The small and medium scale enterprise (SME) sector plays a critical economic role in both developed and developing countries. It is a significant source of job creation and contributes to innovation and technological growth.
In Nigeria, SMEs account for 96% of all businesses and 87% of employment in the agriculture and manufacturing sectors. However, in the last five years, they have contributed just 48% of the national GDP. This figure is skewed by the dominance of oil in the country’s economy. But the output of SMEs in Nigeria could be better. For instance, SMEs in Australia contribute 57% to their national GDP.
The low output of SMEs in Nigeria suggests they may be failing to secure customers because of the quality or price of products and services, and the speed of delivery. It’s possible they could benefit from applying total quality management, a philosophy aimed at continuously improving processes, products and services by focusing on customer expectations. This strategy might help businesses meet consumer demands and offer better customer service.
Not many studies have examined the association between total quality management and performance in SMEs, particularly in developing countries. We carried out research in Nigeria to find out whether organisational culture influenced the way these businesses carried out total quality management and whether it had a bearing on business performance.
By organisational culture, we mean the principles, standards and behaviours that direct the activities of workers in a business.
We found that SME owners and managers found it difficult to align their organisational culture with their efforts to improve their businesses. Our study also showed that a culture that gave more consideration to the client was likely to boost the performance of the business.
Total quality management
Total quality management is a strategy for improving service and efficiency in order to fulfil or surpass consumer needs. The idea is to make a business more competitive in the market. It considers all quality improvements implemented at all stages and including all company workers. It is focused on customers but also includes its workers in performance growth. Quality is integrated into the organisation’s culture through policies, documentation and efficient communication.
Some studies have found that total quality management improves business performance while others have found no relationship. But organisational culture is thought to have a role to play in the way total quality management is followed. Culture influences work style, behaviour and decision making, and ultimately the firm’s performance.
We collected questionnaires from the owners or managers of 364 manufacturing SMEs in the southwestern region of Nigeria in 2018. We identified six total quality management practices – leadership, customer focus, strategic planning, human resource management, information and analysis, and process management. Then we looked at how closely respondents followed them. Respondents were also asked to assess the level of performance of their firms over the past three years.
We found that when total quality management was incorporated into organisational culture, it created competence and promoted proficiency and expertise. So, in this way, organisational culture assisted business owners or managers to improve their firm’s performance. This would be a long-term competitive advantage for the business.
Culture can enhance performance
Our analysis shows that total quality management could improve SMEs’ performance and create a competitive advantage. This would in turn increase their contribution to economic development.
Total quality management recognises organisational culture – a firm’s work style, decision making and behaviour – as one of the most important requirements for enhancing performance.
In our view, more Nigerian manufacturing SMEs need a supportive organisational culture to successfully implement total quality management. This would make companies more profitable and perform better.
We believe total quality management should prioritise managerial leadership in organisations rather than long-term supervision. This is a style of leadership by mentoring and guiding rather than dictating. It would encourage work pride, team work and participatory management. Based on our findings, we believe that a culture that makes workers feel they have something valuable to contribute would be more effective than a culture of fear.
What we found indicates that business owners and managers should focus on their employees’ continuous advancement. They can do this by improving training and appropriate reward schemes, based on a needs assessment. They must also improve the workplace. Leaders must embrace mentoring and guiding and rid the workplace of fear.
We recommend that to meet the needs of customers and exceed their expectations, total quality management should be carried out effectively with the workers’ support and embedded in organisational culture.