Personnel Review 27,1 20 Received February 1996 Accepted October 1997 Revised October 1997

Implementing quality in a small firm An action research approach Stephen Boon Air Technology Systems Ltd, Droitwich, Worcestershire, and

Monder Ram UCE Business School, Birmingham, UK Introduction Quality continues to be something of a preoccupation among British management. Following the “quality route” has been a consistently promulgated response to the increasingly turbulent and competitive operating environments of organisations in a variety of sectors (Dale and Cooper, 1992; Oakland, 1989). There is little sign of a slowing down from the management gurus who appear to dominate this subject (Clutterbuck, 1995); although the prescriptive approach of much of the debate is being challenged by contributions from more critical perspectives (notably, Wilkinson, 1994; Wilkinson and Wilmott, 1995). This paper focuses on the processes involved in implementing quality in a specific context. It is distinctive in two respects. First, the operationalisation of quality that will be reported on here takes place within a small firm. Much of the literature on quality, from both a prescriptive consultancy orientation and a more sceptical approach, is based on the experiences of large organisations; the implication is that the lessons derived from such settings will be equally applicable to the smaller firm. This tendency runs the risk of neglecting the importance of the small firms to the working lives of an increasing number of the population (Storey, 1994); and it ignores the potentially distinctive social-management processes that are thought to prevail in small firms, notably, informality, employee relations and learning (Hendry et al., 1995; Holliday, 1995). Second, the emphasis is on the processes involved in implementing quality in a particular setting. The intention is not to provide a “how-to” guide; of more importance are the lessons that can be learned from a number of sources, including literature and the actual experiences of others, and how they can be incorporated into a particular setting, ATS Limited (the business of the first author). The concern with practice, critical reflection and organisational change is reflected in the choice of methodological approach, which is rooted in the action research paradigm. And the format of the paper reflects the particular stages of

Personnel Review, Vol. 27 No. 1, 1998, pp. 20-39, © MCB University Press, 0048-3486

The authors would like to thank the Editor, the referees and John Sparrow for their comments on an earlier version of this paper.

the process. Accordingly, we start with an explanation of why quality was an issue for the case study organisation. This is followed by an assessment of the different phases of the action research cycle, including: insights from the relevant literature; the experiences of other small firms in similar situations; implementation of this learning at ATS; and a reflection on the total process.

Implementing quality in a small firm

Coming to quality The 1980s provided a fertile ideological backdrop for the flourishing of the notion of quality. Political discourse across the Western world stressed the importance of consumer sovereignty and the role of markets in preserving its freedom (Webb, 1995). Quality, with its eulogising of customers both internal and external to organisations (Walsh, 1995), has fitted neatly into this discourse. At an organisational level, Preece and Wood (1995) have identified four more direct pressures on companies towards the adoption of quality measures. First, as a product market initiative to gain an edge over competitors. This has been particularly evident in the rationales of small business owners embarking on quality systems, notably the standard of ISO 9000 (Holliday, 1995; North et al., 1993). Second, suppliers or customers may “encourage” organisations to take up quality systems. As larger companies gain a quality certification, they may exert pressure on the smaller companies in their supply chain to follow suit (BSI, 1994, p. 18). Third, regulatory bodies and legislation can impose requirements on companies in the conduct of their business. For instance, operating to industry trade specifications is often necessary, to operate in particular markets (BSI, 1994). Finally, the wider organisation itself may stipulate requirements for regions, divisions or subsidiaries to follow. To understand the motivation for introducing a quality management system in the case firm, and indeed any company engaged in this process, it is necessary to appreciate the nature of the business and its position in the industry supply chain (Preece and Wood, 1995). ATS was established in 1992 by the first author and a partner as a design and project management business in the industrial heating and ventilation market. The company, which now employs six people, does not manufacture; rather, it relies on a range of suppliers and sub-contract organisations. A primary reason for implementing a quality management system relates to the market that the company is in. Wherever possible, ATS target the end user. Working for the user has advantages in terms of cash flow and a mutual desire to complete the project in the appropriate time, manner and quality. However, owing to the disparate nature of the UK construction industry and the fact that end user businesses in the sector do not carry sufficient internal construction/engineering staff (they now see this as a secondary activity to the core business), many of ATS’s customers are now mechanical services firms or construction companies. Consequently, there can now be four or more links in the chain – the user, the construction company, the mechanical services company and ATS (not to mention the influence of consultants and architects). The management task of co-ordinating these groups has grown and become more complex. Yet with

