental performance (Greenberg and Unger, 1991).

As a nation, the United States can promote economic

growth and constructive international relations by

strengthening its leadership in environmental goods and

81

service, and by accelerating technology development and

cooperation. Strong environmental policies can coexist with

a growing capitalist economy (Deland, 1992).

Measuring TOEM

Total quality environmental systems are no less

dependent on measurement. In an effort to improvement their

environmental performance, many organizations are faced with

the issue of measurement. Effective environmental

measurement must consider three perspectives: (1) process

improvements, (2) environmental results, and (3) customer

satisfaction. Process improvements measure how effectively

environmental management systems are working. Effective

environmental management systems drive environmental results

and are difficult to sustain unless their effect on

profitability can be proven in terms of customer

satisfaction and cost savings. Environmental results are

the way an organization measures compliance with customer

satisfaction. An example of the various measures of

environmental results is contained in Table 2.6.

TABLE 2.6

82

MEASURES OF ENVIRONMENTAL RESULTS

MEASURE WHAT IT MEASURES ADVANTAGES DISADVANTAGES

Permit Compliance Compliance with applicable permits expressed as exceedances of perait limits.

An essential measure customers will look first to your compliance with permits.

Taken alone, a narrow measure indicating that you are doing only what is required.

Toxic Release Inventory (TR!) Chemical Releases

Over 300 chemicals subject to release annual reporting requirements under SARA Section 313.

Information on releases is widely available to the public. An effective way to communicate performance .

Does not cover all important chemicals; focuses on release volume without accounting for differences in toxicity.

M33/50H Chemicals A subset of 17 of the TRI chemicals identified by EPA as priority candidates for voluntary reductions in releases by industry

A more refined list of chemicals than TRI; companies participating in the 33/50 program and meeting goals will receive public credit.

Leaves out many important chemicals. Not clear that a company not participating in the 33/50 program will receive special credit for these reductions.

Clean Air Act Toxics 189 Chemicals listed in the Clean Air Act as "air toxics" subject to maximum achievable control technology (MACT) standards.

MACT standards will be extremely costly to meet. By reducing or eliminating releases, you avoid very high future costs.

Taken alone, like TRI, not a full measure of environmental performance. Focuses only on air; creates risk of shifting problem from air to other media.

Risk-Weighted Releases Toxic chemicals weighted by their relative toxicity:

. weightings

. toxicity categories

A more realistic depiction of health and environmental effects than unweighted releases.

Toxicity data are frequently highly uncertain. To date risk-weighted approach by key customers--EPA, environmental groups.

Waste Per Unit of Product i on

Percent of production lost as waste; generally measured on a waste weight to production weight basis.

A very broadly applicable measure that incorporates efficiency in use of resources as well as contaminant releases to the environment.

No priority established in terms of types of wastes; | absent other 1 measures, creates an 8 incentive to focus on I high-volute low-toxicity wastes.

Energy Use Total energy use by all aspects of corporate operations; can be expressed also as (X>2 releases.

A comprehensive measure that focuses attention on efficiency in use of a key resource. Anticipates possible global warming concerns; readily communicated to customer.

Energy efficiency is important, but not the only basis on which to evaluate environmental performance. Need 1 other measures as | well. |

83

Solid Waste Generation Total solid waste going to landfills or other disposal facilities.

An important measure in the public mind due to publicity surrounding landfill capacity shortage; often reflects efficiency in resource use.

A very narrow Measure of environmental performance; often misinterpreted as the Most important criterion to judge performance.

Product Life Cycle The total impact of a product on the environment from ran Materials sourcing through production use and ultimate disposal.

The isost comprehensive Measure of product level impact. A meaningful goal to strive for in resource use efficiency and pollution prevention.

Extremely complex to implement. Methodologies are not commonly accepted. Claims based on product-life cycle analysis are frequently treated with skepticism. Difficult to apply at a corporate or unit level.

SOURCE: Wells, Richard P., Hochman, Mark N., Hochman, Stephen D., and O'Connell, Patricia A. "Measuring Environmental Success," Total Quality Environmental Management. Summer, 1992; p. 322.

While these measures appear to comprehensively represent

most areas of ecological impact, each has limitations.

With the exception of a few innovative companies, most

organizations are grappling with the implementation of TQEM

programs. Most companies engaged in TQEM are refining and

calibrating their corporate measurement systems to

accurately determine their current state of environmental

affairs. Table 2.7 is a compilation of various companies

and their respective measurement systems.

84

TABLE 2.7

SELECTED TQEM MEASUREMENT SYSTEMS

I Camxtw

purpose of Measures Parameters |

AT&T/Intel Joint Project

Develop benchmarks for corporate pollution prevention <PP) programs

. Weightings of program elements

. Evaluations of "best of class*1

. Design of generic PP program

. Gap analysis

Saridoz Corporation Plant and corporate S&E (safety and environmental} performance

Key indices reported at all facilities: . Lost time t workday accident rates . Totals: energy, water, waste . S l> E investments, expenses, personnel . Total production, personnel

Niagara Mohawk Track effectiveness of corporate environmental protection programs

. Weighted index comprised of: - Compliance incidents (Mov's etc.) • Emissions and wastes - Enhancements (dollar value)

Green Environment Track effectiveness of corporate environmental protection programs

Score sheet of program implementation: 25 questions, 0-2 pts. each. Categories: . PLAN . DO . ACT . CHECK

Xerox Corporation Integrate environmental issues to core company values

Economic Incentives: . Gain market share via positioning . Cost savings reporting . Reduce risks, future costs

3M Company Track continuous improvement in Pollution Prevention Pays (3P) and production efficiency

Waste quantities reflect 3P, efficiency . Absolute values . Reductions over time . As percentage of inputs

US EPA . Publicize polluters . Economic incentives . Recognize "good citizens'"

. SARA 313/TR1S

. Clean Air Act 1990 pollution market

. 33/50

. Green lights

SOURCE: Fitzgerald, Chris. "Selecting Measures for Corporate Environmental Quality: Examples from TQEM Companies." Total Quality Environmental Management. Summer, 1992; p. 332.

As the table clearly shows, there is a wide diversity

of measures. While determining the correct measure of total

quality environment management is still rather new, a number

of facts have emerged: (1) measurement systems are

necessary to correctly operationalize corporate

85

environmental policies, (2) measurement systems are only

valid if used over a period of time to track changes, (3)

measurement systems must fit the area needing improvement,

(4) results must be public to encourage continuous

improvement, and (5) use clear and concise quantitative

measures balanced with qualitative measures (Fitzgerald,

1992). Though a risk exists in considering only

quantifiable measures, the value and benefit of

quantification must be considered on an individual basis.

Theoretical Model

The basic philosophy underlying the practice of

ecomanagement is the belief that organizations will not

improve environmental performance unless they undergo a

"radical change or paradigm shift" (Blackburn and Rosen,

1993; Dobyns and Crawford-Mason, 1991; Kuhn, 1970; Munroe-

Faure and Monroe-Faure, 1992). This new philosophy calls

for a holistic or systemic view of determining how the

organization and its operation are interrelated with the

environment (Callenback et al., 1993).

TQEM is depicted as a sequential process (Figure 2.8).

The drivers that precipitate the change are quality

practices and environmental performance. As noted earlier,

pressures to improve quality have resulted from past

performances of declining quality, customer expectations and

global standards and competition. Additionally, organiza-

tions must begin to consider environmental performance as a

86

critical part of sustainable competitive advantage (Hunt and

Auster, 1990).

FIGURE 2.8

Model of Total Quality Environment Management

Increased levels of:

*" Management Commitment

Quality Departments

Training

Product/service design

Supplier Quality

Process Management

Data Reporting

Employee Relations

Improved Emissions Efficiency

Improved Compliance

Once quality practices have been implemented, the

effective result should be environmental performance as

measured by reduced emissions and improved compliance.

Environmental performance (effectiveness) has often been

determined by a number of means. It should be noted that

Fortune magazine uses "community and environmental

responsibility" as one of the eight criteria used in its

87

annual "Most Admired Companies" evaluations. The leaders in

the first report in 1993 were judged by reduced emissions,

development of new environmentally conscious technologies,

elimination or reduction of toxic and solid wastes, and

reduction of non-renewable materials usage.

Another key measurement of organizational environmental

effectiveness is financial performance. One recent study

compared the financial outcomes of 84 firms with

environmental ratings given by the Council of Economic

Priorities (CEP), a non-profit group. Results indicated

that companies scoring highest in the CEP environmental

ratings also had a 2.24 percent higher return on assets than

those with the lowest CEP ratings (Starik, 1994). A 10

percent difference between high and low rated firms was

found in sales growth (Makower, 1991). A more recent study

using a different environmental assessment rating found that

of 238 manufacturing, wholesale trade, and retail trade

Fortune 500 companies, both the return on equity and return

on assets were higher for those firms with the "best"

environmental records (Russo and Fouts, 1993).

