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Abstract
In this study, we investigate the transferability of TQM practices to offshore manufacturing firms by validating direct and indirect
relationships among top management commitment, HR-focused TQM practices, employee satisfaction, and employee loyalty. Our
research objective is to isolate critical TQM practices that would enhance employee satisfaction and loyalty among maquiladora
workers. On-site surveys were conducted at two leading maquiladora firms that have long implemented TQM. The statistical results
indicate that employee empowerment, teamwork, and employee compensation have a significant and positive influence on employee
satisfaction. The improved employee satisfaction leads to a higher level of employee loyalty. In addition, the results indicate that the
effects of top management commitment on employee empowerment and teamwork are significantly mediated by employee training,
implying that the success of employee empowerment and quality teams can be dependent upon the level of employee training.
# 2005 Elsevier B.V. All rights reserved.
Keywords: Offshore manufacturing; Total quality management; Employee satisfaction; Structural equation modeling
1. Introduction
At the present time, offshore manufacturing appears
to be the most prevalent trend in the US manufacturing
sector. In 2002, 42% of the US manufacturing imports
were produced in 12 low-cost countries such as China,
India, and Mexicosee Balasubramanian and Padhi
(2005) for a complete list. The proportion of manufacturing imports from these countries will continue to
rise due to the intensifying global competition, which
has led US manufacturers to outsource or even move
their plants abroad (Balasubramanian and Padhi, 2005).
In todays global economy, offshoring is not merely
synonymous with the exploitation of abundant low-cost
labor. It is instead an orchestration of new and available
pools of labor to create the firms new competitive
advantage (Venkatraman, 2004).
As offshore manufacturing has become a popular
alternative for multinational companies (MNCs),
management emphasis has shifted toward improving
offshore affiliates quality and productivity and
sustaining a low-cost advantage simultaneously (Baker
et al., 1993). In this research, we investigate the critical
792
793
Organizational behavior theorists have acknowledged that when an organization becomes institutionalized through a series of adaptive processes, the
organization takes on a distinctive life of its own apart
from the influence of individual members (Selznick,
1996). This conventional view of institutional theory
has evolved into a relatively new institutionalism
often called isomorphism that in order to gain
legitimacy and support organizations tend to model
themselves after similar and dominant organizations
established structure, norms, and rules (Selznick, 1996;
Staw and Epstein, 2000; St. John et al., 2001). In this
context, the implementation of popular management
programs should be understood as an adaptive process
to improve organizational legitimacy and performance
(Staw and Epstein, 2000).
TQM is one of the popular management programs
investigated as an indicator of organizational isomorphism. For example, Westphal et al. (1997) show that the
use of trendy TQM procedures has led to an increase in
the organizational legitimacy of hospitals in the US. Staw
and Epstein (2000) also find that the implementation of
popular management techniques such as TQM contributes to the reputation and legitimacy of the firms. In
other words, companies are viewed as more innovative
and rated as having higher quality when they have
implemented isomorphic TQM practices. Similarly, St.
John et al. (2001) argue that the widespread adoption of
TQM and JIT has led the firms within an industry to share
similar values, processes, and standards.
In many aspects, the universality of TQM
perspective mirrors the primary thesis of institutional
theory in the organizational behavior literature. Proponents of TQM argue that the widespread adoption of
TQM, fueled by same industry benchmarking and the
institutionalization of numerous quality awards, could be
regarded as evidence of the validity of institutional theory
(Rungtusanatham et al., 2005; St. John et al., 2001). Thus,
794
HR-related TQM practices are categorized as infrastructure practices which comprise the environment
that supports effective use of the core quality management practices (Flynn et al., 1995, p. 660). Similarly,
Ahire et al. (1996) developed and validated twelve key
attributes of TQM, in which employee training,
employee empowerment, and employee involvement
were classified as HR-focused TQM practices.
Despite minor differences, the TQM studies in
Table 1 identify HR-focused TQM practices as
employee training, teamwork, employee empowerment,
performance appraisal, and employee compensation.