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increasing competition in the sector and pressure on profit margins, the prevalence of tactics such as withholding of payments or contra-charging ATS’s accounts for so-called “errors” has increased. Quality for ATS serves as an indicator of competence that will enable it to compete with larger well-established businesses. But, unlike many reported instances of the acquisition of ISO 9000 (BS1 1994, p. 18), this interest in quality has not been imposed on ATS by its larger customers. ATS’s specialised niche position in the market and “high skill” activities make it difficult for customers to prescribe the company’s mode of operation. ATS often exercises considerable influence over the nature of customer requirements. Rather, a quality management system would provide transparency of procedures with clients. This would clarify mutual obligations; and, in so doing, reduce the risk of customers imposing penalties arbitrarily (which is a frequent occurrence in this sector). In this sense, the quest for quality was a defensive strategy. Hence quality for ATS is about the management of information, ensuring that information is passed to the correct people at the correct time; and making certain that the correct responses go to clients and suppliers to avoid litigation and unnecessary delays in payment. Taking the action research route Advice on implementing various quality systems is readily available (Huxtable, 1995; Oakland, 1989). There appears to be an ever-growing band of consultants eager to offer their services to resolve almost any organisational “problem” (Clark, 1995). But previous experience of consultants and the stories of other companies that had made use of such services induced a certain scepticism in the first author. Rather than looking to “experts” to provide a solution for ATS, the first author was keen on developing a system “organically”. In effect the aim was to develop a system that would fit with the particular contingencies of ATS. To this end, an action research approach was regarded as the most suitable vehicle for effecting the desired change. Action research, an approach first associated with the work of social psychologist Kurt Lewin in the 1940s, has been a valuable if somewhat neglected approach to management research (Gill and Johnson, 1994). There is a range of definitions for action research and its variants (see Eden and Huxham, 1995, for an extended discussion), but the approach adopted here is that offered by Whitehead (1994, p. 138): …action research is a systematic form of enquiry undertaken by practitioners into their attempts to improve the quality of their own practice.

It is an approach that contains three key features: an intent to take action on an organisational issue; an explicit concern with theory formed from the characterisation or conceptualisation of the particular experience (this differentiates it from a pure consultancy intervention); a process of continual reflection (Eden and Huxham, 1995).

There are three stages to the current project. First, an assessment of the burgeoning literature on quality to glean lessons that could be helpful in the task of introducing an appropriate system for ATS. Second, an investigation of other firms that had adopted some form of quality process; this involved discussions with managers and workers in three small businesses operating in the same sector. Finally, implementing a quality system at ATS. The organisation of the material in this fashion does not simply represent a retrospective account of events. Rather, it provides a framework that was consciously and deliberately followed in the process of expediting this project. Sound action research requires a high degree of method and orderliness in design and execution; and a continuous process of reflection should suffuse the entire intervention (Eden and Huxham, 1995; Ormerod, 1996). We discuss how we attempted to fulfil these aspirations at each stage of the project. Learning from others Lessons from the literature Consulting the appropriate literature was important for a number reasons. First, as a conventional academic “first-step” to familiarising oneself with pertinent issues in the subject area (Burgess, 1984). Second, the investigation of other firms that had adopted quality measures was integral to the research design; reviewing the literature would help to develop sharper and more insightful questions for investigation in these cases (Yin, 1994). Finally, unlike a “problem-solving” consultancy orientation, action research requires an explicit concern with theory (Eden and Huxham, 1995; Ormerod, 1996); scrutinising existing sources would help to develop a more conceptual approach to the implementation of quality at ATS. As noted earlier, much of the literature on quality is prescriptive in orientation and is intended for consumption by executives in larger organisations. The role of quality in small firms is not particularly conspicuous within broader debates on the subject. The implicit message seems to be that quality in its various guises is applicable to all firms regardless of context. As Rees (1993, quoted in Wilkinson and Wilmott, 1995, p. 2) comments on total quality management (TQM) literature: …the principles of TQM are assumed to be universally applicable, and one organization is assumed to be much like another.

The contents of a recent text by Huxtable (1995), Small Business Total Quality, does little to remove the impression that the prescriptions for quality in larger firms are deemed to apply equally to smaller organisations. Recent studies on the take-up of formal quality initiatives in small firms point to their lack of popularity and relevance (Halliday, 1993; Holliday, 1995; North et al., 1995; Small Business Research Trust, 1994). For example TQM, which is a much debated phrase despite its definitional ambiguity, was found to be totally absent in a recent investigation on the take-up of quality initiatives in 150 small firms (North et al., 1995). Seemingly more applicable to the small firm