Systemic examination of organizations and their

relationship to the natural environment will provide a basis

or benchmark for future operations. Stratton and Flynn

(1980) first proposed this ecological approach to

organizational effectiveness by stating:

88

Organizations, in order to survive, must effectively maintain some form of homeostatic balance. Effectiveness, in turn, is related to the ability to acquire, process, and distribute resources, all of which creates a complex system of interdependence between the organization and its environment.

It is this type of effectiveness that ecologically sound

organizations have achieved through the implementation of

quality practices.

While some research has addressed ecological issues as

a primary concern for managers (Buchholz et al., 1992;

Hoffman et al., 1990; Post, 1991), the subject still remains

nebulous. As Shrivastava (1995) proposed, research in "how

environments influence organizations, and how organizations

can procure, exploit, or compete for resources" needs much

attention. TQEM is providing a framework for environmental

management (Council on Environmental Quality, 1993;

Shrivastava & Hart, 1992), and is being recognized as a

means of improving compliance and reducing waste and

pollution (IRRC, 1995).

The position taken in this study maintains that the

change resulting from TQM practices will correspond with

environmental performance. The purpose of this paper is to

determine whether there is any relationship between quality

practices and environmental emissions and compliance.

Model Variables and Hypotheses

Sixteen hypotheses concerning the relationship between

quality practices and environmental performance were

89

investigated. The first concern is the relationship between

quality practices and the level of environmental compliance.

Research of the literature indicated a belief that a

positive relationship existed between the two variables;

organizations that have higher levels of quality practices

will experience higher compliance with existing regulatory

statues and increased emissions efficiency. Each quality

practice will be tested to determine any relationship

between the factor and the Compliance Index® and the

Emissions Efficiency Index®. These two indices are two

different measures of environmental performance. Compliance

is a measure of how well the companies have complied with

the environmental statutes or laws, such as the Resource

Conservation and Recovery Act, Clean Air Act, Clean Water

Act, Safe Drinking Water Act, Toxic Substances Control Act,

Occupational Safety Hazards Act, Atomic Energy Act, and

Endangered Species Act. This is a more proactive measure of

environmental performance. Emissions efficiency is a

measure of the annual Toxic Release Inventory emissions

associated with domestic revenues and serves as a proxy for

exposure to future environmental regulations, representing a

more intensive measure of environmental performance. The

IRRC reports the emissions and compliance results as

indices; the lower the index number, the better the

performance.

HI: Top management support is negatively related to the Emissions Efficiency Index®.

90

H2: Top management support is negatively related to the Compliance Index®.

As the causal forces press for improvement,

organizational members are expected to provide the impetus

for change. Change initiation must start with those in a

position of power (Katz and Kahn, 1978), more specifically,

top management, and then communicated through the hierarchy

by the quality department. The more top management supports

organizational quality, the more positive the influence on

corporate support for environmental quality. The quality

literature contends that supportive management is a

necessary element for superior performance (Deming, 1981;

Juran, 1970; Garvin, 1987). Additionally, companies

actively pursuing a total quality approach have found that

the process necessitates a major change in corporate culture

to move beyond compliance to an environmental investment in

the future (Lent and Wells, 1992; Thomlison, 1992) and a

deep commitment or "systematic institutionalization"

(Feigenbaum, 1951) from top management. The commitment of

management is crucial for productive environmental

management systems (Baker, 1993; Bhushan and Mackenzie,

1992; Dumaine, 1990; Gallagher, 1992; Shetty, 1992).

H3: The level of quality department involvement is negatively related to the Emissions Efficiency Index®.

H4: The level off quality department involvement is negatively related to the Compliance Index®.

91

Organizations that continuously seek to improve their

environmental performance will actively utilize the quality

department as a mechanism to integrate quality principles

throughout the company. This can often be achieved through

the implementation of quality councils and teams (Crosby,

1979; Deming, 1982; Juran, 1986; Leonard & Sasser, 1982;

Mondon, 1982). It should be noted that many companies

prefer to make quality the departmental responsibility with

quality professionals acting as a consultant as needed,

rather than to maintain separate quality departments.

Organizations that proactively manage the environment

typically have preventive programs that are organized by the

environmental management department. Succinctly, it is

their responsibility to manage, rather than react to

environmental issues (Hunt and Auster, 1990).

H5: Quality training is negatively related to the lower Emissions Efficiency Index®.

H6: Quality training is negatively related to the lower Compliance Index®.

Most quality practitioners emphatically stress the

importance of extensive employee training, which includes

team building, problem solving skills, and statistical

techniques (Crosby, 1979; Deming, 1982; Juran, 1986).

Environmental training is vital given the changing

environmental regulatory climate (Marshall and Mayer, 1992;

Weise, 1992). Correct use of measurement tools can provide

guidance to companies wishing to decrease emissions and

92

improve environmental compliance (Coulter, 1993; Fisher,

1992; Foecke, 1991; Nash et al., 1992).

H7: Product/service design is negatively related to the Emissions Efficiency Index®.

H8: Product/service design is negatively related the Compliance Index®.

Research has indicated that quality may suffer in firms

with constant, high rates of change in product or service

design (Garvin, 1983). Accordingly, organizations that con-

stantly strive for product improvements to satisfy

consumers, may find an increase in waste (emissions)

(Friedlander, 1989; van Weenen and Eekels, 1989).

Increasing pressure from consumers requires that companies

adopt a responsible attitude in relation to the environment,

while simultaneously providing continuous product

improvement (Haines, 1993). Green engineering attempts to

identify, develop and improve productivity without

compromising product quality (Burall, 1991; Burnette, 1990;

Navinchandra, 1990; 1991). Environmental concerns have made

"design for disassembly" an importance feature of products,

enabling components to be easily removed for recycling or

repair (Nussbaum and Templeton, 1990; Wilder, 1990).

H9: The development of quality suppliers is negatively related to the Emissions Efficiency Index®.

H10: The development of quality suppliers is negatively related to the Compliance Index®.

93

Studies suggest that supplier linkages should be

evaluated carefully and quality, rather than price, stressed

in the development of limited, long-term relationships

(Deming, 1981; Juran, 1970; Garvin, 1987). Suppliers in

concert with the organization, add a level of legitimacy as

an outside constituent. Since suppliers are not infinitely

associated with the organization, they are perceived as less

self-serving in their association (Pfeffer, 1981). Research

has indicated that many environmental problems may be

"imported" from suppliers (Elkington, 1994). Therefore, a

clear understanding of customer and supplier relationships

and the functional roles played by each is necessary for

successful TQEM programs (Patterson, 1992).

Hll: The level of process management and quality operating procedures is negatively related to the Emissions Efficiency Index®.

H12: The level of process management and quality operating procedures is negatively related to the Compliance Index®.

Research has revealed that quantification of the

process through the use of planning, scheduling and

statistical techniques can improve quality (Crosby, 1979;

Deming, 1982; Garvin, 1984; Ishikawa, 1976; Juran, 1986).

Often the most effective strategy for improving

environmental performance is to focus on new processes

(Paton, 1993), and specifically on reducing non-value added

activities in manufacturing in order to reduce wastes

(Benson, 1991).

94

H13: The level of quality data and reporting is negatively related to the Emissions Efficiency Index®.

H14: The level of quality data and reporting is negatively related to the Compliance Index®.

Studies indicate that organizations should be able to

adequately define costs of quality and development quality

information systems (Deming, 1982; Garvin, 1984; Ishikawa,

1976; Juran, 1986). Because management is driven by

financial concerns, determining the cost of environmental

quality is the first step in improving environmental

compliance and emissions. The total cost of environmental

quality can be used as a benchmark to improve quality and

redirect resources (Greenberg and Unger, 1991/1992).

H15: Level of employee relations in quality practices is negatively related to the Emissions Efficiency Index®.

H16: Level of employee relations in quality practices is negatively related to the Compliance Index®.

Organizational theorists have proposed numerous tactics

for change implementation (Kotter and Schlesinger, 1979;

Nutt, 1986). Combined tactics of education and

communication, participation, facilitation and support, and

negotiation can be utilized by proper employee involvement

or relations. Generally speaking, quality studies have

positively affirmed the importance of employee involvement

in the quality process (Crosby, 1979; Deming, 1982; Garvin,

1984; Ishikawa, 1976; Juran, 1986).

95

Sixteen hypotheses are presented for examination and

are theoretically supported by a review of the literature.

Each hypothesis examines the association between each

quality factor and two measures of environmental

performance: emissions efficiency and compliance.

96

Chapter Summary

This chapter reviewed the relevant literature covering

the areas of quality and the environment. A definition of

quality further supported the need for the strategic

integration of quality practices. The evolution of quality

reinforced the movement of quality issues from simple

inspection perspective to a comprehensive, coordinated

quality orientation. After an extensive assessment of the

literature, Saraph's (1989) eight category framework was

chosen as most representative in the current quality

research. Each quality factor was reviewed to determine

support for each category.

