Gadjah Mada International Journal of Business - January - April.
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Gadjah Mada International Journal of Business Vol.
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1 (January - April 2.
: 1 - 20 Sustainability of TQM Implementation Model In The IndonesiaAos Oil and Gas Industry:
An Assessment of Structural Relations Model Fit Wakhid Slamet Ciptono Alumnus Graduate School of Business.
Faculty of Business and Accountancy.
University of Malaya.
Kuala Lumpur.
Malaysia Abdul Razak Ibrahim Department of Marketing and Information Systems.
Faculty of Business and Accountancy.
University of Malaya.
Kuala Lumpur.
Malaysia Ainin Sulaiman Department of Marketing and Information Systems.
Faculty of Business and Accountancy.
University of Malaya.
Kuala Lumpur.
Malaysia Sharifah Latifah Syed A.
Kadir Faculty of Business and Accountancy.
University of Malaya.
Kuala Lumpur.
Malaysia Abstract: This study purposively is to conduct an empirical analysis of the structural relations among critical factors of quality management practices (QMP.
, world-class company practice (WCC), operational excellence practice (OE), and company performance .
ompany non-financial performance or CNFP and company financial performance or CFP) in the oil and gas companies operating in Indonesia.
The current study additionally examines the relationships between QMPs and CFP through WCC.
OE, and CNFP .
s partial mediator.
The study uses data from a survey of 140 strategic business units (SBU.
within 49 oil and gas contractor companies in Indonesia.
The findings suggest that all six QMPs have positive and significant indirect relationships on CFP through WCC and CNFP.
Only four of six QMPs have positive and significant indirect relationships on CFP through OE and CNFP.
Hence.
WCC.
OE, and CNFP play as partial mediators between QMPs and CFP.
CNFP has a significant influence on CFP.
A major implication of this study is that oil and gas managers need to recognize the structural relations model fit by developing all of the research constructs simultaneously associated with a comprehensive TQM practice.
Furthermore, the findings will assist oil and gas companies by improving CNFP, which is very critical to TQM, thereby contributing to a better achievement of CFP.
The current study uses the DemingAos principles.
Hayes and Wheelwright dimensions of world-class company practice.
Chevron TexacoAos operational excellence practice, and the dimensions of company financial and nonfinancial performances.
The paper also provides an insight into the sustainability of TQM implementation model and their effect on company financial performance in oil and gas companies in Indonesia.
Corresponding authors.
E-mail: wakhidsciptono@mmugm.
ISSN: 1141-1128
http://w.
Ciptono et al.
Abstrak: Studi ini bertujuan untuk melakukan analisis empiris hubungan struktural antara faktor-faktor kritis dari praktik-praktik kualitas manajemen (QMP.
, praktik perusahaan kelas dunia (WCC), praktik keunggulan operasional (OE), dan kinerja perusahaan .
inerja-non-keuangan perusahaan atau CNFP dan kinerja-keuangan perusahaan atau CFP) di perusahaan minyak dan gas yang beroperasi di Indonesia.
Tambahan studi ini meneliti hubungan antara QMPs dan CFP melalui WCC.
OE, dan CNFP .
ebagai mediator parsia.
secara bersamaan.
Studi ini menggunakan data dari survei terhadap 140 unit bisnis strategis (SBU) dengan 49 kontraktor perusahaan minyak dan gas di Indonesia.
Dari temuan menunjukkan bahwa enam QMPs memiliki hubungan positif yang tidak langsung dan signifikan terhadap CFP melalui WCC dan CNFP.
Hanya empat dari enam QMPs memiliki hubungan positif yang tidak langsung dan signifikan terhadap CFP melalui OE dan CNFP.
Oleh karena itu.
WCC.
OE, dan CNFP berperan sebagai mediator parsial antara QMPs dan CFP.
CNFP yang mempunyai pengaruh signifikan pada CFP.
Implikasi utama dari penelitian ini adalah, bahwa manajer perusahaan minyak dan gas perlu mengenali betul hubungan model struktural, dengan mengembangkan konstruk penelitian secara bersamaan yang dikaitkan dengan praktik TQM yang komprehensif.
Selanjutnya, dari temuan, akan membantu perusahaan minyak dan gas dalam meningkatkan CNFP, yang sangat penting untuk TQM, sehingga berkontribusi untuk pencapaian kinerja yang lebih baik dari CFP.