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is the system of ISO 9000, which is a mechanism for securing consistency of procedures rather than heightened sophistication of products or services. Awareness of ISO 9000 among small firms seems to come about through government exhortation and the buying practices of larger firms. Government encouragement through the DTI’s Enterprise Initiative (DTI, 1991) has been a significant conduit for the dissemination of the ISO 9000 message. For instance, North et al. (1995) found that half of their sample firms were aware of the Enterprise Initiative. Larger firms have also assisted in stimulating interest in ISO 9000 by making its possession a contractual requirement for trading purposes (Sherwood, 1986). However, ISO 9000 itself has attracted considerable criticism for a number of reasons. First, the emphasis on developing appropriate procedures is not necessarily connected to an understanding or requirement of quality in terms of sophistication of products or services, working environment or management practices. Holliday’s (1995) ethnographic study of production processes in small firms where ISO 9000 was in place illustrates that the importance of the “badge” lay in its utility as a marketing device. The appearance of quality was crucial for market reputation; and the burden of maintaining the quality reputation was something that both managers and workers colluded in sustaining. Second, the emphasis on procedures tends to generate increased bureaucracy, which is the very antithesis of the notions of flexibility and responsiveness that positive conceptions of quality supposedly encapsulate (Halliday, 1993). Finally, ISO 9000 need not necessarily occasion more enlightened labour management practices. For example, despite the claims for improvements in training that ISO 9000 promotional literature often makes, North et al. (1995) found that few firms in their study engaged in any systematic process of deepening employees’ skills. Rather, acquisition of ISO 9000 was seen to involve nothing more sophisticated than getting to grips with the essentially administrative procedures associated with it. For the small firm practitioner wishing to move beyond the consultancy hype and the evangelism of many quality texts and manuals, the above points highlight the limitations of generic approaches to the implementation of quality. Even more searching questions are posed by the emerging critical treatments of the subject (Ghobadian and Gallear, 1996; Preece and Wood, 1995; Wilkinson and Wilmott, 1995). In particular, the contributors to the volume edited by Wilkinson and Wilmott, Making Quality Critical, set out to illuminate the social, political and economic forces that have shaped the emergence of quality as an issue for British management in the 1980s and 1990s. For example, “empowerment”, an oft-cited boon of quality, may be more a mask for work intensification than a genuine attempt to facilitate more autonomous decision making (McArdle et al., 1995); relatedly, the drive for quality can lead to the individuation of workers and their assuming greater responsibility without any commensurate increase in rewards (Roberts and Corcoran-Nantes, 1995); and quality initiatives often lack coherence with other organisational change programmes and people-management initiatives (Kerfoot and Knights, 1995).

Although these insights are drawn from the examination of large organisations, they do nonetheless highlight the complex and often contradictory nature of the quality process and point up lines of enquiry for further investigation. This becomes apparent when addressing the next stage of the research, which focuses on the concrete experiences of smaller firms operating in the same sector as the case firm, ATS. Using networks A brief review of the salient literature demonstrates the need for caution when contemplating the introduction of a quality initiative. To learn more about the quality process and how it could be applied to ATS, we decided to contact other small firm operators involved in the same sector. The basic purpose was to gain an insight into the actual processes involved in managing quality, not simply familiarisation with the technicalities of a particular system. To get close to this desired authenticity, the first author made contact with three small businesses, referred to here as BAB, BEM, and TT, who were a regular part of his own company’s “network”. “Networks” and “networking” are contested constructs with a variety of meanings (see Curran and Blackburn, 1994, for extended discussion). Here, networks are viewed as “the means by which firms gain knowledge of their customer markets and access to various materials, financial and human resources for doing business” (Hendry et al., 1995, p. 37). In this case, the first author’s network was used as a learning resource; eliciting the concrete experiences of others operating in a similar context would add insights to the accounts documented in the literature. A combination of detailed interviews and more informal wide-ranging discussions were conducted by the first author with the network contacts in three firms. In BAB, a senior manager and two operational employees were interviewed. These interviews were supplemented with more informal discussions with other employees in social settings. At BEM, the informant was a middle manager; an operational employee was the principal contact at TT. No claims are made regarding the “representativeness” of these informants’ views. But, critically, all respondents had “hands on” operational roles and were closely associated with the quality systems in their respective companies. Conducting interviews with known respondents in this informal manner was a deliberate and important part of the project. The purpose of the interviews was to gain an insight into the “below the surface activities” (Oppenheim, 1992) of quality at work. Because the first author and respondents came from a similar social and work background, they had a shared structural location which proved invaluable in creating the rapport necessary for an authentic exchange of views (Hobbs, 1988; Oakley, 1981). The shared structural location with participants in the field enabled issues to be broached but would undoubtedly have been more time-consuming and problematic for outsiders to address. Relatedly, it is well established that social relationships involving friends may play a significant part in the networks of entrepreneurs; they can provide access to material and knowledge-based resources (Birley, 1985; Hendry

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et al., 1995). Hence, the utilisation of existing contacts in the current research can be seen as a natural feature of the entrepreneurial learning process rather than simply a pure data-gathering strategy. In addition to the benefits of ease of access and “pre-understanding” (Gummesson, 1991) of the research context, there were other important reasons for the choice of the network firms. First, they were all small firms. As we have noted, studies of quality in small firms are conspicuous for their rarity; this is particularly significant because of the differences between small and large organisations (Hendry et al., 1995). Second, the network firms operated in the same sector as ATS. The notion of a homogeneous small business sector is problematic; small firms have a variety of market “shapes”, attitudes, and organisational practices which affect the character of social relations at work (Curran and Blackburn, 1994; Scase, 1995). Eliciting the experiences of firms subject to the same sectoral processes as ATS would reinforce the salience of the data at this stage of the project. Finally, the three network firms had operated some form of quality system for a number of years; this would enable the respondents to speak from experience. A grounded theory approach was adopted when analysing the contents of the interviews. Easterby-Smith et al. (1991) have summarised the seven stages to data analysis in this approach: (1) Familiarisation: this involved repeated listening to the taped interviews and interrogation of the transcripts. (2) Reflection: key to this was a systematic talking-through of issues with the second author, members of action learning set (the first author was a student on a Master’s degree course), and a re-reading of the literature. (3) Conceptualisation: this involved making analytical sense of the taped comments. (4) Cataloguing concepts: the practice of creating categories and indexing. (5) Recoding: re-interpreting and re-assigning data after further reflection. (6) Linking: identifying connections between different strands of data. (7) Re-evaluation: developing a framework for understanding what is going on in the organisations under scrutiny. The results are now discussed. Discussion Background The three businesses were at different stages of the quality process. BEM was working towards ISO 9000 certification, and also had a number of “customer feedback” mechanisms in place. TT had secured ISO 9000 two years earlier. BAB had recently achieved ISO 9000, but were also experimenting with other quality management approaches. The interviews and discussions with the respondents were conducted when there were signs of a slight upturn in the