We incorporate these five TQM practices as the main
research variables. These TQM variables are also
consistent with Category 5. Human Resource Focus
of Baldrige National Quality Award Criteria (2005),
which emphasizes the importance of employees
performance management, education and training,
and well-being and satisfaction.
2.3. The conceptual model building and research
hypothesis
The hypothesized conceptual model is provided in
Fig. 1. As shown in Fig. 1, the conceptual model typifies
the traditional framework of TQM, in which top
management commitment is the key driver (exogenous
variable), HR-focused TQM practices and employee
satisfaction as intermediate endogenous variables, and
employee loyalty as an endogenous variable. Although
the causal associations among the constructs shown in
Fig. 1 seem to be straightforward, to our knowledge the
present study is the only one that holistically
investigates the relationships among HR-focused
TQM practices, employee satisfaction, and employee
loyalty. Most of the literature cited in the paper
examined individual construct relations, such as the
relationship between empowerment and satisfaction
(e.g., Koberg et al., 1999; Laschinger et al., 2001;
Seibert et al., 2004; Spreitzer et al., 1997).
2.3.1. Top management commitment and HRfocused TQM practice
Since the inception of the TQM movement, quality
leadership by top management has been supported by
many researchers (Anderson et al., 1995; Choi and
Behling, 1997; Flynn and Saladin, 2001; Kaynak,
2003). To achieve total quality, top managers must
clarify quality goals, treat quality as a strategic issue, set
quality as a priority, allocate adequate resources to
quality improvement efforts, and evaluate employees
based on their quality performance (Ahire et al., 1996).
Table 1
Comparison of TQM practices identified by the major studies and the present study
Key driver
Present Study
Top management
leadership
Role of quality
department
Visionary leadership
Top management
support
Top management
commitment
Top management
commitment
Quality performance
Customer satisfaction
Competitive advantage
Product quality
Improvement of
quality systems
Employee
satisfaction
and loyalty
Employee relations
Learning
Workforce management
Employee training
Training
Employee fulfillment
Work attitudes
Employee
empowerment
Employee
involvement
Teamwork structures
for improvement
External interface
management
People and customer
management
Employee
empowerment
Employee training
Strategic quality
management
Customer satisfaction
Human resourcefocused TQM
Teamwork
Appraisal system
Employee
compensation
Others
Process management
Process management
Product and
service design
Supplier quality
management
Quality data reporting
Continuous improvement
Process flow
management
Statistical control/
feedback
Product design process
Supplier relationship
Customer relationship
Statistical
process control
Design quality
management
Supplier quality
management
Product and
internal quality
Benchmarking
Customer focus
Supplier partnerships
Operational quality planning
Quality improvement
measurement systems
Communication of
improvement information
Customer satisfaction orientation
Dependent variable
795
796
797
798
(1)
ET g 2 TM z2
(2)
TW g 3 TM z3
(3)
AS g 4 TM z4
(4)
EC g 5 TM z5
(5)
(6)
(7)
(8)
TW g 3 TM b3 ET z3
(9)
799
800
Table 2
Profiles of the survey respondents
Profile
Number of respondents
Category
Count
Proportion (%)
Gender
407
Male
Female
158
249
38.8
61.2
Age
396
