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Quality models in an SME context

A critical perspective using a grounded approach Rodney McAdam

University of Ulster, Newtownabbey, Northern Ireland

Quality models in an SME context 305 Received June 1999 Revised September 1999

Keywords Small- to medium-sized enterprises, Model, Quality Abstract This paper adopts a critical perspective in seeking to inquire how TQM-related models, developed initially in large organisations, are applied in the SME context. Using a grounded inductive approach, a study is made of 20 SME cases, where a quality model, the balanced scorecard, has been applied. A grounded model is derived which shows the critical factors in regard to the principles of TQM, when quality models are applied in an SME context. The findings indicate TQM, when a quality model is applied in an SME context. The findings indicate that SMEs can be compromised by the mechanistic and formalised nature of such models, which the SMEs consider as adding bureaucracy, while needing to remain flexible and innovative in a very dynamic environment over which they have little control.

Introduction The principles of total quality management (TQM) are often applied within large organisations by using models developed in the context of large organisations, such as the business excellence model (BEM) (Brown et al., 1999) and the balanced scorecard (BS) (Kaplan and Norton, 1992, 1996). The continued hegemony of the quality or business excellence movement has resulted in these, and similar, models being increasingly applied in other areas, such as the public sector and small to medium-size enterprises (SMEs). While there is a considerable amount of advocacy based literature relating to these models being applied in SMEs, there is a paucity of research which looks at the underlying assumptions of the models in the context of SMEs by taking a critical perspective (Wilkinson and Willmott, 1994). According to Burgoyne and Reynolds (1998), who summarise the work of Kemmis (1985), a critical perspective should include a ``questioning of assumptions'' or a close examination of the ``taken for granteds''. If the routine application of large organisation based models to instill TQM principles in SMEs is problemetised by taking a critical perspective, then a possible dichotomy exists between these models and the essence of TQM in SMEs. For example, if the business excellence model had been developed in an SME environment would it have the same nine criteria? If the BS was based on SMEs would it have the same four quadrants? As stated by Chittenden et al. (1998), ``these models are designed by big business for big business''. Instead of using specific contextual models, SMEs are being compelled to use models, which not

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only fail to instill the principles of TQM, but contort the business and consume large amounts of scarce resources (Wiele and Brown, 1998). By adopting a critical perspective this paper seeks to inquire how TQMrelated models developed initially in large organisations are applied in an SME context and ultimately to determine how the principles of TQM can be better incorporated in SMEs. Principles of TQM Ostensibly, the goal of all the models already discussed is the incorporation of TQM principles within an organisation. What are the principles of TQM? There has been a proliferation of TQM frameworks in the literature. Jamal (1998) provides a useful synthesis of the literature based on the work of Grant et al. (1994), Hackman and Wageman (1995), Krishnan et al. (1993), McDonnell (1992), Ross (1993), Olian and Rynes (1991), Spencer (1994) and Deschamps and Nayak (1995). His summarised approach also largely agrees with that of Kanji and Asher (1993) and Ahire et al. (1996), namely: . TQM is strategically linked to the business goals. . Customer understanding and satisfaction are vital. . Employee participation and understanding at all levels are required. . The need for management commitment and consistency of purpose. . The importance of processes and measures. This five-point framework containing the principles of TQM is used in the paper as a litmus test for the contribution of the quality-related models to TQM in SMEs. The implicit assumption in this reasoning is that TQM principles, as defined, are sufficiently generic as to apply to both large and small organisations (Ghobadian and Gallear, 1996; Wiele and Brown, 1998). The quality-related models from large organisations There are numerous quality-related models with almost the entire genre having been developed in large organisations (Wilkes and Dale, 1998), for example the business excellence model, the balance scorecard, ISO 9000, Investors in People, business process improvement, etc. Only two models will be considered in the discussion because of space limitations, namely the business excellence model and the BS model. Both of these models have been developed in large organisations and applied in small organisations and each claims to contribute towards the incorporation of TQM principles within an organisation (Wilkes and Dale, 1998; Kaplan and Norton, 1996). Business excellence model The BEM model is comprehensibly described in the literature (e.g. EFQM, 1999; Longbottom, 1998) and therefore there is no need for replication here. However, briefly, the model has nine criteria, five of which are in the enablers category to help achieve results and four of which are results based criteria.