construction industry (of which heating and ventilation are a part); but levels of business were still significantly lower than they had been in previous years, and job insecurity remained a constant fear. BEM, employing 12 people, was a newly-created division of a former privatised utility. It had not suffered redundancies; indeed it still appeared to retain a Civil Service ethos in many of its practices. According to the informant in this setting, the combination of a public utility culture, an attachment to well established ways of working, and the long service of the employees (many had been with the company for over ten years) had created a reluctance to change. The company’s quality initiative was imposed by the wider organisation of which it is part. This process was described by the respondent as being “forced on us from above”, and appeared to go against the grain of previous working arrangements: A lot of the people are “dyed in the wool”, they have done it this way and can’t see any reason why they should change.

Both TT and BAB had endured many job losses since the heady days of the construction boom in the late 1980s. Then, BAB employed in excess of 100 workers compared with the 30 it currently employs. Radical restructuring accompanied this shake-out of jobs; BAB had two changes of managing director and some major changes to the organisation of its “business units”. This rationalisation had a dramatic impact on working relations at BAB. At its peak, when the company employed over 100 staff, the culture of the organisation was described as “paternal”. An older managing director had recruited a team of young, enthusiastic and highly committed staff to senior positions. They felt a debt of loyalty to him; and he acted as a mentor to these new recruits. However, in 1992: a hatchet man was brought in … The culture changed overnight with employees behaving only in the short term to suit the new autocratic management (management respondent).

Talk of quality in this new organisational climate seemed to be little more than a cover for a harsher management regime. The same respondent claimed that autocratic decisions were enforced by introducing management procedures in the guise of quality. TT had been established for over ten years. At its peak in the late 1980s, the business had a turnover of £1.8 million; but at the time of interview, it was down to £300,000. The impetus for quality in TT emanated from a client with whom 30 per cent of their business was placed. Hence there was little freedom of manoeuvre; the message was “conform to our system or lose the business”. Bureaucracy and control From the earlier review of the literature, it was apparent that the adherence to formal procedures that quality systems often require can prove dysfunctional (Halliday, 1993; Holliday, 1995). Formalisation can attenuate the capacity of small firms to act in an entrepreneurial fashion (Ghobadian and Gallear, 1996).

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Furthermore, it can lead to a situation where managerial control is enhanced at the expense of individual workers (Kerfoot and Knights, 1995). In the network firms, the level of bureaucracy occasioned by the need to follow quality procedures was a common complaint. As noted in the case of TT, the procedures were imposed by a major client. Management at TT responded by hiring a consultant to produce a manual for an appropriate system. Our informant described the document as “unusable”. Although the manual was replaced, the current system was still not regarded as satisfactory: It is unworkable. I am working from a position where I see paper work as a necessary evil. This [quality] manual is totally unworkable…

At BAB, the new senior management’s desire for “hard facts” resulted in the production of quality documentation which allowed for the close monitoring of employees; this would facilitate “control from a distance”. Commenting on the alienating effect of this system, the management respondent stated: There are far less people but I would not say people are empowered because there is that much control throughout the organisation in terms of reporting that real power is taken away for decision making. I would not say that people are in power at all.

The monitoring and control of the individuals at BAB was so intense that it actually ran the risk of affecting sales. The senior manager explained the use of a sales measurement procedure: …I know people, salesmen in another division – one of the product divisions, have said to me people just don’t know what they are talking about because I have to have six quality interviews or meetings per day which means I have got to be talking to so many people per week which means I cannot service the people that really do give me orders. These others just will not give me orders. While there is an argument you need to widen your customer base, yes I agree with that, but you cannot neglect the people that really give you core business, and there has got to be another way, I don’t know what the other way is, but there has got to be another way of doing it as opposed to a manager sitting there saying – “You have not done ‘x’ quality calls per week, so your metric is down”.

For TT, quality was “policed” by external auditors who assessed whether the company were observing procedures set out in the ISO 9000 standard. When the auditors were due to visit, there was what one manager described as “pandemonium” as the organisation prepared itself. Management and staff conspired to “fool” the auditors; but the situation would return to normal after the visit. This practice, which has been documented in other studies (notably, Holliday, 1995), highlights the impact of deploying quality as a marketing badge. The system has little substantive influence on working practices; indeed it can actually inhibit informal processes that many small firms rely on for their competitiveness (Holliday, 1995; Ram, 1994). Management and workers in the firms investigated appeared to circumvent the formal quality procedures in order to expedite their tasks. For example, a salesman at BAB was required to fill in detailed forms on all his clients; but this requirement militated against him spending more time on customers who might give him business and less where the prospects of securing a deal were remote.