The second part of the literature review examined the

current research regarding environmental issues. Present

analysis revealed the increasing importance of environmental

issues to organizations, particularly in the areas of

emissions and compliance. Frameworks for TQEM, results and

measurement systems were reviewed. Finally, this chapter

presented a theoretical model, research hypotheses, and

submitted that the relationship between the eight factors of

quality and environmental emissions and compliance be

further investigated.

CHAPTER 3

METHOD

This chapter presents the research methodology for

determining the relationship between quality practices and

environmental performance. Specifically, the chapter

describes the methods used to measure quality practices, the

data employed to determine environmental performance, and

the process used to analyze and interpret the results.

Research Process

This study will focus on the relationship between

quality practices and environmental performance. Since this

study will consider the two elements: quality practices and

environmental performance as mutually exclusive factors, two

sources of data were utilized. First, quality practices

were determined by analyzing eight critical factors of

quality management reported on the survey instrument.

Second, environmental performance was determined by

utilizing the information published by the Investor's

Responsibility Research Center which measures environmental

compliance and environmental emissions.

Given that the variables of quality practices and

environmental performance are being measured to determine

97

98

the relationship between the two, correlation research was

deemed the most appropriate method (Kidder and Judd, 1986) .

Correlation research involves collecting data to determine

whether, and to what extent, a relationship exists between

two or more quantifiable variables. The basic

correlational research process is depicted in Figure 3.1.

FIGURE 3.1

CORRELATIONAL RESEARCH PROCESS

PROBLEM SELECTION

\ SAMPLE AND INST =tUMENT SELECTION

\ f DESIGN AND I PROCEDURE

\ f

DATA ANALYSIS Ah ID INTERPRETATION

The problem investigated in this research is whether any

relationship exists between quality practices and compliance

and emissions.

Sample and Instrument Selection

The surveyed population included all the companies

listed in the Standard & Poor 500 Index (S&P 500) which

represents approximately 80 percent of the value of all

issues traded on the New York Stock Exchange. The S & P

99

includes industrials, public utilities, transportation, and

financial companies and is currently one of the 12 leading

economic indicators used by the U. S. Commerce Department.

Since the survey measures the actual level of quality

management practices, the instrument will be directed to the

quality assurance or quality manager of each organization

sampled.

Each organization listed in the S & P 500 Index was

contacted via INTERNET or faxed to determine who in each

firm is responsible for quality issues. Each organization

was contacted via INTERNET or fax to determine whether the

firm was willing to participate in the survey. After

confirmation was received, each firm was sent the survey on

INTERNET or by fax. If a response was not received within

one week, a follow-up survey was transmitted in the same

manner. One hundred sixty three companies initially

responded, 84 surveys were useable, yielding a response rate

of about 17 percent.

The use of computer surveys in organizational settings

is a relatively new means of obtaining data. In an academic

setting, several researchers (Feinstein, 1986; Kiesler and

Sproull, 1986) have used this technique and have found that

"mean responses to an organizational survey administered on

computer (electronic mail) and paper did not differ"

(Sproull, 1986). Additionally, Corman (1990) found paper

100

and computer surveys produced comparable data, while the

computer based data demonstrated better test-retest

reliability and criterion validity (Rosenfeld et al., 1993).

Instrument for Quality Practices

To measure quality practices, a validated instrument

developed by Saraph, Benson and Schroeder (1989) was chosen

(Appendix C). One hundred and twenty organizational

requirements for quality management were gleaned from the

literature research. A judgmental grouping of similar

prescriptions resulted in eight separate categories. These

eight categories or factors are top management leadership,

role of the quality department, training, product design,

supplier quality, process management, quality data reporting

and employee relations. These categories appear to

represent most of the relevant quality management factors

used by current practitioners and academicians.

Using the 120 organizational requirements, the

researchers developed appropriate measurement items for each

category. After a critical review, elimination,

reclassification, and pretesting process, content validity

was established. Each item was answered using a five point

interval rating scale as follows:

101

Extent or Degree of Current Practice Is

Very Low Low Medium High Very High

1 2 3 4 5

Extent which the divisional top management supports long term quality improvement process.

For each critical factor, the level of quality

practices was determined by the mean of all the items for

that factor. Using the suggestion by the authors of the

instrument, a vector of the averages for the eight factors

can then be used to determine the level of quality

management (Saraph et al., 1989).

Reliability

Reliability is the degree to which a test consistently

measures whatever it was intended to measure. The more

reliable a test, the more confidence that the scores would

remain the same regardless of the times it was administered

(Gay and Diehl, 1992). The authors of the instrument used

the internal consistency method to test reliability

(Nunnally, 1967; Sellitz et al., 1976) as it works well in

field studies with one administration (Saraph, 1989). Using

the SPSS reliability program, each critical quality factor

was analyzed for internal consistency. Table 3.1 shows that

the reliability coefficients ranged from .71 to .94, which

is considered to be acceptable.

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TABLE 3. 1

RELIABILITY COEFFICIENTS FOR CRITICAL QUALITY FACTORS

Critical Factor: Number of Items Alpha

Management Leadership 13 .94 Role of Quality Department 6 .83 Training 10 .87 Product/Service Design 8 .71 Supplier Quality Management 10 .81 Process Management 13 .76 Quality Data and Reporting 9 .88 Employee Relations 9 .85

SOURCE: Saraph et al., 1989.

Validity

The simplest definition of validity is that degree to

which a test measures what it was intended to measure. The

authors support the content validity as the critical factors

were determined by an exhaustive literature review and

pretesting. Predictive validity was demonstrated by the .8

multiple correlation coefficients between the eight measures

of quality management and the perceived quality performance

measure. Construct validity was also tested to determine if

the measure can correctly ascertain the theoretical trait it

was designed to measure. Research studies that involve a

construct, either as an independent or a dependent variable,

are only valid to the extent that the measure of the

construct of interest is valid (Gay and Diehl, 1992).

According to the researchers, construct validity was

determined by factor analysis that demonstrated each measure

to be a separate construct.

103

Dillman (1978) proposed that three groups should be

used to determine the applicability of survey instruments

prior to mailing. The Saraph instrument (1989) was

pretested using the following groups to ascertain whether

the appropriateness of the survey length, if any statements,

scales or instructions could be misinterpreted by the

respondents and to comment on any changes needed: (1)

dissertation committee and faculty knowledgeable in subject

matter, (2) University of North Texas Center for Quality

and Productivity, and (3) representatives from large,

representative organizations. Participants in the pilot

study were asked to complete the survey in the same manner

as in the full scale administration (Rosenfeld, 1993) . Nine

responses were obtained and respondents indicated no major

changes in the instrument. Two respondents noted a

clarification of wording and the inclusion of the "Non-

applicable" option on the survey scale. Those changes are

reflected on the final instrument.

Data Used for Environmental Performance

Assessing corporate environmental activities and

performance is a rigorous exercise. The proliferation of

environmental regulations and reporting creates a wealth of

information, but does not always represent a comprehensive

environmental assessment. After an exhaustive examination

of the literature and contact with GEMI, published data on

environmental performance gathered by the Investor's

104

Responsibility Research Center (IRRC), a non-profit research

center that provides institutional investors and companies

with research and impartial reporting on business and public

policy issues, was judged to be the most appropriate and

comprehensive source of environmental performance and

measurement. IRRC systematically gathered and compiled a

large amount of data and other information on the Standard &

Poor 500 companies from three major sources: governmental

agencies, corporations and the media.

First, the IRRC secured information on environmental

compliance, spill incidents, annual toxic releases,

regulatory enforcement actions and penalties, and waste

cleanup. This information is received from the federal

agencies and contractors responsible for maintaining

environmental databases for the U.S. government. Much

information was obtained by filing Freedom of Information

Act requests. The federal database information provides the

majority of the quantitative performance data used to

profile each company.

Second, another source of information was the S & P

companies. Securities and Exchange Commission 10-K filings

were reviewed to determine corporate environmental

practices, programs, policies, disclosure practices,

achievements and environmental goals and projects.

Companies were not asked to provide compliance data, but to

105

only verify compliance data gleaned from the government

databases.

Lastly, the IRRC reviewed nearly 400 newspapers,

journals and trade publications for relevant information

about the environmental activities of the companies.

Governmental information concerning hazardous waste cleanup

responsi- bilities, permit restrictions, and toxic chemical

emissions were meticulously scrutinized.

The IRRC developed two extensive measures of

environmental performance: the Emissions Efficiency Index®

and the Compliance Index®. The Emissions Efficiency Index®

is a tool for analyzing companies' progress in reducing

emissions of selected toxic chemicals associated with

manufacturing processes. While there is no certainty that a

pattern of increasing emissions per dollar of revenue

produced will result in greater financial risk,

proliferating environmental regulations and litigation

strongly indicates that companies be able to generate

revenue without excessive levels of pollutants.

There are several important limitations to the Toxic

Chemicals Transfers and Releases data used in the IRRC's

environmental reports. First, this information is largely

self-reported. Required since 1987, organizations must

report their releases, and while originally the reporting

was sporadic and inconsistent, recent results show dramatic

improvements. Additionally, certain facilities are exempt

106

from reporting requirements. Utilities, transportation

firms and waste disposal facilities, among other non-

manufacturing companies, are not required to report toxic

chemical emissions.