The BEM is shown in Figure 1 (this is the 1998 version of the model as this was the version used by the SMEs involved in the research). The model was originally developed by a consortium of large organisations (e.g. BT, Post Office, etc.) working with the European Foundation for Quality Management, in Brussels. The model assumes a causal link between enablers and results. A process called selfassessment is used to appraise organisations against the BEM. The BEM, along with the Baldrige model, was the first systematic approach for effectively measuring TQM within an organisation. More recently, attempts have been made to apply the model in different sectors, such as the public sector (Curry, 1999)

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The BS model Similarly to the BEM, the BS is comprehensibly described in the literature (e.g. Kaplan and Norton, 1992, 1996; Newing, 1995). The BS was developed by Kaplan and Norton (1992) using large organisations as the basis for the model. Essentially the BS model consists of four quadrants, each containing different types of organisational goals, measures and improvement activities as shown in Figure 2. Kaplan and Norton (1996) show that all four quadrants are dynamically interlinked when the BS is used to develop TQM-based change programmes. For example, the financial quadrant will be influenced by the success of the customer quadrant in terms of new customers. Organisations using the BS often cascade the initial corporate level BS down to several levels of linked scorecards, even to personal level for personal appraisal (e.g. Nortel, BT). Discussion of the models in regard to the TQM principles in an SME context Having established a framework of TQM principles and having selected two models from large organisation, these models are discussed from a critical perspective for each of the TQM principles in an SME context. TQM is strategically linked to the business goals The BEM and BS models attempt to link TQM and business goals in a number of ways. First, the nine criteria of the BEM claim to represent a business and its

Figure 1. The BEM 1998 version, which was used by the SMEs in the research study

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Figure 2. The balanced scorecard

strategy in its totality. Second, policy and strategy is a key criterion and third the results criteria are supposedly linked to the causal actions associated with the enablers (EFQM, 1999). Also, the BS process seeks to link strategic statements down to business or continuous improvement activity within the operations of an organisation. However, there are some potential problems when these approaches are applied in an SME environment. Strategy formulation and linkage to operations is a very dynamic process in SMEs (Gunasekaran et al., 1996). This dynanisicm is a reflection of the everincreasing market turbulence that SMEs find themselves in. Formerly secure niche markets are being encroached on by increasingly agile larger organisations and key customers are demanding higher quality at lower cost (Ghobadian and Gallier, 1996). It is doubtful if the BEM and BS models can link TQM to the business goals in such a dynamic environment, far removed from that of large organisations which have the ability not only to cope with market change but also the ability to shape it. For example, the average time for a selfassessment iteration of the BEM is between six months and one year, designed to fit within a one year business plan and a three- to five-year rolling strategic plan (Wiele and Brown, 1998). SMEs cannot afford such timescales, which would appear as metamorphosis in the face of continuous market changes, which must be readily reflected within changes in the SMEs operations (Ahire et al., 1996). Customer understanding and satisfaction are vital Both the BEM and BS specifically address the needs of customers and have sophisticated customer measuring systems. The BEM has a customer results criterion and the BS has a quadrant dedicated to customers. However, these