His means of “working” the system was to prioritise and service his clients in the way that he saw fit; after that, he would fill in the forms to suit management: The system is there and you work the system, if you know what I mean. You have to work the system, you have to pull the strings of the system.

Evidence of working the system was also apparent in the design department at BAB. (From a commissioning engineer): The point I would like to make is that the people who are doing the witnessing and the checking are not competent, it is as simple as that, they are not competent to check the work. I am regularly asked to witness or sign (off) a design … Yes, a design, if there is nobody else I will sign it, which is wrong because I am not competent.

Sales were secured in this way; but it was due more to the initiative of individuals than the guidelines of the quality system: But it is nothing to do with the quality system … I would say that is in spite of the quality system. But I would say that it is very much down to the personalities and how they interact with all the players or stakeholders in each project, consultants, end users, whoever it is that you deal with would really say whether you get the next job.

Communication Effective communication within an organisation is often regarded as a key process in the successful implementation of quality (Ghobadian and Gallear, 1996; Hill, 1991a). For example, Ghobadian and Gallear (1996) found in their study that the small firms that had adopted TQM successfully had recognised the importance of good communication and established systems for this purpose. In the network firms, no such systems existed. In the case of TT, it was noted that the externally-imposed drive for quality resulted in a near unworkable manual being foisted on employees. There was little evidence of an inclusive process for the shaping and dissemination of quality messages here. BEM too lacked any systematic approach to communication. Our informant claimed that there was much “rhetoric” about the importance of communication. However, there was no tangible mechanism for facilitating this; and, in practice, communication was considered to be little more than “a post-mortem down the pub”. At BAB, the autocratic nature of the management regime was seen to militate against the free-flow of information. As noted earlier, quality measures were actually seen as punitive devices. In common with the other firms, no formal communication system existed at BAB. Our operational employee informant gave an example of the problematic nature of communication in the company by describing how the contents of a manual were disseminated to workers: You are given a manual and it is assumed that you are aware of it. No one has sat down and said “Do you know what ISO is, … this is what it means to you, this is how you can help, and this is what it means for the company?” There is an assumption that everyone is aware of what it is.

Compounding the ostensibly problematic approach to communication in the network firms was the perceived lack of management education and skill

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among those responsible for the implementation of quality. Respondents made the general point that were education and training was not valued, and definitely not linked in any systematic way with the quality process. At TT, the directors of the company were “from the tools” (that is, former manual workers); and had developed the company without any formal training and development. They did not see the benefit of developing staff in this way. At BEM, training for employees was confined to the occasional technical course. And at BAB, training was seen as a cost that the company could not afford; a senior manager on a MBA course had to fund it through his own resources because of a lack of support from the company. By eliciting the experiences of the key informants, a number of learning points were evident. First, the context in which quality initiatives are introduced is crucial to the unfolding of the process. This includes factors such as the impetus for quality, managerial objectives and the nature of work relations. In the network firms, quality initiatives tended to be imposed rather than freely adopted; were introduced at a time of considerable uncertainty; and necessitated significant adjustments to working arrangements that management often thought were unproblematic. Second, the greater formality of procedures that, to some extent, accompanies quality processes, can occasion greater bureaucracy. It certainly did in the network firms, but the issue is the extent to which this is inevitable. Finally, where effective communication and the skilled handling of quality approaches are lacking, the prospects for successful implementation are not propitious. Implementation The examination of recent literature and the investigations into the network firms yielded useful information on the quality process. Insights from these sources highlighted that the process was not axiomatic with efficiency, profitability or enlightened labour management; and there was a feeling that it was another operational constraint that had to be managed. Yet, despite these ostensibly negative findings, there was still a need for a greater formalisation of procedures at ATS and a desire to acquire the credentials that would allow for greater competitiveness. There was also a commitment on the part of the first author to learn from the experience of others. And, although rare, there were examples of the potential of progressive quality initiatives. In particular, Ghobadian and Gallear’s (1996) case-study-based account of TQM in SMEs outlines the many ways in which small firms may actually be better suited to adopting quality processes than larger businesses. They affirm the view implicit in the critical literature and the interviews with the “network” firms in the current project, namely that the prevailing culture of the organisation is critical to mediating approach to quality: Among the most important factors are management style, self-actualization, and affiliative style. That is to say, soft contingency approaches connected with the management approach and culture of the organization (Ghobadian and Gallear, 1996, p. 91).

Consistent with this approach, it is necessary to have an insight into the nature of working relationships at ATS before discussing the process of implementation in more detail. To this end, the second author conducted interviews and informal discussions with each member of ATS during the period of the research. Consequently, the assessment of work relations at ATS has effectively been “triangulated” by this procedure. The two owners of ATS are not classic entrepreneurs in the sense of having a burning desire to run their own enterprise. Indeed, they had enjoyed lucrative paid employment for over ten years, and thrived in a company that they described as “dynamic and entrepreneurial”. It was redundancy that was the spur to the creation of ATS. Generous redundancy payments allowed the partners to start ATS in a “very deliberate and methodological fashion” (partner). The partners had two principal aims: “to make money and have a good time”. When recruiting workers, it was important to choose workers who would “fit in” with these aspirations. They recruited three employees who worked with them in their previous company: They were with us in the pub getting drunk. This bred a bit of loyalty (partner).