The second measure of environmental performance

developed by the IRRC is the Compliance Index®. Corporate

environmental compliance activities include constructing and

operating pollution control facilities, developing plans for

achieving compliance with new federal and state require-

ments, training employees, investigating and cleaning up

contamination at company properties and other sites,

responding to environmental litigation and resolving

government proceedings against the company. Large

corporations typically overspend anywhere from 20 to 40

percent on environmental compliance in efforts to assure

regulatory compliance (Environmental Manager. 1991).

Environmental expenses in each category can vary

substantially from company to company, therefore, a direct

comparison of environmental compliance expenditures across

companies is questionable.

Analyzing compliance trends in conjunction with data

concerning its S & P industry group may give a relative

indication of how well a company is complying with U.S.

environmental law. Penalties assessed to companies having

high industry norms may be a sign that environmental

performance of a company is not adequately controlled. The

107

IRRC Compliance Index® is designed as a size-normalized

method for comparing the historical ability of companies to

meet national environmental standards and to comply with

applicable environmental laws in domestic operations (IRRC,

1991).

Companies with diverse operations and multiple

environmental exposure may have a higher total level of

penalties and therefore, a higher Compliance Index®, than

that of their competitors who do not. Likewise, companies

with waste-intensive operations, such as chemicals, smelt

and waste disposal, probably face increased exposure to

environmental regulation than companies in other industries.

The index is a relative indication of a company's total

environmental compliance liability, but a company's overall

business diversification must be examined before comparisons

between companies can be made.

Design and Procedure

Correlation is widely used in descriptive research when

the goal is to locate variables that might be related in

some way to the variable of interest (Black, 1994). In this

study, correlation was used to determine the relatedness of

quality practices and environmental performance. Campbell

and Stanley (19 63) suggest a simple correlation design,

where high correlation between the variables being tested

strengthens the hypotheses' credibility, and low correlation

lessens the credibility of the hypotheses. Succinctly

108

stated, "correlation does not necessarily indicate

causation, but a causal law of the type producing mean

differences in experiments does imply correlation." This

approach can be effectively used as a preliminary

examination of hypotheses, with those (hypotheses)

"surviving...checked with more...manipulation" (Campbell and

Stanley, 1963). Other researchers have likewise confirmed

this approach as applicable in descriptive research (Katz et

al., 1951; Morse & Reimer, 1956).

The degree of relationship is expressed as a

correlation coefficient (r) (Gay and Diehl, 1992). This

study was designed to test hypotheses regarding the

relationship of quality practices and environmental per-

formance, a correlation coefficient is interpreted in terms

of its statistical significance. Correlation provides an

estimate of how strong two variables are related; a

correlation coefficient near +1.00 would indicate the two

variables are related, a coefficient near .00 indicates no

relationship, and -1.00 indicates an inverse relationship.

Since the mean score for each quality factor is scaled with

higher means indicating higher practices, the environmental

data is scaled inversely. Therefore, a negative correlation

would indicate a positive relationship. While several

methods of correlation are available, Pearson's product-

moment correlation was used as this method of analysis is

109

the most reliability estimate of correlation (Gay and Diehl,

1992) .

To determine whether the difference between the

correlation coefficient and zero is statistically

significant, t tests were performed. The null results are

not meaningful if a type II error has been committed. To

safeguard against type II error, the minimum true

correlation was calculated that would correctly reject the

null hypothesis at least 95 percent of the time (Cohen,

1977). The 95 percent level was selected to ensure use of

the same level of confidence in accepting and rejecting the

null hypothesis. If the true correlations are less than

.30, then type II error is greater than .05, but it can be

concluded that all the true correlations between quality and

the environmental dimensions are small or negligible (less

than .30).

Statistical Power

A common misinterpretation about statistical testing

involves the relationship between sample size and level of

statistical significance. If a given relationship is found

to be statistically significant at a given confidence level,

it is often implied that greater confidence could be

achieved with larger sample sizes (Sawyer and Peter, 1983;

Rosenthal and Gaito (1963). While larger sample sizes

reduce sampling error because they more closely approximate

the population parameters, it is clear that "differences in

110

the amount of sampling error are included explicitly in the

computation of statistical significance tests" (Sawyer &

Peters, 1983). Peters & Sawyer (1983) in an examination of

statistical significance tests further stated that:

Moreover, because effect size is a measure of the strength of the relationship and large effects are more likely to be re-plicated than small ones, researchers should have more confidence in the study with the smaller sample.

Meyer (1974) further demonstrated this with a Bayesian

analysis of bionominal data with different samples sizes and

found that "though a larger sample size helps to reduce the

sampling error...it does not necessarily increase the

probability of a valid rejection." Using Cohen's (1977;

1983) convention for .30 medium effect (ES = population

product-moment correlation coefficient and n=500), .80 power

level, and testing all hypotheses as directional at alpha of

.05, the recommended sample size is 84. To recap the

hypotheses and testing, Table 3.2 is provided.

Ill

TABLE 3.2

SUMMARY OF HYPOTHESES AND STATISTICAL TESTS

HYPOTHESIS FACTORS QUALITY

STATISTICAL TEST ENVIRONMENTAL

HI: P < 0 Management commitment Compliance t test

H2 : P < 0 Management commitment Emissions t test

H3 : P < 0 Quality department Compliance t test

H4 : P < 0 Quality department Emissions t test

H5: P < 0 Training Compliance t test

H6 : P < 0 Training Emissions t test

H7 : P < 0 Product/service design Compliance t test

H8 : P < 0 Product/service design Emissions t test

H9 : P < 0 Supplier quality Compliance t test

H10 : P < 0 Supplier quality Emissions t test

Hll: P < 0 Process management Compliance t test

H12 : P < 0 Process management Emissions t test

H13 : P < 0 Data and reporting Compliance t test

H14: P < 0 Data and reporting Emissions t test

HIS: P < 0 Employee relations Compliance t test

H16 : P < 0 Employee relations Emissions t test

112

Chapter Summary

This chapter described the method used to test the

hypotheses listed in Chapter 2. Surveys were sent to a

sample of the Standard and Poor 500 companies via INTERNET,

fax or mail to determine quality practices in the respective

organizations. Data used to measure environmental

performance was obtained from the Investor's Responsibility

Research Center, which compiles information on the S & P 500

to determine compliance and emissions standards.

After the responses were received, data was analyzed to

determine the relationship between the variables of quality

and environmental performance, measured by compliance and

emissions efficiency. Using Pearson's product-moment,

correlation coefficients were calculated and t-tests were

performed to determine any statistical significant of the

differences. A summary of the hypotheses and test statistics

is represented in Table 3.2.

CHAPTER 4

DATA ANALYSIS AND RESULTS

The data analysis and results of this study are

discussed in this chapter. Descriptive statistics profiled

the raw data collected from the respondents. Pearson's

Product Moment Correlation was used to determine the

correlation between primary data obtained from the

companies' quality practices and secondary data that

measured the companies' environmental emissions and

compliance performance. To interpret the meaningfulness of

the correlation coefficients, t tests were calculated. Each

hypothesis was tested to determine whether it was

supported/not supported by the data analyzed.

Respondent characteristics

The study used the Standard and Poor 500 companies.

They represent a diverse number of companies and are

perceived as being representative of the largest and most

competitive organizations in the United States. Originally,

the author planned to reach a majority of the companies

through electronic mail, but discovered that few companies

maintain an external electronic mail system on the INTERNET.

A contingency plan was implemented so 487 requests for

113

114

participation and information regarding whom the survey

should be directed, were faxed. Thirteen fax numbers were

invalid. The fax response rate was relatively effective as

the majority of surveys faxed were returned within one week.

One hundred sixty-three companies agreed to participate and

provided names of respondents. Surveys with accompanying

instructions concerning the research were faxed to the

designated respondents. If surveys had not arrived within

two weeks, reminder notices were faxed. After four weeks,

additional notices were transmitted asking whether another

survey should be sent. Of the 163 surveys sent, 84 were

returned as useable surveys. Demographics indicated that

the sample was representative, with a wide variety of

industries represented.

Contextual Results

To determine the nature of the operating environment

and levels of competition and corporate emphasis on quality

and environmental issues, respondents were asked to reply to

a number of contextual questions. Results of contextual

questions revealed that 89.2 percent felt the degree of

competition faced by their company was high to very high and

83.4 percent faced moderate to high industry entry barriers.

Additionally, 85.7 percent noted that consumer demands for

quality were high to very high and that regulatory/legal

requirements for product quality were moderate to high (95.3

percent). The categorical responses to the contextual

questions are shown in Table 4.1.

