The structural link between TQM practices and financial performance: the mediating role of operational performance

Abstract

PurposeThis study aims at examining the effect of total quality management (TQM) practices on the financial performance ISO 9001:2008 certified manufacturing companies in Ethiopia with a mediating role of operational performance.Design/methodology/approachA cross-sectional survey research was conducted to meet the purpose. Data used for the study were solely primary data and were collected from the top and middle-level managers of different departments and senior experts working under the production/operation and quality management units of the target organizations. Data were obtained from 302 participants working in 73 companies using a self-administered questionnaire. Structural equation modelling (SEM) technique was applied to test the hypotheses positing the structural link between TQM practices, operational performance and financial performance.FindingsThe findings show that TQM practices had a significant direct and positive effect on both operational performance and financial performance and that operational performance significantly affects financial performance. The bootstrapping output of the mediation analysis also established that operational performance partially mediates the causal link between TQM practices and financial performance.Research limitations/implicationsThe empirical evidence provided by the present study provides helpful insights and guidance to managers to make a good deal of investment in maintaining enhanced performance outcomes under the operations stream that eventually would lead to better financial outcome.Originality/valueBeing one of the first attempts to empirically examine the structural linkages among TQM practices, operational performance and financial performance in Ethiopian manufacturing organizations, this paper provides strategic insights on the importance of implementing TQM practices in a holistic manner for the achievement of better performance outcomes.

The impact of TQM practices on organizational performance and on innovation: the mediating role of organizational learning

“…This result is consistent with the results obtained by (Pambreni et al., 2019; Androwis et al. , 2018) which argued that the principal role of TQM enhances quality performance, also, this result is consistent with the results obtained by (Adem and Virdi, 2023; Rawashedeh, 2018; Wei et al. , 2017) which showed that TQM practices improve operational performance.…”

“…The more industries adopt TQM practices, the more likely they are to enhance their performance. This result is consistent with the results obtained by (Pambreni et al, 2019;Androwis et al, 2018) which argued that the principal role of TQM enhances quality performance, also, this result is consistent with the results obtained by (Adem and Virdi, 2023;Rawashedeh, 2018;Wei et al, 2017) which showed that TQM practices improve operational performance. On another side, our findings give another report regarding the impact of TQM on OP in the Tunisian context.…”

“…In fact, the relationship between TQM and organizational performance (OP) is considered an important area of research in quality management (Nair, 2006). A literature review of a large body of studies examining the impact of TQM on OP which have been conducted in developing countries (Adem and Virdi, 2023;Do et al, 2021;Bhaskar, 2020;Hilman et al, 2020;Lakhal et al, 2006;Demirbag et al, 2006) and in developed countries (Psomas et al, 2016;Zeng et al, 2015;Prajogo et al, 2004;Kaynak, 2003) reveals conflicting results. Many empirical studies have confirmed the positive effect of TQM on OP (Do et al, 2021;Psomas and Jaca, 2016;Kafetzopolous et al, 2019;Youssef and Youssef, 2018;Flynn et al, 1995;Bouranta et al, 2017;Martinez-Costa and Jimenez-Jimenez, 2009).…”

“…The empirical investigations have conceptualized OP as a multidimensional concept. These dimensions concern financial dimension (Lakhal et al, 2006;Kaynak, 2003) and nonfinancial dimensions such as operational performance (Adem and Virdi, 2023;Acquah et al, 2023;Abdi and Singh, 2022;Anil and Satish, 2019;Jaca and Psomas, 2015;Lakhal et al, 2006), quality performance (Abdi and Singh, 2022;Lakhal and Pasin, 2008), business performance (Do et al, 2021), market performance (Kaynak, 2003). However, other studies have focused on either financial performance indicators (Hendricks and Singhal, 1996;Easton and Jarrell, 1998) or non-financial performance (Sharma and Modgil, 2020;Anil and Satish, 2019;Rawashnedeh, 2018;Bouranta et al, 2017;Arshad and Su, 2015;Jaca and Psomas, 2015;Hassan et al, 2012;Zehir et al, 2012;Kocoglu et al, 2011;Prajogo and Sohal, 2004;Kaynak, 2003).…”

“…In fact, the relationship between TQM and organizational performance (OP) is considered an important area of research in quality management (Nair, 2006). A literature review of a large body of studies examining the impact of TQM on OP which have been conducted in developing countries (Adem and Virdi, 2023; Do et al. , 2021; Bhaskar, 2020; Hilman et al.…”