The social cohesion and compatibility that the owners spoke of were confirmed in discussions with employees at ATS. In interviews with employees (conducted by both authors), terms like “trust”, “openness” and “team-working” were regularly mentioned. For example, referring to the shared background of many at ATS, one employee commented: It helps to reinforce the no-blame culture. It creates a better working environment when you know that you get on with colleagues.

Although this strong social bond was an important facet of life at ATS, the “colleague-based” approach to work relations (Scase, 1995) also stemmed from the particular business that the company were in. In professional service firms like ATS, which essentially comprise a small number of highly skilled employees, work tends to be organised on the basis of specialist and changing customer needs. The constantly shifting nature of such demand requires “flexible” work roles, duties and responsibilities. The work process tends to be broken down into “projects”, jobs, and accounts. This allows activities to be organised according to client needs, for which particular individuals in the company are responsible (Goffee and Scase, 1995). Work organised in this specialised fashion carries the possibility of fragmentation. Integration of such activities often relies on effectiveness of social networks and the cultivation of work teams. We have already noted the strength of social networks at ATS. The pooling together of specialist talent is a critical feature of the project-based work that companies like ATS engage in. This interdependence of skills serves as a mechanism for integrating the potentially diverse activities of ATS. As one employee commented:

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We are all more integrated at Air Technology. We do not have the “them and us” situation to any degree at all really and we all have to realise that we are not just purely contract engineers, are not purely design engineers, are not purely salesmen … To get the fully integrated approach I think we have to be as open as possible. I think that this is possible with Air Technology in its being a small company and in the way the company is run…

This collegial approach to work relations at ATS, which was a product of choice and the necessity of operating in a high skill market niche, was an important feature of the eventual implementation of quality in the company. The results of the action research were discussed with members of the organisation over a two-day period. Together, the task was to use the learning accrued from the study to devise an appropriate approach to quality for ATS. The resulting approach incorporated three main strands: appropriate procedures, a communications forum, and a process of education and development. Appropriate procedures Congruent with the aim of developing more formal and transparent market procedures, a set of protocols was devised to manage the flow of information with customers. In essence, this involved adapting basic ISO 9000 principles on design control to suit the particular needs of ATS. The concrete outcome was four simple one-page forms and a 700-word document; this controls the flow of information between ATS and the customer. In parallel with these design control procedures, a cost of quality (COQ) schedule was implemented. COQ is a means of establishing a financial measure of quality. It comprises three cost areas: conformance costs, which are the costs that are necessary to conform to the requirements of the customer; nonconformance costs, which are made up of mistakes, errors and waste that may occur during the contract; and overhead costs, which are an amalgam of the administrative, investment and incidental costs necessary to meet the needs of the customer. The fieldwork experiences and documented accounts noted earlier highlighted the potential for quality-related procedures to generate bureaucracy and serve as a mechanism for managerial control. Even in the simplified guidelines adopted at ATS, there was a recognition that this was possible. But what served as a bulwark against these possibilities was not so much the content of the forms or procedures; rather it owed much to the way in which they were devised, or “constructed”. The new procedures were neither imposed by management nor dictated by the edicts of external agencies (that is, customers or monitoring bodies). In line with the company ethos of informality, openness and relatively high individual discretion, the documentation, and more importantly, agreement to operationalise it, emerged from deliberations with employees. For example, COQ, as well as means of controlling costs, is a tool to identify where “improvements” can be made. In effect, it identifies the individuals who are responsible for “errors” or “waste”. But by developing the form in conjunction with employees, and by emphasising its positive rather than

punitive role, COQ became a valuable conduit for continuous improvement. The principal employee involved in the form’s evolution commented: We have got a no blame culture at Air Technology, we have got to be seen to avoid the circle of making the same mistake over and over again. You can do that to a certain extent on the engineering side of things but what is to say that you don’t make the same mistake over and over again on the costing side of things? This particular form now gives us a good way of proving that, a good way of showing that.

The same employee contrasted this situation with his previous company, where work relations were more conventionally hierarchical: I think certainly being on the contracting side of things for many years you do obtain a certain deviousness and it is quite, quite easy to hide costs that might be attributable to your own mistake and then, in a culture with set boundaries, highlight a cost that has been made, that has been produced incorrectly by some other department and use that as a “look, I told you so” type of situation.