20 or less
2125
2630
3135
3640
4150
50 or more
63
102
100
64
32
26
9
15.9
25.8
25.3
16.2
8.1
6.6
2.3
Education
396
<Elementary
Elementary
Middle school
Technical school
High school
Some college
College
15
106
119
44
44
26
42
3.8
26.8
30.1
11.1
11.1
6.6
10.6
395
71
119
88
49
68
18.0
30.1
22.3
12.4
17.2
397
64
28
81
91
133
16.1
7.1
20.4
22.9
33.5
Type of work
396
Quality control
Production
Administration
Engineering
Others
52
218
33
23
70
13.1
55.1
8.3
5.8
17.7
801
802
Table 3
The measurement model statistics
Construct
Indicator
Standardized
loading
Measurement
error variance
AVEa
Cronbachs
alpha
Composite
reliability
TM1
TM2
TM3
0.666
0.887
0.776
0.556
0.213
0.397
0.612
0.826
0.824
Employee empowerment
EE2
EE4
0.749
0.770
0.439
0.407
0.576
0.723
0.731
Employee training
ET1
ET2
ET3
0.687
0.663
0.789
0.528
0.560
0.377
0.511
0.760
0.757
Teamwork
TW1
TW2
0.661
0.645
0.563
0.583
0.427
0.610
0.598
Appraisal systems
AS1
AS3
0.656
0.822
0.569
0.324
0.553
0.679
0.709
Employee compensation
EC1
EC2
0.877
0.784
0.230
0.385
0.692
0.808
0.817
Employee satisfaction
ES1
ES3
ES4
0.716
0.856
0.675
0.487
0.267
0.544
0.567
0.772
0.795
Employee loyalty
EL1
EL2
EL3
EL4
0.524
0.675
0.805
0.798
0.725
0.544
0.351
0.363
0.504
0.792
0.798
803
Table 4
Measures of the model fit
Desirable range
2
x -Test statistic
x2-Test statistic/d.f.
Root mean square error of approximation (RMSEA)
RMSEA 90% confidence interval
BentlerBonett normed fit index (NFI)
BentlerBonett non-normed fit index (NNFI)
Comparative fit index (CFI)
Goodness of fit index (GFI)
Degrees of freedom (d.f.)
3.00
0.08
0.90
0.90
0.90
0.80
Measurement model
Structural Model A
Structural Model B
336.068
2.100
0.059
0.0500.067
0.887
0.916
0.936
0.910
160.000
357.552
2.008
0.056
0.0480.064
0.939
0.962
0.968
0.884
178.000
314.667
1.787
0.050
0.0400.058
0.946
0.971
0.975
0.897
176.000
Table 5
Construct correlations and discriminant validity
Constructs
TM
EE
ET
TW
AS
EC
ES
EL
0.782
0.501
0.577
0.300
0.419
0.397
0.453
0.368
0.759
0.594
0.248
0.343
0.338
0.534
0.354
0.715
0.308
0.383
0.356
0.471
0.314
0.653
0.253
0.208
0.327
0.319
0.744
0.260
0.311
0.419
0.832
0.408
0.255
0.753
0.547
0.709
The diagonal elements in bold are the square roots of the average variance extracted. The offdiagonal elements are the correlations between
constructs. For discriminant validity, the diagonal elements should be larger than any other corresponding row or column entry. All the correlation
coefficients were significant at p < 0.01 level.
804
805
806
Table 6
Summary of the hypothesis test results based on structural Model B
Association
Hypothesis
Causal path
H1a
H1b
H1c
H1d
H1e
TM ! EE
TM ! ET
TM ! TW
TM ! AS
TM ! EC
H2
H3
H4
H5
H6
EE ! ES
ET ! ES
TW ! ES
AS ! ES
EC ! ES
H7
ES ! EL
H8
H9
ET ! EE
ET ! TW
Path coefficients
t-Value
Hypothesis supported
0.229
0.683
0.159
0.570
0.484
2.243
7.443b
1.232
5.594b
6.292b
Yes
Yes
No
Yes
Yes
0.493
0.083
0.259
0.134
0.208
3.511b
0.587
2.724b
1.825
3.032b
Yes
No
Yes
No
Yes
0.788
6.823b
Yes
0.602
0.369
Yes
Yes
5.097
2.663b
Legends: TM, top management commitment; EE, employee empowerment; ET, employee training; TW, teamwork; AS, appraisal systems; EC,
employee compensation; ES, employee satisfaction; EL, employee loyalty.
a
Significant at p < 0.05 level.
b
Significant at p < 0.01 level.
807
factor for employee satisfaction is employee empowerment, followed by teamwork and employee compensation, but employee training and appraisal systems are
not significantly associated with employee satisfaction.