approaches, although exacting, assume that customers are relatively homogenous and numerous. In the SME environment there is much ``closer proximity to the customer'' (Barrier, 1994). This proximity is coupled with a larger number of SME employees having direct customer contact and knowledge (Hale and Cragg, 1996). Therefore, the customer voice can be incorporated within SME operations without prolonged and formalised approaches which can divert scarce resources and which SMEs often considered as adding bureaucracy. Furthermore, Raymond et al. (1998) see the SMEs' traditional loyalty to specific customers as a key catalyst for driving customer informed business improvement within SMEs, rather than sophisticated and impersonal measuring systems. The closer loyalty and proximity to specific customers can lead to increased SME employee knowledge about customer needs. This knowledge can then be incorporated within the business improvement effort rather than relying on an annual or biennial self assessment or BS iteration. Employee participation and understanding at all levels are required The BEM model has both people management and people satisfaction, enabler and result criteria, respectively. The BS has a quadrant on people or employee learning and growth. Through the processes of self assessment and BS formation, large numbers of people from all levels can be involved (Brown et al., 1999). Once again, these involvement methods are predicated on the assumption of a large organisation with several layers of management and where employees are somewhat remote from the influencing voice of the customer. Borley (1994) concludes that TQM should involve employees by simple, easily understood, methods with a lack of bureaucracy. However, both the BEM and BS approaches for involvement require large formal elements, often involving considerable bureaucracy, with only an indirect route to customer satisfaction. The BEM model remains rather complicated and formalised in this respect, and is often viewed as increasing bureaucracy for SMEs. In the SME environment there is little spare resource, every employee has a key role, and usually several (Ryans, 1995). Employee involvement is seen as a natural process to be nurtured and developed rather than artificially existing in complicated and formalised models which do not fit the SME environment and which could add unnecessary bureacracy (Yeb-Yun Lin, 1999). The BEM and BS require diversity of skills and experience across many different functions (Willmott, 1995), SMEs are unlikely to have this breadth of experience and knowledge (Raymond et al., 1998). Kinni (1995) concludes that this issue of knowledge is compounded by the BEM and BS sometimes being equated with executive work (e.g. writing reports, cross-functional work, business analysis etc.) and, therefore, potentially further limiting SMEs in applying the principles, in terms of human resource availability at higher levels.

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SMEs have a natural degree of flexibility and change orientation because of their closeness to the customer and the lack of organisational layers and bureaucracy (Hale and Cragg, 1996). This flexibility is linked to rapid decision making which can quickly implement TQM related decisions (Wiele and Brown, 1998). In such an environment it can be difficult to accept a highly formalised model which has a minimum cycle time of six months and implicit assumption of available resources and multi-layers of management. The need for management commitment and consistency of purpose The first criterion within the BEM is leadership, it is a key enabler within the model and is based on a facilitating style of leadership which advocates a role modeling approach. This style of leadership is very supportive of the TQM framework (Wilkinson and Willmott, 1994; Taylor, 1997). Similarly, the BS shows leadership in a coach/mentoring style to be a key determinant of success in implementing TQM (Kaplan and Norton, 1996). Implicit with the models is an assumption that managers will be able to spend considerable time (sometimes 100 per cent) directly involved in implementing self assessment and the BEM and the BS. In the SME environment the need for leadership commitment and vision in regard to the TQM effort is also of paramount importance (Gunasakaran et al., 1996). However, leaders and managers in SMEs often lack the expertise and training that is necessary to assimilate and apply complex models and methodologies (Yeb-Yun Lin, 1999), also they have little available spare time (Hale and Cragg, 1996). This lack of expertise and available time can result in implementation of rhetoric rather than the substance of the models. A potential advantage for SMEs in applying TQM is the natural visibility and involvement of the managers. If they are committed and driving the TQM effort then their approach will be visible and clear to all employees (Wiele and Brown, 1998). It is difficult to envisage this process being augmented by the application of the BS or BEM with their attendant increased formality, and in the view of some SMEs, increased bureaucracy. The importance of processes and measurement Central to the BEM model is the business process criterion. This criterion defines a series of steps for systematic definition, management and improvement of business processes. The BS also has a quadrant dedicated to business processes. The models also allow for the possibility that an organisation may not be completely process based, i.e. there may be a partial process-functional structure (Peppard and Rowland, 1995). Both models are built on the assumption that quasi-permanent business processes exist within the organisation and that these processes can be defined and managed (e.g. ISO 9000 and process mapping, Chittenden et al., 1998). However, as shown by Raymond et al. (1998), processes within SMEs, although existing, are much more temporal and less defined than in large organisations. Furthermore, if

