The effects of total quality management on profitability: The case of international organization for standards (ISO) certified companies in Kenya

Abstract

Total Quality Management (TQM) is an accepted technique to ensure performance and survival of businesses in modern economies. Recent studies claim that the successful implementation of TQM could generate improved products and services, as well as reduce costs, lead to more satisfied customers and employees, and eventually improved financial performance. The purpose of this study was to establish whether this nature of relationship exists between TQM and financial performance in ISO certified companies in Kenya. The objective of this study was, therefore, to establish the effect of the implementation of TQM in ISO certified companies in Kenya. This study was a survey focused on establishing management environment, quality control tools and techniques, focus on customer and focus on supplier relationship affect ROA as a measure of financial performance. All the 38 ISO certified companies formed the sample of this study effectively making it a census. Data was collected by a questionnaire delivered by hand to the selected ISO certified company and collected after a week. The study found that management environment, quality control tools and techniques, focus on customer and focus on supplier relationship affected the returns of ISO certified companies. However, the regression analysis showed a weak relationship among the variable. This indicated by the constant term, 6.68 which was not significant; the coefficient of quality management environment, -24.27 which was statistically insignificant; the coefficient of focus on customers, 12.27 which was statistically insignificant; the coefficient of quality control tools and techniques, 7.06, which was statistically insignificant; and the coefficient of focus of supplier relationship, 7.37, which was also statistically insignificant. The study recommends that ISO certified organizations should put in place strong management environment policies. The policies should focus on putting in place a favorable work environment and ensuring sufficient financial resources that will enable achievement of organizational objectives and boost profitability. Focus on the customer should also be strengthened. Companies should put in place more effective mechanisms for quality control. Supplier relationship should also be strongly managed.