115

TABLE 4.1

SUMMARY OF CONTEXTUAL FACTORS

FACTOR MEAN VERY LOU

LOW MODERATE HIGH VERY HIGH

Degree of competition 4.41 4.8% 6.0% 32.1% 57.1%

Industry entry barriers 3.60 1.2% 14.5% 30.1% 31.3% 22.9%

Consumer quality demands 4.28 3.6% 10.7% 39.3% 46.4%

Legal/Regulatory requi rements

4.02 1.2% 3.6% 26.2% 29.8% 39.3%

Demographics

Demographic analysis revealed that 90.5 percent of the

companies currently have international operations, predomi-

nantly through exportation (81.0 percent) and 95.2 percent

responded that headquarters were located in the United

States. The respondents showed an average length of time

with the company of 16.6 years and with an average level of

responsibility at the mid-management level. The majority of

companies averaged 42,254 employees worldwide with the mean

total sales revenues being $ 2.5 billion. Table 4.2

represents a profile of the respondents.

116

TABLE 4.2

RESPONDENT PROFILE

CHARACTERISTIC MEAN RESPONSE

Companies with international operations

90.5%

Primary mode of internationalization through exportation

81.0%

U.S. Headquarters 95.2%

Number of employees 42,254

Sales revenues $2.5 billion

Data Analysis

Prior to testing the hypotheses, correlations among all

of the quality factors were determined. Table 4.3 presents

the descriptive statistics and factor intercorrelations.

None of the intercorrelations were noteworthy, suggesting

that multicollinearity should not be a serious problem in

this study. Using variance inflation factors as suggested

by Myers (1990) and the condition number (square root of the

ratio of the largest to smallest eigenvalue in the predictor

matrix), analysis further confirmed the non-existence of

multicollinearity. Though subjective, this analysis has

been used to determine multicollinearity (Myers, 1990;

Freund and Littrell, 1991; Judge and Dobbins, 1995).

117

TABLE 4.3

DESCRIPTIVE STATISTICS AND INTERCORRELATIONS

Variable H SO 1 2 3 4 5 6 7 8 0

Management commitmentO) 3.57 .746 1.000 .5770 .6030 .6964 .5579 .4928 .5672 .6914 1 Quality department(2) 3.93 .656 1.000 .5849 .5251 .4701 .4700 .5672 .6914 i Training(3) 3.36 .742 1.000 .4942 .4305 .5034 .5708 .7149 I Product service design<4) 3.63 .685 1.000 .6270 .6293 .6590 .7063 I Supplier quality<5) 3.37 .714 1.000 .4940 .5777 .6244 D Process Management(6) 3.37 .597 1.000 .7028 .6450 1 Data and report?ng(7) 3.41 .784 1.000 .6378 8 Employee relations(8) 3.24 .713 1.000 8

p < .001

Correlation research requires that certain assumptions

be made regarding the nature of the study. First, this

method of research should demonstrate that the concept,

problem-solving performance, can be accurately and reliably

measured (Keppel and Zedeck, 1989). Second, it is assumed

that the correlational design is used to clarify, suggest,

refine or amplify experimental findings and does not imply

cause and effect relationships. Third, it is assumed that

the variables are linearly related, although in many studies

involving the association or relationship between two

variables, there may be no clear basis for designating one

of the variables as independent/dependent and the decision

is more or less arbitrary (Edwards, 1976).

Correlation coefficients were determined using

Pearson's Product Moment Correlation. The computation of

the correlation coefficient involves the relative distances

of the scores from the two means of the distributions

(Thomas and Nelson, 1990). First, hypotheses 1, 3, 5, 7, 9,

118

11, 13 and 15 were tested to determine if significant

correlation existed among the eight factors of quality and

the first measure of environmental performance or emissions

efficiency.

Hypotheses Related to Emissions Efficiency

Analysis indicated that Hypotheses 1, 3, 5, 7, 9, 11,

13, and 15 were not supported. The correlation analysis

revealed a positive correlation, with the exception of

Hypothesis 5 which indicated a nonsignificant negative

correlation (-.034, alpha .05). With this instrument, a

positive correlation indicates a negative relationship

between the quality practices and the emission efficiency

indices. This information is summarized in Table 4.4.

119

TABLE 4.4

CORRELATIONS BETWEEN QUALITY FACTORS AND EMISSIONS EFFICIENCY

Quality factor Correlation coefficient

df t P value

HI: Management commitment .113 82 1.03 .846

H3: Quality Dept. .059 62 .480 .685

H5: Training .210 82 1.94 .972

H7: Product/ Service design .058 82 .513 .696

H9: Supplier Quality -.034 82 -.304 . 381

Hll: Process Mgmt .244 82 2.25 .986

H13: Data and reporting .109 82 .989 .836

H15: Emp. Relations .205 82 1. 90 .969

Second, hypotheses 2, 4, 6, 8, 10, 12, 14 and 16 were tested

to determine if any correlation existed among the eight

factors of quality and the second measure of environmental

performance or compliance.

Hypotheses Related to Compliance

Hypotheses 4. 6 and 14

Analysis indicated that Hypotheses 4, 6 and 14 were not

supported. While the correlation coefficients were

negative, t tests indicated that the relationship was not

significant. Therefore, there appears to be no positive

120

relationship between the role of the quality department,

training, and data and reporting with the compliance index.

Hypotheses 2, 8, 10. 12 and 16

Statistical analysis indicates there is a positive

relationship and supports hypotheses 2, 8, 10, 12 and 16.

Management commitment, product/service design, supplier

quality, process management and employee relations appear to

be positively related to the compliance index measure. The

higher the level of quality indicated in each of the

factors, the lower the compliance index. This information

is summarized in Table 4.5.

121

TABLE 4.5

Quality factor Correlation coefficient df

t P value

H2: Management commitment -.237 82 -2.21 .015*

H4: Quality Dept. -.144 62

CO H •

H 1 .121

H6: Training -.143 82 -1.31 .098

H8: Product/ Service design -.303 82 -2.81 .003*

H10: Supplier Quality -.323 82 -3.05 .002*

H12: Process Mgmt -.355 82 -3.40 .001*

H14: Data and reporting -.175 82 -1.60 .058

H16: Emp. Relations -.233 82 -2.17 .017*

•Significant at .05

Results revealed that eleven of the hypotheses were not

supported and five were supported. Table 4.6 summarizes the

hypotheses tested.

122

TABLE 4.6

RESULTS OF HYPOTHESES TESTED

HI: Management commitment is correlated with emissions efficiency

Not supported

H2: Management commitment is correlated with environmental compliance

Supported

H3: Quality department is correlated with emissions efficiency

Not supported

H4: Quality department is correlated with environmental compliance

Not supported

H5: Training is correlated with emissions efficiency

Not supported

H6: Training is correlated with environmental compliance

Not supported

H7: Product/service design is correlated with emissions efficiency

Not supported

H8: Product/service design is correlated with environmental compliance

Supported

H9: Supplier quality is correlated with emissions efficiency

Not supported

H10: Supplier quality is correlated with environmental compliance

Supported 8

Hll: Process management is correlated with emissions efficiency

Not supported

H12: Process management is correlated with environmental compliance

Supported

H13: Data and reporting is correlated with emissions efficiency

Not supported I

H14: Data and reporting is correlated with environmental compliance

Not supported |

H15: Employee relations is correlated with emissions efficiency

Not supported I

H16: Employee relations is correlated with environmental compliance

Supported

123

Chapter Summary

This chapter presented the results of the study.

Discussion included a summary of the contextual factors,

analysis of the data to determine intercorrelations, and

calculation of the correlation coefficients and t tests to

determine the significance of the correlation coefficients.

Additionally, sixteen hypotheses were tested to determine

whether any relationship existed between any of the

identified quality practices and two measures of

environmental performance. Analysis identified that eleven

of the hypotheses were not supported and five were

supported. The next chapter will discuss the findings,

their implications and limitations, and future research.

CHAPTER 5

DISCUSSION OF RESULTS

This chapter will discuss the results presented in

Chapter 4 and the implications of these findings. Addi-

tionally limitations and directions for future research will

be addressed.

Discussion of Hypotheses

All eight quality practices were tested against two

measures of environmental performance: emissions efficiency

and compliance. Quality practices were determined from

primary data gathered from the sample. Environmental

performance was determined by using the emission efficiency

index and compliance index published by the IRRC.

Hypotheses related to Emissions Efficiency

While quality practices may appear to be intuitively

related to reduced emissions, results of this study

apparently do not support the relationship. All hypotheses

tested relating to quality practices and emissions

efficiency demonstrated no significant association.

Companies that have higher levels of emissions of toxic

chemicals may face greater environmental risks than

companies with lower emissions because of the potential for

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125

negative publicity, litigation based on Toxic Release

Inventory (TRI) information, and escalating cost of

pollution and waste management. Despite the exemption of

certain industries due to minimum employee or chemical usage

size, many companies have reduced, or plan to reduce their

toxic emissions (IRRC, 1994). It is assumed that the

failure to find any significance could stem from a number of

reasons. First, emissions data suffers from certain

inconsistencies: data is self-reported, use of different

methods for estimating emissions, and uncertainty about the

reportable industrial wastes. Second, many of the

organizations have not achieved recognizable results from

TQM with about 58 percent acknowledging complete

implementation. Additionally, emissions data is somewhat

time-lagged. Longitudinal collection of data at relatively

short intervals could provide empirical validation of these

time lags (Monge, 1990). Future replication of this study

to account for these inconsistencies could represent a

completely different outcome.