these processes are ``institutionalized'' by the BEM or BS, it could cause serious problems in regard to the SMEs ability to react to market place changes (Kinni, 1995). In comparison to large organisations, SMEs have relatively informal, flatter and highly centralised structures (Hale and Cragg, 1996). Thus, SMEs should not have the same degree of problems when implementing TQM-based change that large organisations have in regard to middle management resistance and functional fiefdom (Francis and McIntosh, 1997). Hale et al. conclude that SMEs have more opportunity for rapidly forming a team based process structure, because of their informal style and natural cross functional working style. However, rapid and spontaneous cross functional process working in SMEs may be restricted by the adoption of formalised approaches such as the BEM and BS. Research methodology To research the issue of applying quality models in an SME context, a qualitative research study into 20 SMEs, each of which had applied the BS in an attempt to incorporate TQM principles, was carried out. Equally the research could have investigated SMEs using the BEM, Baldrige etc., these areas are suggested as possibilities for further research but are beyond the scope of the current research. The research method chosen was that of inducting theory using case studies (Eisenhardt, 1989). In this approach theory or models are developed throughout the empirical study in a grounded approach (Glaser and Stauss, 1967) rather than using hypothesis testing. In this approach there is no need for a large number of cases to achieve validity, but rather the more in-depth study of a relatively small number of cases to observe what is happening (Remenyi et al., 1998, Burgoyne and Reynolds, 1998). Strengths of theory building from cases include the likelihood of generating novel theory through juxtaposition of contradictory or paradoxical evidence, the emergent theory is likely to be testable (as measured during case analysis) and the resultant theory is likely to be valid as it is closely linked with case evidence (Larrson, 1993). The key steps of the research methodology are shown in Figure 3. The methodology involved the following steps. First, 20 SME's (all with fewer than 250 employees) were chosen for the study, based on their involvement in BS and business improvement in general and their willingness to participate in the study. These organisations had been introduced to the BS through by a number of key ways: . influenced by large suppliers; . university development programmes; . government grant aid. None of the SMEs were using any form of BS before being introduced to the formal BS. Instead, SMEs had various types of reporting mechanisms linked to improvement programmes.

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Figure 3. Research methodology

Second, management representatives from each organisation were formed into social constructionist learning workshops groups (Morgan and Smircich, 1980; Easterby-Smith, 1993). Each group constructed meanings in regard to successful BS implementation in their organisations without pre-set agendas based on large enterprise findings. At all of these meetings a university facilitator was present. In total, 23 workshops were held at different organisation locations to increase cross-learning and benchmarking. These workshops were a key part of the grounded theory approach (Eisenhardt, 1989). Third, each organisation had to decide the critical factors for implementing the BS in their organisations. Finally each case was fully written-up. The qualitative data was then coded (Remenyi et al., 1998 and EasterbySmith et al., 1993) into the main a priori categories of the five principles of TQM, derived from the literature as described earlier. Eisenhardt (1989) points out that the use of a priori constructs is acceptable in grounded qualitative research, provided their origins are firmly rooted in the literature or experience. Within each category the component factors were established by further use of the coding procedure.