The finding that employee empowerment is strongly
influential to employee satisfaction provides a meaningful implication. In the literature, the implementation
of employee empowerment in the maquiladora industry
has been viewed as a challenging task. The literature
recognizes that a high level of power distance, cultural
differences, and the lack of trust between the management (from the US or other developed nations) and the
Mexican employees have been critical obstacles to
employee empowerment (Jun et al., 2004; Lawrence
and Lewis, 1993; Nicholls et al., 1999; Pavett and
Whitney, 1998; Knotts and Tomlin, 1994). The findings
of this research, however, indicate the possibility that
the TQM success of the sample firms may be accredited
to the level of employee empowerment. In other words,
the more empowered the employees are in improving
product and service quality, the more satisfied they are
(see the corresponding indicators in Appendix A).
These results indirectly support the previous finding that
the lack of employee empowerment may have been
impeding the successful implementation of TQM in
maquiladoras (Lawrence and Yeh, 1994; Robert et al.,
2000).
In addition to employee empowerment, teamwork
and employee compensation have positive impacts on
employee satisfaction. To a certain degree, this result
contradicts the literature that the concept of teamwork
does not fit into the Mexican culture due to the high
power distance and strong uncertainty avoidance in
Mexican society (Adler, 1999; Lawrence and Yeh,
1994). The disparity between other studies and the
present study may be attributed to the differences in
sampling of companies. Based on our results, it can be
recommended that management should strive to
institutionalize appropriate employee empowerment,
teamwork, and compensation programs in order to
improve employee satisfaction and employee loyalty.
808
809
be some commonality among all the offshore manufacturing bases, readers should be cautioned in
generalizing the results, especially to the affiliates in
other countries. Thus, future research may be conducted
to verify these results by studying the offshore
manufacturing firms located in a variety of regions.
In addition, the present study employed a crosssectional survey method, which is limited in exploring
longitudinal evidence of how TQM evolves in
organizations. If one can examine the changes in
employee satisfaction and loyalty at different stages of
TQM implementation, it would be more helpful in
identifying a specific causality between TQM and
employee satisfaction and loyalty. Finally, it should be
noted that since the present study focused only on the
HRM practices commonly accepted as key TQM
attributes (see Table 1), other important HRM practices,
such as employee selection, employment security, and
selective hiring of new personnel, were excluded in the
studys model.
Appendix A
Please indicate your experience and perception on each statement, using the following scales: 1, strongly disagree;
2, disagree; 3, neutral; 4, agree; 5, strongly agree.
Top management commitment (TM)
TM1
Top management views quality as being more important than cost
TM2
Top management allocates adequate resources toward efforts to improve quality
TM3
Top management is visibly and explicitly committed to quality
Employee empowerment (EE)
EE1
I am provided with substantial autonomy and responsibility
EE2
I am encouraged to develop new ways to provide better products and services
EE3
I am not punished for quality improvement ideas that are unsuccessful
EE4
I am provided with sufficient information to arrive at good quality suggestions
Employee training (ET)
ET1
I have received sufficient training at this firm to do my job effectively
ET2
I am trained in quality improvement skills
ET3
Much of the training at our facility emphasizes product and service quality
ET4
I am trained in group-discussion and communication techniques
Teamwork (TW)
TW1
Teams are used extensively at this firm
TW2
Product and service quality teams are formed for the long run
TW3
I think that my teams are effective in producing quality goods and services
Appraisal systems (AS)
AS1
The quality of my work is an important factor in evaluating my job performance
AS2
I am regularly given feedback on my job performance
AS3
Part of my job performance evaluation is based on how well I work with teams
AS4
Part of my job performance evaluation is based on customer feedback on product and service quality
Employee compensation (EC)
EC1
I am satisfied with the pay that I receive
EC2
I earn more than others who do similar work at other firms
EC3
My pay encourages me to improve the quality of my work
810
Appendix A (Continued )
EC4
EC5
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