Third, companies that have higher levels of toxic waste

emissions may face great environmental risks than companies

with lower emissions levels. Emissions appear to be

concentrated in a handful of industries. The chemical

industry alone accounts for more than 26 percent of total

S & P 500 emissions in 1989-1991, with two companies solely

accounting for about 21 percent of the total (IRRC, 1994).

126

The broad variation may stem from various waste reduction

programs, the use of different production processes,

differences in pollution creating businesses, or the extent

of components out sourced from external suppliers. While

this study looked at the aggregate of all industries, future

research should separate various industries.

Hypotheses related to Compliance

When companies fail to meet standards and requirements

imposed by environmental statutes, they may be subject to

notices of noncompliance, administrative fines, and civil

penalties that require remediation, or even criminal

proceedings against the company and/or executives.

Noncompliance penalties also can be viewed as an inexact

proxy for the level of effort and expense that a company

devotes to legislated standards for environmental

performance. The primary costs of compliance are company

activities and expenses associated with achieving

performance standards set by regulations. Penalty amounts

consistently above or rapidly increasing above industry

norms may be a warning that environmental conditions are not

carefully considered (IRRC, 1994) .

The five hypotheses supported in this study related to

the compliance measure of environmental performance. More

specifically, while results disclosed no relationship

between compliance and quality departments, training, and

data and reporting, analysis showed a significant

127

relationship between management commitment, product/service

design, supplier quality, process management and employee

relations.

The role of the quality department in association with

environmental compliance may be difficult to clarify. The

department's primary role is seen as supportive to the

quality effort, rather than providing information to improve

compliance. Training may suffer from the same type of

specificity to the quality domain. As shown in the review

of literature concerning quality training, most efforts have

concentrated on such issues as team building, communication,

and continuous process improvement tools, rather than

focusing on compliance with environment statues. Likewise,

with data reporting, non-support could be associated because

most quality information is specific to costs associated to

non-conformance, or defects, rather than costs related to

noncompliance with environmental laws. The following

sections examine the significant relationships supported in

this paper between five quality practices and compliance.

Management Commitment and Compliance (H2)

First as noted in Chapter 2, theory indicates that the

commitment of management to any new management change is

primary. Thus it is not surprising that management

leadership is the primary instigator in TQEM. "Teach and

institute leadership" is one of W. E. Deming's Fourteen

Points. Quarles (1976) noted that affirmative leadership is

128

required for controlling the "adverse environmental side

effects of industrial activity" and challenged industry to

implement sound ecomanagement practices. Research (Bower,

1969; Ackerman, 1973; Andrews, 1973; Salter, 1973) regarding

corporate environmental responsibility, has demonstrated

that regardless of the sound ecomanagement practices

implemented, organizations will simply become amoral

corporate structures without the guidance of strong

ecoleadership.

This study supported a positive relationship between

management commitment and compliance, suggesting that

organizational leaders are taking a more proactive role in

supporting sound compliance with environmental standards. A

1990 survey by Deloitte & Touche revealed that regulatory

compliance issues dominate environmental concerns for most

corporations and a more recent survey (1991) revealed that

77 percent of senior management now see the environment as a

major dimension of their strategy. Instead of perceiving

that law and regulations (compliance) are the driving forces

that eventually impact strategic management, core

environmental values are now becoming the emerging view of

the environment as a strategic priority. This study was

directed to those in the organizations having clear

corporate responsibility and knowledge, thereby lending

credence to the tested hypothesis supporting the

relationship between management commitment and compliance.

129

Product/service design and Compliance (H8)

Hypothesis 8 was supported, confirming a significant

relationship between product/service design and compliance.

Product design guides many aspects of the manufacturing

process, dictating cost, quality and environmental

compatibility. Yet, the role of the competitive strategy

has been fundamentally ignored. In the product

manufacturing process, while the design phase only accounts

for about 5 percent of the product's cost, between 7 0 - 8 0

percent of the product's life-cycle cost (materials,

manufacturing, distribution, servicing) is dictated by its

design (Oakley, 1993). Knowledge of this, makes it

difficult to determine why a direct relationship was not

established between product/service design and emissions.

Four major compliance trends that affect product design

appear to be merging. First, globalization of products has

necessitated that product design be compatible with

international environmental laws and regulations. As

exemplified in the respondent profiles, 90.5 percent of the

companies have international operations. Governments are

seeking harmonization in environmental legislation, leading

to a general increase in environmental requirements. Second,

many states are passing laws to reduce the sources of solid

wastes, with a majority of the legislation dealing with

packaging and disposable consumer goods. Additionally, the

U.S. government is considering revisions to the RCRA

130

concerning solid waste generation. The RCRA currently is a

legislative compliance mechanism that accounts for the

greatest number of compliance violations. Surveyed

companies noted the importance of the legal and regulatory

environment (69.1 percent) to their operations. Third, new

requirements regarding product labeling have prompted many

companies to seek new product designs. Companies fearing

the market effect of labeling their products as

environmentally threatening, has led to new innovations in

product design and quality. Accordingly, the survey

identified customer needs for quality as a high priority

(85.7 percent). Fourth, many governments are adopting

procurement standards that specify the preference for

recycled materials. According to Paton (1993) "Product

lines may gain significant savings by changing

specifications...to permit inclusion of recycled content."

Increasingly, new terminology is surfacing that addresses an

interface between product design and the environment: design

for the environment, design for reuse, to mention only a

few. Many of the TQM practices present in organizations

offer significant opportunities for reducing the

environmental consequences from product manufacturing

processes.

Supplier quality and Compliance (Hicn

Hypothesis 10 was supported showing the positive

relationship between supplier quality and compliance.

131

Supplier quality can play a critical part in the

manufacturing of ecologically safe products. Manufacturing

organizations are examining suppliers' environmental

practices to determine if their policies are consistent with

the organization's policies and standards. Potential direct

and indirect impacts of supplier activities are considered

in the selection process. Historical and current compliance

records can be used to track the suppliers and determine

whether the supplier is retained. Compliance regulations

regarding manufacturing issues, such as labeling, also

affect suppliers, and organizations wishing to avoid any

pass-through of liabilities may wish to scrutinize suppliers

regarding environmental practices.

Process management and Compliance CH12^

Hypothesis 12 confirmed a relationship between process

management and compliance. Ecologically focused process

management offers new opportunities for improving

environmental impacts and reducing non-compliance.

Conscious consideration of the environmental impact of

manufacturing involves developing and implementing processes

that minimize or reduce hazardous chemical waste, reduce

scrap, and improve compliance. Recognition of this leads

companies to alter their mindset from an end—of—pipe

control, to meet environmental regulations, to avoiding

pollution at the beginning (Weissman and Sekutowski, 1992).

For example, a total quality-focused company can utilize

132

process control indicators, such as compliance audits, to

evaluate how the processes are working (Greenberg and Unger,

1992). Review of the findings then allow the organization

to modify the system for better compliance and overall

continuous improvement.

Employee relations and Compliance (H16)

Hypothesis 16 established an association between

employee relations and compliance. Deming was a strong

proponent of worker participation in decision making and

advocated that "constancy of purpose for improvement of

product" (Deming, 1986) could best be achieved through

involvement of employees. Companies approaching full

implementation of TQM have reported a number of relevant

findings: flattening of hierarchies, increased empowerment

in divisions and plant floors, and integration through a

team approach of most management functions (Thomlison,

1992). Teams are often responsible for prioritizing quality

and environmental improvements by addressing the cost of

noncompliance. In doing so, they share in the

responsibility of setting internal compliance objectives

which often results in reduced costs and reduced

environmental impact of the goods they produce.

Results inconsistencies

Lack of statistical support for emissions efficiencies

could be attributable to two factors. First organizations

133

have just begun to realize the importance of adopting

proactive environmental programs, rather than responding in

a reactionary manner as crises appear. Mitroff (1994) has

noted that this logic has begun to change with organizations

who have identified the relationship between environmental

performance and profitability. This is consistent with how

scholars (Sethi, 1975; Buchholz, 1991) have characterized

the life cycle process in social responsibility research.

Second, inconsistencies could be attributable to the various

implementations of TQM throughout the surveyed

organizations. Hackman and Wageman (1995) noted that the

measurement, exogenous disturbances, and temporal issues can

make it difficult to statistically verify TQM. In addition,

trends are surfacing that indicate a gradual movement to TQM

adoption, but with the realization that this trend has been

tediously slow.

Research Limitations

The results presented should be interpreted with

caution, due to the difficulties associated with self-

reported data. Common method variance can occur and as

Podsakoff and Organ (1986) noted, "many organizational

research issues stubbornly resist reformulation in terms of

other approaches" and the relationship between quality

practices and environmental performance may be one of these.