Case study analysis The critical issues relating to the BS's effect on the organisation were coded from the qualitative data and categorised under the five principles of TQM. Although the qualitative data is discussed in the following sections, a simple quantitative coding analysis gave an insight into how the application of the BS, related to the integration of TQM principles in the SMEs studied. Figure 4 shows the frequency distribution for the number of coded issues relating to each of the five categories of TQM, as obtained from the analysis of the 20 cases. This shows that a significant number of issues were recorded for all five categories. In particular the need to contribute to strategic goals, people involvement and processes and measures had most issues. This analysis indicates that the BS at least had an impact (whether positive or negative) on all of the five key areas of TQM within the SMEs studied. The qualitative data was also categorised using the four quadrants of the BS (Figure 4), i.e. financial, customers, processes and learning and growth. The results are shown in Figure 5. It is notable that the frequencies are higher for all four quadrants than for the TQM principles shown in Figure 4. The reason for these increased frequencies was that the issues raised in the data could not be simply coded into one quadrant, they usually had to be coded against two or three quadrants. For example a financial issue was intrinsically linked to learning and growth and customer issues (e.g. training and development in customer care). This finding reflects the difficulties that SMEs experience when trying to ``fit'' their businesses with four quadrants of a model developed for large organisations. The key findings from the research study are discussed as follows under each of the five TQM principles.

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Figure 4. Frequency distribution of issues within each main category (the five categories are the five TQM principles)

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Figure 5. Frequency distribution of issues within each main category (the five categories are the five TQM principles)

TQM is strategically linked to the business goals There was general agreement among the SMEs represented that strategy was frequently formed without proper consideration for the resources and infrastructure to implement the resultant plans: there is usually a large void ± a lack of systematic processes to implement strategy.

These findings were consistent with those of Wiele and Brown (1998) who also found similar disconnects. The BS was seen as a new and significant approach for ``strategically managing the business'' and linking the strategy to realistic operational improvement plans in accordance with the principle of TQM: . . . the most important consideration for management is that the BS must reflect the strategic objectives of the organisation.

However, some questioned the benefit of the BS, stating that SMEs which had already identified strategies prior to the introduction of the BS, may be reluctant to adopt this more ``mechanised approach'' and ``jeopardise strategies that are already working to some degree''. The SMEs tended to have a ``if it works don't fix it'' approach, primarily caused by a lack of resources with which to experiment for improvements. Chittenden et al. (1998) also discuss the dangers of mechanised approaches within relatively flexible SMEs. From this perspective the BS was seen as a tool for large companies with complex strategies relating to multiple products and markets. Others see the BS, not as being mechanised, but as being systematic and ``taking the surprises out of normal strategic forecasting''. These SMEs considered the BS to be juxtaposed

to the SMEs' rapidly changing environment and innate adaptability (Ahire et al., 1996) and as being flexible enough to check strategy against business improvements in an iterative and timely manner. The BS was seen as providing a much wider perspective of strategy linked to business improvement, no longer was their a narrow financial focus which failed to assess the critical lead measures relevant to the organisation's growth. Gunasekaran et al. (1996) speak of the need for this wider focus to enable SMEs to become more effective. This wider perspective was also seen as being ``extremely challenging'' and was not for SMEs which were ``marking time''. The ``short termism'' of the SMEs was revealed in comments relating to business improvement: . . . there were poor results for TQM, after six months there was no significant improvement, this sounded the death knell.

Thus, there was an expectation that the BS would have an immediate significant effect on key financial indicators linked to the strategy. In almost all cases this expectation led to profound disappointment. SMEs which had received considerable training also found the short term expectation difficult to manage, especially in fast changing markets, rapidly increasing competition and limited investment funds. This reluctance of SMEs to engage in long-term planning and focus on short termism is also acknowledged to by Gadenne (1999). It was interesting to observe that some organisations which had applied the BEM before the BS, preferred the BS in regard to this TQM principle as the BS was seen as helping set the strategy and the BEM was seen as informing the process through business assessment. Previously they had found that using the BEM: . . . led to a lack of correlation to strategic plans and thus to disillusionment.

