Effect of total quality management practices on nonfinancial performance: an empirical analysis of automotive engineering industry in Ethiopia

Abstract

PurposeThe purpose of this study is to explore the total quality management (TQM) practices and identify their effect on the nonfinancial performance (NFP) in the automotive engineering industry in Ethiopia. Despite many studies investigating the relationship between TQM practices and NFP, rare research has been conducted on TQM in automotive industries, making this a hugely unexplored field.Design/methodology/approachThe data underlying this study was collected using more than 500 self-administered questionnaire survey, distributed to the employees working under different departments and factories under one automotive engineering industry. Extensive data screening and refinement processes for discarding irrelevant items for the questionnaire (Likert five-point scale) were carried out. The data was employed to test the proposed theoretical model, established with the objective of assessing the effect of TQM practices on the NFP in the case industry. Empirical validated relations have been proofed for previously done researches that there were positive relations between the TQM practices and NFP. Different statistical tools applied include descriptive data analysis, correlation analysis, mean scale test, reliability analysis and factor analysis, and finally, two models were developed based on structural equation modeling by using SPSS and AMOS-26 software.FindingsResults found in this study were quite surprising. Initially, there was a total of ten TQM factors. The six independent factors survived from factor analysis only two factors (employee involvement and innovation) were contributing to the NFP. The study was acted as a performance evaluation system to track the industry NFP. Although the study focused on the effect of TQM practices, for more results it is recommended to conduct a 360-degree further research study to reveal the weaknesses, strengths, opportunities and challenges of the case industry performance.Research limitations/implicationsEvery research has its own limitations. The way the analysis is conducted in this study ensures that the limitations do not compromise the validity of the results obtained. Control variables (industry type, size, age, process type and technology used) are not considered in the research which may affect the results obtained. The study included the automobile industry alone, so the obtained results cannot be generalized to other industries.Practical implicationsThe positive relationship between the TQM practices and NFP measures indicates the importance of each of these practices in improving the industry. Researchers/managers/practitioners can use this developed model periodically to understand where the industry stands in the quality management journey. They can also analyze the effect of TQM practices on financial as well as operational performance measures. The research findings can also motivate the top management of the industry for better planning of goals, to arrange resources in time, in pursuit of improving quality, employee and industry performance.Originality/valueThe Ethiopian manufacturing industry is required to improve their manufacturing and service quality, in order to enhance their productivity and boost their competitiveness in an international market, which is the basis of this study. This study signifies one of the first attempts to empirically explore this linkage between TQM and performance in the Ethiopian automotive industry context.