Despite the problems identified in using surveys, the

practicality of these measures "makes them virtually

134

indispensable in many research contexts" (Podsakoff and

Organ, 1986). Furthermore, since the data gathered

concerning quality practices and environmental performance

was collected from two different sources, common method

variance is not deemed a valid limitation. Other

limitations addressing the fallibility of surveys, have been

well documented by several researchers (Nunnally, 1967;

Phillips, 1981; and Sudman, 1976).

Another limitation is that cause-effect relationships

between the variables in this study could not be established

given the research methodology employed. Although this

limitation can be minimized through the use of some

longitudinal or experimental designs, the use of such

methods was beyond the scope of this study as originally

proposed.

Construct validity

Cook and Campbell (1979) serve as the definitive source

for research methodology. As with most correlational

studies, construct validity is the issue that must be

addressed. In this particular study, threats of mono-method

bias, hypothesis guessing, and evaluation apprehension were

evaluated.

Mono-method bias can occur when data is collected

primarily through one means. This study employed the use of

survey completion by electronic transmission, namely fax,

although several responses were received by mail. In

135

addition, statements were worded both negatively and

positively, to lessen any bias that might occur as a result

of single-direction wording.

Hypothesis guessing was not possible as the hypotheses

tested were developed from two sources of information. The

respondents had no information regarding the association of

their input to the environmental performance measures

gleaned from secondary sources.

Evaluation apprehension should be considered as a

threat to construct validity. Respondents to the survey

were profiled from the demographics as having a position of

long tenure and high familiarization with the organization.

While respondents may want to divulge only the most positive

information, perusal of the data appeared to reflect

realistic appraisals.

Statistical conclusion validity

Statistical conclusion validity must be addressed as a

threat to construct validity. Factor analysis revealed that

statements measuring three of the quality factors (training,

product design, and supplier quality) yielded two factor

loadings each. This information is inconsistent with

Saraph's validation of the instrument and should be

considered as an explanation for nonsignificance of those

hypotheses related to emissions efficiency.

136

Rival Hypotheses

As with most developing research topics, the

relationship tested between quality practices and compliance

and emissions demonstrated mixed results. Scholars (Webb et

al, 1966; Neale and Liebert, 1973) have suggested that rival

hypotheses must be acknowledged and enumerated based on

existing knowledge. The only identifiable rival hypothesis

is that the size and financial strength of the organization

could unduly bias the environmental measures. While studies

have shown a significant relationship between organizational

size and pollution (Bragdon and Marlin, 1972; Bowman and

Haire, 1975; Spicer, 1978), the IRRC data utilized in this

study was size normalized.

While this study was the first to explore the

relationship between quality and environmental performance,

it suffered from a number of limitations imposed in any

descriptive research. Nevertheless, the results suggest

that a relationship exists between certain quality practices

and compliance.

Contributions to Current Knowledge

In the United States, public concern, changing

environmental statutes and expanding litigation has elevated

environmental issues on the priority list of management.

Increasing costs of pollution control, and potential

liabilities include not only new technologies and cleanup

costs, but escalating administrative costs and lower

137

corporate credit ratings (Newell, et al., 1990). Many

investors are requiring environmental audits to determine

potential liabilities prior to acquisitions (Solomon et al,

1985).

Although the magnitude of environmental compliance

penalties levied by governmental authorities is quite modest

relative to the size of major companies, TQEM, remediation,

pollution control, legal and other compliance costs are a

large and rapidly growing concern in many industries.

Environmental expenditures now account for approximately 2

percent of the nation's gross domestic product and are

continuing to increase (IRRC, 1994). As a result, the

environment has been elevated to the level of strategic

concern for a number of industries (Edwards and Kuusinen,

1989) .

According to the IRRC trends in environmental

compliance data have shown an increase in assessed

penalties. Total federal penalties against the S & P 500

companies nearly tripled in 1991, to $102 million, with the

highest penalties assessed under the Resource Conservation

and Recovery Act (RCRA). Companies are responding in a

number of ways: improved environmental audit systems,

inclusion of environmental information in public sources,

and modification of products and services in response to

environmental concerns.

138

Because standards for assigning monetary penalties vary

among the environmental statutes, compliance is best

compared with that of other companies subject to that

statute, rather than with penalties under other statutes.

The environmental data utilized has normalized penalty

assessments under each statue to account for the size, using

domestic revenue as a surrogate for size. The total value

of penalties assessed against the S&P 500 companies for

violation of the major environmental statutes totaled more

than $173 million during 1989-1991 with the smallest non-

compliance penalties assessed under the Occupational Safety

and Health Act and the largest non-compliance assessments

under the Clean Water Act. (IRRC, 1994).

Despite frequent industry criticism of specific

"command and control" regulation and the increasing

prominence of "market-based" and voluntary environmental

regulations, environmental compliance remains relevant to

environmental management. It is far from being the overall

benchmark measure of a company's overall environmental

performance.

Hazilla and Kopp (1990) suggested that social costs of

compliance regulations exceed private costs: incorporating

the impact of regulations on investment and labor supply,

environmental regulation expanded the EPA's original

estimate of $78 million in 1990 to $203 million. While

ecological goals can be set through regulation, market

139

forces are the most effective at changing individual waste

generation. Instead of a "command and control" approach,

programs such as the "Project 88" let companies choose the

most cost effective solutions (The Economist. 1988; Begley

and Hager, 1991).

Organizations that strive to improve their

environmental performance will seek new methods of

operation, such as TQM, and through the integration of

compliance, pollution prevention and strategy achieve sound

ecomanagement. While this study was descriptive in nature,

and did not support the hypothesized relationship between

emission efficiency and quality practices, it is hopeful

that organizations will eventually identify the positive

environmental benefits between these two fields.

Organizations must recognize the interdependence and

connectedness of their operations to the environment and

their responsibility to sustainable development (Buchholz,

1991).

Future Research

Tom Peters has argued that the company of the future

will ke "lean, green, and clean," with "massive competitive

advantage" (1987). Strategist, Michael Porter, has stated

that "the conflict between environmental protection and

economic competitiveness is a false dichotomy... Strict

regulations do not inevitably hinder competitive advantage

against foreign rival...they often enhance it" (1991).

140

Cairncross (1991) in her stark synopsis of environmental

conditions, optimistically admits that the environment

"represents an extraordinary opportunity... for enterprise.11

TQEM will be central to ecologically sound business (Gladwin

and Eidlin, 1993).

Traditional management theories are constantly being

revised to adapt to these changing conditions. One such

change will be the recognition of the ecological risk and

degradation from business operations on our natural

environment. Researchers and practitioners alike are

seeking to understand and explore new management methods

that address issues such as quality and the natural

environment. As Shrivastava (1995) states, "This new

concept of strategy deals with the co-alignment of an

organization with its environment...and the flowering of

green organizational/management theories and practices." A

recent issue of The Academy of Management Review (October,

1995) is devoted to the topic of ecologically sustainable

organizations and encourages academia to seek new paradigms

that address the importance of the natural environment in

achieving sustainability. The recognition of the strategic

importance of the ecological environment could stimulate the

burgeoning topic in today's literature.

Another management area that could possibly benefit by

this study is in the social responsibility literature. The

author sees a very close parallel to social responsibility

141

life cycle theory (Buchholz, 1991). Using the research

could justify what several authors have identified as new

environmentalism (Buchholz, 1991; Preston, 1986; Rodman,

1983) , where "ecological consciousness" transcends

traditional environmentalism, and reactive actions are

replaced by proactive approaches. Hunt and Auster (1990)

described this as a series of stages, where companies are

complying with environmental issues, admitting the presence

of pollution problems, recognizing the importance of

addressing their environmental problems, establishing

mechanisms for determining environmental issues and

proactively seeking continuous improvement to lessen

ecological impacts. Using this theory may explain the

support for the compliance relationship which is comparable

to the reactive stage and non-support of the emissions

relationship that corresponds to the more proactive (total

quality approach) stage.

It is suggested that future replications of this study

should develop an overall measure of quality based on the

quality factors utilized, rather than specifically examining

each individual dimension. It is presumed that the

cumulative synergy of those factors could demonstrate more

significance in the relationship between quality and

environmental performance.

Current organizational assessment indicates a

relationship may exist between certain quality practices and

142

environmental performance, but that future research should

address the issue over an extended period of time. As noted

by Shrivastava & Mitroff (1984) organizations and academia

should strive to search for ways in which to integrate

research and application to real-world situations. As Peter

Drucker (1989) has noted, we must recognize the paradox

between our economy and ecology, and change the way we think

about their interaction. To treat environmental impact as

"externalities" can no longer be tolerated. This study

could serve as a means for establishing the relationship

between two seemingly diverse fields, and suggesting its

importance to future organizational research.

143

Chanter Summary

This chapter provided a narrative description of the

results and how each hypothesis was affected. While

emissions efficiency hypotheses were not supported by the

analysis, companies should recognize the potential for

integration of TQM and environmental performance. Of the

eight hypotheses tested relating quality practices and

compliance, five of the propositions were supported, and

three were not. Management commitment, product/service

design, process management, supplier quality, and employee

relations were positive related to the compliance index.