It is this correlation that is vital for success for SMEs (Wiele and Brown, 1998). On further examination these organisations were found to have applied an ``workshop-based'' self-assessment for the BEM (EFQM, 1999). This approach is not overly formal compared with other BEM self assessment approaches, therefore the poor experience with BEM cannot be directly related to methodology. Rather, they viewed the BS as a more effective and straightforward approach. The general understanding of both the BEM and the BS was found to be good by all the SMEs, this understanding was checked at the workshops described in the research methodology. The relatively poor experience with the BEM was caused by the SMEs' desire for closure within short time scales, while the BEM has at least a 6-12 month cycle before strategy and business improvements are clearly linked. Customer understanding and satisfaction are considered vital Some of the SMEs seen the BS as enabling the organisation to provide a wider range of products and services to customers, rather than the narrow range

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normally associated with SMEs (Raymond et al., 1998). This more eclectic range was considered to be related to the much wider approach within the BS compared with a purely financial focus. For example there were improved process approaches (process quadrant of BS) which improved new product development and ultimately the number of new products on sale to customers. The new product development process had shortened cycle times in terms of concept to customer. This wider product range was seen as helping to attract new customers. However, the BS was not considered to be a substitute for a close relationship with the customer, which according to Hale and Cragg (1996) is a traditional SME strength: . . .we need the BS and to keep talking to our customers.

This view emphasised, once again, that the SMEs considered the BS to be somewhat mechanistic where traditional strengths such as flexibility and personal relationships with customers were required (Raymond et al., 1998). The BS focus on targets and measures was found to be useful. SME customer links, relying on personal relations and close proximity, can be somewhat lax in setting meaningful targets relating to customers and markets. The BS was found to add rigour to this process, but only when used in parallel with the existing informal approach. Thus, the BS was being used both as a ``check'' and as a ``driver''. Key measures were customer satisfaction, retention and number of visits to customers from managers. A key benefit from using the BS (also found in large organisations, Kaplan and Norton, 1996) was found to be better organisational alignment with customer needs: . . . we used the BS to drive the organisational change needed to move from purely functional to better customer understanding.

This benefit was especially prominent in the high growth SMEs studied, where market and customer changes were putting pressure on the organisation's process and structure for change: . . .adopting and anticipating future customer requirements will require substantial change in processes.

The innate flexibility and change orientation within SMEs aided this process. Also, the changes in processes (driven by the BS process quadrant) had a beneficial effect where the process (as almost always) affected or impacted external customers. Employee participation and understanding at all levels are required The BS was found to highlight a typical weakness in SMEs, namely a lack of systematic training and development of employees so that they can adequately contribute to business improvement efforts: . . . the business will have to invest in re-skilling employees, with an emphasis on Information Technology.

. . .it is essential that the employees learn, innovate and improve continually in every aspect of the business to retain the competitive edge.

These findings agreed those of Raymond et al. (1998) regarding the lack of training and development in SMEs. Employees were seen as a key source of innovation in meeting customer needs, in agreement with Gunasekaran et al. (1996), hence the need to invest in their development by using the BS. Furthermore, the BS was seen as driving appropriate measures in this area, for example, employee satisfaction, training levels and reward and recognition levels. Implementation of the BS was considered to be assisted by appropriate reward and recognition, especially in regard to the learning and growth quadrant of the BS, but only after: . . . commitment is measured and observed.

A number of concerns were expressed that the BS placed too much emphasis on the employee performance compared with management. Employees could be constrained with measuring systems which actually hindered their natural flexibility in the SME context, a concern also voiced by Chittenden et al. (1998), and echoing concerns about applying ISO 9000 in SMEs. Careful communication was considered vital if employees were to reconcile the flexible demands of their jobs with the perceived relatively more inflexible constraints of the BS. These concerns resulted in some SMEs deciding: . . . the BS seems more suited to larger organisations. . .than to smaller close knit SMEs, it's a good concept but it is too difficult to implement properly in SMEs.