The introduction of formal procedures highlights a potential tension that small firms engaged in implementing an approach to quality face. Small firms tend to have few formal processes. Yet initiatives like TQM, ISO 9000 and, in the case of ATS, the desire to have transparent customer protocols, require a degree of formalisation. Insistence on the adherence to formal procedures could detract from the organic nature of small enterprises, thereby stifling the search for continuous improvement that quality initiatives supposedly encourage. As Ghobadian and Gallear (1996, p. 98) argue: “The challenge is to introduce formal procedures while retaining and encouraging the entrepreneurial culture of the enterprise.” At ATS, the greater formality required by the cost of quality schedule did not appear to compromise the “entrepreneurial culture” of the company. To a certain extent, this can be put down to the inclusive process of implementation. But perhaps more importantly it can be explained by the collegial and open nature of work relations in the case firm; this lessened the prospect of the new protocols being used as a punitive device. In sharp contrast, the “quality” measures introduced in the network firms were seen by employees as an externally imposed hindrance at best, and tool of managerial control at worst. Contributing to these negative views were the high degree of uncertainty that workers faced – job insecurity is known to have an adverse effect on organisation commitment (Hallier and Lyon, 1996). The communications forum Another innovation that has resulted from this investigation into the quality process has been the introduction of a communications forum. Although this monthly forum has a set agenda in which aspects of company sales, design and marketing are discussed, its principal purpose is to provide an opportunity for employees to comment on any aspect of the business. To avoid this simply becoming a “talking shop” the forum has been integrated with the previous arrangement of monthly marketing and sales meetings. Hence, there is a genuine attempt to link discussions on quality and working practices with

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matters of corporate policy. This follows from Hill’s (1991b) observation on the demise of quality circles from a position of some popularity in the 1980s; often, they were seen as a largely cosmetic adjunct to the main arenas of decision making. The creation of the forum was designed to prevent such dualism. The development of the design control procedures provides an illustration of the successful working of the forum. The first attempt to devise the procedures was made by ATS management; this resulted in an over-complicated procedure and 15 forms. At one of the early forum meetings, it transpired that the documentation was only being used sporadically; and that the main reason for this was the volume and complexity of the forms. This provided the impetus to simplify the documentation, that is, de-bureaucratise. What is further illustrated by this example is the forum’s capacity to serve as an arena for continuous improvement; but this again can be traced to the nature of work relations in the organisation. ATS employees were not prepared to fill in the forms perfunctorily (as was often the case in the network firms); and they were not reluctant to highlight the inadequacies of the documentation. Whether this forum achieves the genuine participation that it aims for is a matter of debate. ATS management are aware of the view that measures like these, where work is re-designed in order to encourage greater participation, can constitute little more than a sophisticated attempt to deepen managerial control (Ramsay, 1985). There is also the argument that granting discretion to skilled employees is necessary to expedite particular work tasks; unduly close control would be dysfunctional since it would stifle the creative deployment of worker effort (Edwards, 1979; Goffee and Scase, 1995). Hence the forum at ATS could be seen as a useful means of channelling the efforts of skilled workers to management goals rather than a genuine instance of worker democracy. These points notwithstanding, the forum has become an effective mechanism for securing workers’ views on a range of organisational issues; ATS employees have not been slow to comment on customers, suppliers, work relations, and the apparent failings of management. They have also offered useful suggestions on what the future directions of the company should be. One employee thought the way in which continuous improvement was achieved had changed as a consequence of the introduction of the communications forum. Commenting some six months after they were first set up, he stated: Previously, continuous improvement was done individually, not collectively. We had to learn the same lesson over and over again. Now, a problem is solved once throughout the company.

But this was the entry in the journal that the first author kept during research for this project: I see all the invoices and hear all the discussions in the office (the office is open plan). I therefore have a good idea prior to any discussion of the costs of quality. It could be argued that I am monitoring the operatives on a daily basis and indeed I cannot help this as I am also company secretary.

Education and development The third element of the approach to quality at ATS is the emphasis attached to the education and development of the workforce. Four out of six of the employees are engaged in management development courses which will result in formal qualifications. Promoting the “continuous improvement” of people as well as products is a common exhortation in the guides to quality implementation (Dale and Cooper, 1992). But, for small firms, such a commitment to education would seem unusual, for such businesses are reputed to be reluctant to make use of formal programmes of training (Atkinson and Meager, 1994; Storey, 1994). Ample evidence of this was provided by network firms. This is attributed to management attitudes, a fear of poaching, the actual expense of training, its relevance and the size of the business. When training is embarked on, it is usually very short-term and to acquire very specific skills (Atkinson and Meager, 1994). However, this does not mean that learning, in the sense of acquiring skills and knowledge, does not take place. It does; but much of it is informal and takes the form of learning from experience (Hendry et al., 1995). And critically, it is guided by the nature of working relationships. These relationships are the key to understanding why education at ATS is such a high priority. The partners who run the firm have seen the value of formal educational processes to the development of the organisation; and this is an important indicator of how seriously a firm will take the issue of training (Hendry et al., 1995). Although the link between training and small firm performance remains unproven (Storey, 1994) or, perhaps more accurately, difficult to quantify, both partners at ATS feel that the personal development that has accrued from their educational experiences has been of undoubted benefit to the business. And it is this experience that has encouraged management to provide formal learning opportunities for their workforce. In sharp contrast, many of the managers in the network firms had not engaged in formal programmes of education and development. Apart form their technical training, which many had completed some time ago, few had engaged in management training. Indeed, training in this sense was actively discouraged; it was not seen as directly relevant to the business, and the welldocumented fears of “poaching” were often relayed by the interviewees. This type of attitude among managers militates strongly against the prospects of successful implementation of quality initiatives (Ghobadian and Gallear, 1996). The impetus for education at ATS, then, came from the partners and the working relationships that they sought to cultivate, rather than the requirements of the particular nature of the quality system. As North et al. (1995) demonstrated in their study of ISO 9000 in small firms, the quality system required attention to detail rather than a deepening of skills. Yet the granting of learning opportunities at ATS is patently not an altruistic exercise without the prospect of benefit for the company. The workforce at ATS possess high degrees of technical skill and are, in many cases, more expert than the owners of the business. Furthermore, the inherently uncertain and turbulent