Furthermore, this chapter identified the implications of

these findings, research limitations, and directions for

future research.

APPENDIX A

144

145

Crosby's 14 Step Quality Improvement Process

1. Management Commitment 2. Quality Improvement Teams 3. Measurement 4. Cost of Quality 5. Awareness 6. Corrective Action 7. Zero Defects Planning 8. Employee Education 9. Zero Defects Day

10. Goal Setting 11. Error Cause Removal 12. Recognition 13. Quality Councils 14. Do It All Again

Source: Crosby, Philip B. Quality is Free. (New York: McGraw-Hill, 1979).

APPENDIX B

146

147

U. Edwards Demi rig's 14 Points as They apply to the

Environment (Adapted by Greenbridge Management, Inc.)

1. Create constancy of purpose toward minimizing detrimental environmental effects with a plan to remain competitive and stay in business.

2. Adopt the new philosophy. You are in a new environmental age. You can no longer live with accepted levels of contamination and environmental destruction.

3. Cease dependence on end-of-pipe treatment of waste streams. Require, instead, statistical evidence that environmental protection is built into processes. Purchasing managers have a new job and must learn.

4. End the practice of awarding business on the basis of price tag. Instead, depend on meaningful measures of environmental protection, quality and price.

5. Find problems. It is management's job to work continuously on the system. It is not enough to wait for the environmental inspector to knock on your door.

6. Institute modern methods of training employees in environmental protection on the job.

7. Institute modern methods of supervision of production workers. The responsibility of the foreman must be changed from sheer numbers to environmental protection, quality, and the elimination of waste.

8" Drive out fear, so that everyone can work effectively for the company and so that employees will alert management to environmental problems.

9. Break down barriers between departments. People in research, design, sales and production must work as a team to foresee problems in production that might be encountered and cause detrimental environmental effects.

10. Eliminate numerical goals, posters, and slogans for the work force that ask employees to protect the environment without providing methods to do so.

11. Eliminate work standards that prescribe numerical quotas with no regard to environmental protection.

12. Remove barriers that stand between the hourly worker and his or her right to pride of workmanship and his or her right to protect the environment.

13. Institute a vigorous program of education and training.

14. Create a structure in which top management will push employees every day to meet the first 13 points.

Source: Green, Philip E.J. "Environmental TQM." Quality Progress. May, 1993: p. 77-80.

APPENDIX C

148

149

PART ONE: QUESTIONS PERTAINING TO QUALITY PRACTICES

Pleas* rate each of the following quality Issues ori how you feel quality Is being practiced in your company. 1*Very Low (VI), 2*Low (L), 3«Moderate 00, 4«High <«), 5«Very High (VH>, 6« Not Applicable <NA)

1. Kole of Top Management & Quality Policy VL L M

Extent to which the top executive (responsible 1 2 3 for quality performances) assuaes responsibility for quality performances.

Acceptance of responsibility for quality 1 2 3 by major department heads.

Degree to which top management (top executive 1 2 3 and major department heads) is evaluated for quality performance.

Extent to which the top management supports 1 2 3 long-term quality improvements process.

Degree of perticipetfon by major department 1 2 3 heads in the quality improvement process.

Extent to which the top management has distinct 1 2 3 objectives (e.g. MBOs) for quality performance.

Specificity of quality goals within the company 1 2 3

Comprehensiveness of the goal setting process 1 2 3 for quality.

Extent that quality goals and policy are 1 2 3 understood within the company.

Importance attached to quality by top 1 2 3 management in relation to cost and schedule objectives.

Amount of quality review in top management 1 2 3 meetings.

Degree that top management considers quality 1 2 3 improvement as a way to increase profits.

Degree of comprehensiveness of quality plan 1 2 3 within the company.

2. Kole of the Quality Department

Does your company have a separate quality department? YES

If the answer is NO, should your company have a YES separate quality department?

VH

MO

MO

MA

6

6

6

6

6

6

6

6

6

6

6

6

6

If your company has NO separate »JaUty department, please skip the rest of this se«Knt and begin on sequent 3.

Visibility of the quality department 1 2 3

Quality department's access to top management 1 2 3

Autonomy of the quality department. 1 2 3

Utilization of quality staff professionals 1 2 3 as a consulting resource.

Amount of coordination between the quality 1 2 3 department and other departments.

Effectiveness of quality deportment in 1 2 3 improving equality.

150

Training

Specific work-skills training (technical and vocational) given to the hourly employee* throughout the company.

Team Building and Groif> Dynasties Training for employees.

Quality related training given to all managers/ supervisors throughout the company.

Training in the "total quality concept" i.e, philosophy of company-wide responsibility for quality, throughout the company.

Training of employees to implement quality circle type program.

Training in the basic statistical techniques (such as histograms, control charts etc.) in the company as a whole.

Training in advanced statistical techniques (such as design of experiments, regression analysis etc.)

Commitment of top management to employee training.

Availability of resources for employee training.

Product/Service Design

Thoroughness of new product/service design reviews before the product/service is produced arid marketed.

Coordination among affected departments in the product /service development process.

Quality of new products/services emphasized in relation to cost or schedule objectives.

Extent of analysis of customer requirements in product/service development process.

Clarity of product/service specifications and procedures.

Extent to which inplementation/producability is considered in the product/service design process.

Extent that sales and marketing people consider quality as a salable trait.

Quality emphasis by sales, customer service, marketing and P* personnel.

VL

Supplier Quality (Supplier of goods and/or serv

Extent that sifspliers are selected based on quality rather than price or schedule.

Thoroughness of the supplier rating system.

Reliance on reasonably few dependable suppliers.

Amount of education of suppliers by company.

Technical assistance provided to the suppliers

Involvement of the suppliers in the product development process.

2

2

2

2

2

2

2

es)

3

3

3

3

3

3

3

VK

5

5

5

5

5

5

5

5

5

5

5

5

5

U

6

6

6

6

6

6

6

6

6

6

6

6

6

Extent that looker term relationships are offered to suppliers.

Clarity of specif feations provided to the si43pUers.

Responsibility assumed by purchasing department for the quality of incoming products/services.

Extent to which suppliers have programs to assure quality of their products/services.

6. Process Management/Operating Procedures

Use of acceptance sampling to accept/reject batches of work.

Use of statistical control charts to control processes.

Amount of preventative equipment maintenance.

Extent that inspection, review, or checking of work is automated.

Amount of incoming inspection, review, or checking.

Amount of final inspection, review, or checking.

Importance of inspection, review, or checking of work.

Self*inspect ion of work by workers.

Stability of production schedule/work distribution.

Degree of automation of the process.

Extent that process design is "foolproof" minimized the chances for employee errors.

Clarity of work or process instructions given employees.

7. Quality Data and teporting

Availability of cost of quality data.

Availability of quality data (error rates, defect rates, scrap, defects, etc.)

Timeliness of the quality data.

Extent of quality data collected by the support/service areas.

Extent that quality data (cost of quality, defects, errors, scrap, etc.)

VM

5

151

HA

6

6

6

6

6

6

6

6

Extent that quality data is available to hourly employees.

Extent that quality data is available to managers/s^pervi sors.

Extent that quality data affects superior/ managerial evaluations.

Extent that quality data are displayed at employee workstations.

152

VL VH MA

Employee Relations

Extent that quality-circle/employee Involvement type programs ere iwpl wented.

Effectiveness of quality-circle/eepioyee Involvement type programs.

Extent that employees are held responsible for error-free output.

Amount of feedback given employees on their quality performance.

Degree of participation in quality decisions by hourty/non-supervisory employees.

Extent that employee quality awareness measures are used.

Extent that employees are recognized for superior quality performance.

Impact of labor union on quality improvement.

Supervisor's effectiveness in handling quality dec i s i ons/probi ems/i ssues.

153

PARI TWO: QUESTIONS PCRTAIMIW TO ENVIRONMENT FACED BY TME COMPANY.

Please rite each of the following item related to environment faced by your division on a 1 to 5 acale. 1*Very Low (VL) 2*Low <L>, 3*#oderate<N), 4«High {«), 5«Very High <VN>, 6»Mot Applicable (MA)

1. Marketplace Environment

Degree of competition faced by our company.

Barriers to entry in our industry.

Quality demands of our customers and the marketplace in general.

Regulatory/legal requirements on the quality of the company's products and services.

2- Fast Quality Performance

Generally, our company's past 3-year quality performances rates.

Perceived customer satisfaction with quality for past three years.

3, Demographics of respondent's company

Do you have international operations? Yes

Where is headquarters (country) located?

Do you export goods or services? Yes No

How marry years have you been with the company

Number of employees in company worldwide

VL 1

NO

Number of employees in your company location

Total sales

Uhat is your position title?

Wiat is your management level within the whole company?

Top Middle Lower

VH

5

5

5

HA 6

Please fax to: Sharyiui Tomlin (915) 942-2119 Aagelo state University Sail Angelo, TX 76909

APPENDIX D

154

155

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