The BS was seen as helping employees know the strategic plans of the SME through improved communication, cascading communication and increased involvement in improvement initiatives. Typically in a large organisation the application of the BS should improve visibility of organisational strategy down through all levels of employees (Kaplan and Norton, 1996). The current research reveals that the SMEs studied did not experience this affect to the same degree. Possibly the SMEs already had such visibility, albeit of a relatively ad-hoc strategy, sustained by personal contacts and tacit knowledge, and therefore did not highly rate the visibility benefit of the BS. The need for management commitment and consistency of purpose The strong centrally concentrated effect of management in SMEs (Ahire et al., 1996) was considered to be an advantage in implementing the BS. The managers' influence was seen as vital in enabling SMEs to develop longer term plans by using the BS: . . . managers must support the implementation of the BS to create future value and not just short term goals.

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Many SMEs remained unconvinced of the value of long term goals , as espoused by the BS approach, as they were influenced by volatile markets over which they have little or no leverage, in agreement with Ghobadian and Gallear (1996). The management team must champion the BS, however concern was expressed as employees could adopt passive resistance approaches because the BS is largely seen as a management tool for measuring employee performance: . . . it is a very political process where the BS is to become the key management tool within the organisation.

This effect, of concentrating on one approach (the BS in this case) is much larger in SMEs than in larger organisations where several change management approaches may be in use (Gunasekaran et al., 1996). The long timescale (in SME environment) for effective implementation, often 18 months plus, was seen as a critical test for management resolve to implement the BS and led to questions about the BS's suitability for SMEs. Managers were considered responsible for communicating the BS to all levels of the organisation. Furthermore managers should ensure there is appropriate training in regard to the BS: . . . individuals who are responsible for implementing the BS should understand the process and agree the measures and begin collecting them.

The importance of processes and measures The BS was considered helpful in focusing SME efforts in keeping their processes and measures aligned with their business strategy. Often, the fast-moving environment of SMEs results in discontinuities with existing processes and measures which do not keep pace with the rapid change (Wiele and Brown, 1998). Concern was expressed that the BS would ``flood the SMEs with extra measures: . . . we don't need more measures, what are we doing with the existing measures is the issue, we should support the existing measures or remove them.

This point illustrates the dichotomy between SMEs needing improved measurement in some circumstances and their need to remain flexible and be less constrained in other circumstances (Yeb-Yun Lin, 1999). Furthermore, some SMEs were concerned that the BS would result in too much time ``measuring'' rather than ``doing'': . . . a concern exists that unless a business has the capacity to capture measures on an ongoing basis and has the resources to feed the BS with data, then its implementation in a small business will be problematic.

Also, changing processes for data collection can result in expensive changes to hardware and software in SMEs which usually have little spare capital resource (Gunasekaran et al., 1996).

The BS's focus on process was considered useful in identifying and reinforcing the need for improved training and development for employees to effectively manage process and measures. Some SMEs which had already applied ISO 9000 considered it a useful foundation on which to build the BS with associated training and development. The setting of targets and benchmarks was seen as important in regard to processes and measures. Targets should be set that are achievable and should not be long-term targets over which the SME had little control and hence would lead to demoralisation of the employees. The BS's inherent benchmarking capability was seen as extremely important in the SME sector which is often parochial and narrow focused (Hale and Cragg, 1996). Conclusions and critical factors The paper has investigated the role of quality/business improvement models, developed originally for large organisations and then applied within SMEs by : . summarising existing relevant literature under the category headings of the five principles of TQM; . a qualitative analysis of 20 SMEs which had applied a quality/business improvement model, namely the BS approach. Based on the findings it was found that the quality model, namely the BS as developed in large organisations had a number of problems when applied to SMEs. The model was found to introduce a degree of mechanisation and inflexibility that SMEs found difficult to accept in times of turbulent market changes which demand increased agility. Simply reducing the rigour in the model did not alleviate the problem. On the positive side, the model increased the measurement rigour and link between strategy and operational processes. Ultimately, grounded theory model building is inductive and cannot be generalised without understanding the constraints of the research (Eisenhardt, 1989). However, the findings increase the likelihood that applying quality models in general to SMEs will follow a similar pattern The main conclusions are summarised in the model shown below. This model, derived from the qualitative data, lists the key critical factors under the five category headings, when implementing quality models, derived in large organisations, within SMEs. Many of the factors listed apply equally to large and small organisations. (1) TQM is strategically linked to the business goals: . strategy must be linked to resources and infrastructure; . there is a need for systematic measurable process to implement strategy; . the links between strategy and business improvement must be clear; . mechanistic inflexible approaches must be avoided; . approaches must cope with rapidly changing environments and be adaptable;