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nature of the operating environment means that skills have to be deployed to new and ever-changing situations that are difficult to predict and prescribe. Potentially, there is a basic conflict between the: organisational aspiration to be able to describe, specify and evaluate, and control competency in the job, and the extent to which true proficiency is buried in the “tacit skills”, which are only partially “describable” and destroyed by attempts to prescribe them (Hendry et al., 1995, p. 149).

Encouraging education can therefore be viewed as a means of harnessing the creative efforts of workers to the benefit of the firm through the granting of a certain discretion rather than prescription. At the heart of this process, there is a potential struggle over ownership: Does the individual retain ownership over his/her own learning, or the organisation? And to what extent are they compatible? At present, the workforce appear to be revelling in the opportunity to develop their skills. But, as Hopfl and Dawes (1995) have demonstrated, employee development and “empowerment” taken “too far” can lead to a clampdown by management. In small organisations, this conflict often results in employees leaving either to set up on their own or to join another firm. Conclusion This paper set out to examine how a quality system was introduced in a small firm. Much of the debate on quality is prescriptive and is based on the experiences of larger organisations. By taking an action research approach, it was possible to reflect on the processes involved in the implementation of quality in a neglected context (that is small business) whil satisfying the organisational requirement for the adoption of an appropriate system. Like many small businesses, the interest in a formal approach to quality at ATS was initiated by external pressures. “Sharp” practices by customers, an expanding and progressively diverse industry chain, and the need for professional “credentials” in the marketplace, persuaded ATS management of the need for a more formal approach to quality. But, rather than following the common practice of enlisting the services of a specialist consultant, ATS endeavoured to develop a system organically. Operating within an action research framework, the experiences of others were drawn on to inform the eventual system adopted. The study shows that external pressures can play a significant role in shaping the approach to quality. As other studies have demonstrated (Holliday, 1995; North et al., 1995; Preece and Wood, 1995) such pressures can lead to greater bureaucracy, labour intensification and closer control, while having little substantive impact on the sophistication of the product or service. However, the ATS experience illustrates that management can handle these pressures in ways that do not necessarily result in these negative consequences. Management had a degree of latitude in handling these pressures. Key to the unfolding of this process was the nature of working relationships in the firm.

Work relations at ATS were characterised by “openness”, trust and informality. Owing much to a shared social milieu and background, these features eased the process of effecting the change that adherence to the quality system required. Furthermore, the high skill profile of the workforce militated against too direct a form of control. In small, high-skill organisations, work relations tend to be colleague-based rather than overtly hierarchical (Goffee and Scase, 1995); and tasks usually involve the deployment of high levels of worker discretion. Attempts to engage with quality in such contexts need to recognise this. In terms of the aim of the project, that of implementing a viable approach to quality at ATS, the piece of action research reported on here was arguably successful. Using the Whitehead definition of action research noted earlier, a systematic inquiry was undertaken by a practitioner in order to improve the quality of his practice. ATS now have an approach to quality that patently works for them. Other small firm practitioners may find this approach to implementing quality, or more general change initiatives, of value. But there are wider implications which arguably action research programmes (Eden and Huxham, 1995) and case-study accounts (Yin, 1994) should draw out. First, prescriptive and generalist approaches to the implementation of consultancy tend to neglect the often vital social processes at work that underpin the trajectory of any change programme. Some of the more critical literature (notably Wilkinson, 1994; Wilkinson and Wilmott, 1995) may be of greater value to practitioners since it sensitises readers to the nature of such processes and highlights the often inevitable tensions in quality initiatives. Second, the current research bears out the emerging though still rare studies of quality in small firms. In particular, credence is given to Ghobadian and Gallear’s (1996) conclusions on the implementation of quality in four SMEs: they too highlight the importance of managerial motivation, appropriate structures, effective communication and education and training. However, we have also stressed the importance of particular contextual features like the nature of the labour process and social relations at work. Finally, the evidence from respondents in the network firms indicates that, where work relations are adversarial and conventionally hierarchical, the implementation of quality systems is likely to be problematic. However, even the comparatively “enlightened” approach to quality set out here does not mean the possibility of conflictual pressures is eliminated. Potentially, struggles will always exist between the levels of autonomy afforded to workers and the management’s need to control their activities; over the extent to which organisational and individual learning is compatible; and who retains control of that learning. These tensions can be handled in a variety of ways; but they will probably always exist in one form or another, since they ultimately reflect the fundamental antagonism in the employment relationship between the need for control and consent.

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