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Research Article

The Effects of Corporate Culture, TQM, and Six Sigma Quality Management on Non-Financial and Financial Performance

Son, Seongjin

Dankook University

Published: January 2009 · Vol. 38 No. 6 · pp. 1691-1719
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Abstract

With increased focus given to the quality innovation, the achievement of quality excellence is essential for companies that seek to compete in global markets. Many companies to accomplish long-term competitiveness have adopted advanced quality management programs such as TQM, 6Sigma. In general, previous studies obtained optimistic results about the successful implementation of TQM and/or 6Sigma. But some of the studies yielded mixed results. One likely reason for the unsuccessful story is the possibility that TQM and/or 6Sigma are contextdependent such as corporate culture, the implementation period of adopted quality management programs etc. However, these factors have largely been ignored in the literature of quality management programs. Thus, one of the purpose of this study is to empirically analyze that non-financial performance have a mediating effect on the relationships between quality management level and financial performance. And this study also examine the effects of corporate culture in the confirmed mediating relationships among quality management level, non-financial performance, and financial performance. Corporate culture is generally defined as the values and beliefs of an organization that shape its behavior. It is also assumed that successful implementation of the quality management programs requires a strong support from corporate culture that emphasizes systematic continuous improvement. Adopting the competing values model of Quinn and McGrath(1985), corporate culture is classified into “flexible” versus “controlled culture” and “outer-directed” versus “innerdirected culture”. Implementation of the quality management programs was measured through various factors based on criterion of MB Award, such as leadership, strategic quality planning, human resources focus, customer and market focus, process management, information analysis and application. Business performances were measured through non-financial performance measures, such as internal business process results(employee, production process, quality), customer results, and perceived financial performance measures. These latent variables of the study were evaluated on a seven-point Likert scale(1=Significant decrease; 7=Significant increase). The findings of the study can be summarized as follows: First, a test of structural equation model(SEM) was conducted to confirm that non-financial performance had a mediating effect on the relationship between quality management level and financial performance. It was found that quality management level enhanced internal business process results, customer results sequentially and finally non-financial performance enhanced financial performance. More specifically, such a mediating relationship was founded in both flexible/outer-directed culture and controlled/inner-directed culture. Second, a test of multi-group structural equation model(MSEM) was conducted to compare the effects of corporate culture in the confirmed mediating relationships among quality management level, internal business process results, customer results, and financial results. Results showed that flexible culture and outer-directed culture more strongly mediating effects on the given relationships of the study than controlled culture and inner-directed culture. But it could not supported with statistical significance. The results of the study deliver an implication that companies and managers who want to accomplish customer-oriented quality excellence with adopted TQM and/or 6sigma programs must have positive mind-set toward organization-wide innovation, and also must realize structured business innovation with proper culture in the process of quality management. And finally these all efforts must bring a specific continuous improvement in the non-financial and financial performances.
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