TQM payback experience in manufacturing firms

Abstract

An extensive search of the literature showed no data on the payback times associated with moving to a total quality management (TQM) style of management. Given the company‐wide nature of the undertaking, and the fact that TQM conversion is generally considered to be a long‐term, difficult process, this finding was unexpected. A survey of manufacturing companies showed that the initial investment associated with shifting to TQM was recouped in one year for 42.3 per cent of the responding companies. Payback times were two years or less for 65.4 per cent of the companies and three years or less for 80.8 per cent of the companies. All companies that reported quantitative data expected their TQM efforts to be profitable eventually, if not already so. Thus, despite the substantial training, reorganization and systems modification costs, initial TQM investments are being paid back within a time frame similar to that for other large financial undertakings. The lack of financially unfavourable TQM programmes among the survey respondents suggests that the probability of financial success is high.