The Structural Effects of Quality Management Control Systems on Organizational Performance

The Structural Effects of Quality Management Control Systems on Organizational Performance

Zulnaidi Yaacob (Universiti Sains Malaysia, Malaysia)
DOI: 10.4018/978-1-4666-6635-1.ch023
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Abstract

This chapter discusses the results of an investigation into the effects of control systems on organizational performance within the context of Quality Management (QM). Data were collected using questionnaires from 205 managers within local authority organizations in Malaysia. Respondents were selected using stratified random sampling, and the data was analyzed using two computer software programs: SPSS and AMOS. The findings demonstrate the existence of a significant effect for Quality Management Control Systems (QMCS) on employee satisfaction, innovation, and cost benefit. Although the direct effect of QMCS on customer satisfaction was insignificant, this relationship was mediated by the dimensions of employee satisfaction and cost benefit. In summary, this chapter provides evidence for the significant role performed by control systems as a source for performance improvement within QM-organizations. In addition, this study reveals that the relationship between control systems and performance is not a simple and direct relationship but rather a structural relationship.
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Introduction

The notion of quality management is believed to bring out about not only better performance, in terms of both financial and non-financial factors, but it is also purportedly able to craft new forms of organization that are associated with several positive outcomes. These include more mutual communications among employees, a higher level of employee engagement in decision making, and both broader and longer term views in assessing the overall performance (Kaynak & Hartley, 2005; Kim et al, 2012). This effectively transforms organizations from what were initially coined ‘traditional organizations’ to what is known as ‘contemporary organizations’. However, such management does not only affect how an organization works, but also how it is designed. Both factors are very closely associated with the issue of management control systems (MCS) within contemporary organizations that feature aspects of quality management. Despite calls for more research on MCS within contemporary organizations (Arjalies & Mundy, 2013), the literature suggests the need for further studies on MCS which critically considers the nature of the relationship between MCS and the specific strategies pursued by organizations (Pondiville, et al, 2013).

Rather than organizing MCS as a traditional formal control mechanism, consisting of planning and control elements, the literature suggests that contemporary organizations have crafted their MCS as an integrative part of the organizational strategy (Arjalies & Mundy, 2013). In other words, control systems are developed to be strategy oriented. The existence of strategy-related characters in MCS was found where organizations develop MCS whilst also keeping in mind the diverse and complex array of strategy requirements needed to pursue a strategy successfully. As such, MCS, within the context of QM, is said to include several facets of QM, such as greater participation from a wider range of employees and performance evaluation that is beyond the benchmark of merely quantitative and financial outcomes (Kim et al, 2012). As a result, MCS within such instances have been coined as strategy-related control systems (Ittner & Larcker, 1997). While the literature acknowledges the significance of strategy-related control systems, studies on this issue are relatively scarce. Therefore, this expands the margins of the existing literature by investigating MCS that are practiced within the sphere of quality management. Acknowledging the richness of the extant literature discussing MCS, it is noted that previous studies fall into various streams. This paper discusses an investigation into the effect of MCS on organizational performance. Theoretically, the observed effect of MCS on performance is one of the significant pieces of whole picture of MCS as a discipline; this has been highlighted by the author in a review of the development of the MCS research paradigm (Chenhall, 2003). Practically, this study discusses the issues related to organizational performance, thereby providing scientific solutions for any organizations similar to the one included within this study.

Key Terms in this Chapter

Management Control Systems: A collection of systems which gather and use information to evaluate the performance of organizational resources (human resources, physical resources etc.) in achieving the goals.

Customer Satisfaction: The condition customers experience when they receive the product or service in a manner which meets their expectations.

Quality Management: A system intended to bring out about not only better performance, in terms of both financial and non-financial factors, but also purportedly able to craft new forms of organization that are associated with several positive outcomes.

Employee Satisfaction: Involves dimensions such as job motivation, career development, working environment, and organizational support.

Innovation: Finding new products and new ways of performing tasks.

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