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the focus must be wider than simply financial; there must be adequate short term benefits in addition to long term potential; . all improvement initiatives must be synthesized because of scarce resources. (2) Customer understanding and satisfaction are vital: . a wider range of products and services can be developed; . the customer focus is not subsumed within the financial focus; . there is no substitute for a close customer relationship; . nothing can replace ``talking to the customers''; . the mechanisatic approach must not replace the flexibility within personal relationships with customers; . improved target setting for markets and customers; . improved organisational alignment with customer needs. (3) Employee participation and understanding at all levels are required: . there is an increased focus on training and development; . there is an increased emphasis on helping employees learn, innovate and improve; . employees are recognised as a source of innovation; . appropriate measures are developed for learning and growth; . reward and recognition for employee efforts; . the danger of an unhealthy focus on employees akin to Taylorism; . the need for careful communication to employees; . balancing the flexible demands of the job with the relatively inflexible demands of the BS. (4) The need for management commitment and consistency of purpose: . the strong central focus of SME management aids implementation; . management commitment is vital; . learn to create future value as well as short term gain; . it is difficult to convince SME managers about long term goals in fast changing environments; . managers must avoid using the BS as a tool against employees; . the BS can have an overly dominant effect on an SME; . long implementation times are a test of management resolve; . managers must communicate regularly and effectively; . .

.

managers should allocate appropriate resources, training and development.

(5) The importance of processes and measures: .

. .

. .

.

. .

processes and measures must continuously be aligned with strategy in the fast moving environment; there is a danger of developing too many measures; there is a constant tension between the need for flexibility and the constraints of processes and measures; SMEs prefer ``doing'' rather than ``measuring''; considerable scarce resources are required to capture measures on an ongoing basis; training and development are needed for effective process management; targets can be established for processes; process benchmarking can help overcome the parochial nature of SMEs.

Although the model has been developed primarily using the BS application within SMEs, it is considered sufficiently general to apply to other quality models applied in SMEs. If SMEs are applying the BS they can use this model to ensure that there is a meaningful contribution to TQM by scaling and assessing the factors within the five sections of the model. This grounded model can be further used and developed in three ways. First, further grounded studies, involving SMEs which have applied quality models developed in large organisations, can be carried out to check the scope of the categories and factors. Such an exercise would add to the robustness and validity of the model (Eisenhardt, 1989). Secondly, the model is a useful starting point for hypothesis testing using quantitative techniques to check the correlation's between the categories and factors (Remenyi et al., 1998). Third, SMEs which are applying quality models can use this model as a guide for optimising the effectiveness of the change implementation (Yeb-Yun Lin, 1998). References Ahire, S., Golhar, L. and Damodar, Y. (1996), ``Quality management in large versus small firms'', Journal of Small Business Management, Vol. 34 No. 2, pp. 1-15. Barrier, M. (1994), ``Re-engineering your company'', Nation's Business, Vol. 82 No. 2, pp. 16-28. Borley, D. (1994), ``Total quality management involving everyone for business effectiveness'', Quality World, March, pp. 150-4. Burgoyne, J. and Reynolds, M. (1998), Managment Learning: Integrating Perspectives in Theory and Practice, Sage, London. Brown, A., Wiele, T. and Millar, R. (1999), ``Self-assessment and quality awards: a formula for making quality strategic'', Journal of Strategic Change, Vol. 8 No. 2, pp. 87-94.

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