Studi ini menggunakan prinsip-prinsip Deming.
Hayes dan Wheelwright berdimensi praktik perusahaan kelas dunia, praktik keunggulan operasional Chevron Texaco, dan dimensi kinerja-keuangan dan non-keuangan perusahaan.
Paper ini juga memberikan wawasan tentang keberlanjutan model implementasi TQM dan efeknya pada kinerja keuangan perusahaan di perusahaan minyak dan gas di Indonesia.
Keywords: company performance.
Indonesia.
operational excellence.
total quality management, world-class company Gadjah Mada International Journal of Business - January - April.
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Introduction A successful TQM implementation should consider other contemporary management practices such as learning organization through operational excellence practice, world-class organization .
world-class company practic.
, and performance management .
as an integrated network .
of management practices (Luthans et al.
TQM researchers- to develop a comprehensive TQM implementation modelhas sought out the contextual factors affecting TQM effectiveness (Montes et al.
Gilbert .
and Raffio .
cited in Montes et al.
argue that, when a TQM program is properly implemented, the company productivity and/or profitability will improve then.
Thus, it can be concluded that this improvement is a result of the TQM implementation program.
Nonetheless, the improvement noticed essentially could have originated as a result of other events concurrent in time along with an intervention.
This means that a relationship between the improvement process and the organizational results could have been obscured by some exogenous shocksAicontextual factors of TQM implementation such as environmental or market factors (Montes et al.
Hence, a concern must be deeply given to the conceptual and contextual factors and attempts are needed to realize that TQM implementation should not be operated separately from other change initiative programs .
ontextual factor.
Aiit actually could be integrated instead.
This study in turn is also designed to investigate the rationale of linkage among ten research constructs .
ncluding two contextual factor.
Aisix critical factors of quality management practices, world- class company practice, operational excellence practice, company non-financial performance, and company financial performance.
In fact.
TQM is described as a total system approach (Sitkin et al.
in which one of its major principles is the appreciation of systems (Leonard and McAdam Therefore, a collaboration of TQM with other theories and practices as a total system will be able to assist in developing TQM dynamics models (Vancouver 1996.
Leonard and McAdam 2.
Here, the study by the researchers is designed to develop a comprehensive model of TQM implementation by empirically examining and focusing on the structural relations of critical factors among quality management practices, contextual factors related to TQM implementation .
orld-class company practice, operational excellence practic.
, and company performance .
inancial and non-financia.
based on management perception in the oil and gas industries in Indonesia.
By testing the model the researchers suggest that structural relations among six critical factors of quality management practices.
r QMP), world-class company practice (WCC), operational excellence practice (OE), and company non-financial performance (CNFP) may lead to superior company financial performance (CFP) using structural equation modeling (SEM).
SEM is a collection of statistical techniques which in this study is used to allow a set of complex relations among one endogenous variable (CFP), six exogenous variables (QMP1-.
, and three mediating variables (WCC.
OE.
CNFP)- to be examined.
For the complexity and multidimensionality in the phenomena of interest.
SEM is considered to be the only tool of analysis that allows complete and simultaneous tests of all the relations (Ullman 2.
Ciptono et al.
The primary purpose of the current study is to offer a new empirical evidence on the form and strength of the structural relations among critical factors of quality management practices .
xogeneous variable.
, world-class company practice, operational excellence practice, company non-financial performance .
ediating variable.
and company financial performance .
n endogeneous variabl.
in oil and gas business units that have adopted TQM.
A theoretical support for the constructs used in this investigation primarily comes from the total quality management and sustainability strategic disciplines.
In summary, the objectives of the current study are as follows:
to examine the relationships between critical factors of quality management practices and world-class company practice.
to examine the relationships between critical factors of quality management practices and operational excellence practice.
to reveal world-class company practice and company non-financial performance partially mediating the relationhips between critical factors of quality management practices and company financial .
to reveal operational excellence practice and company non-financial performance partially mediating the relationships between critical factors of quality management practices and company financial .
to find out the significant influence of company non-financial performance on the company financial performance.
Sustainability of TQM Implementation Program The implementation of sustainability of TQM needs to change from a predominantly narrow and mechanistic approach, with quality basically rested on hard elements related to production or systematic measurement of standard operating procedure (SOP)- to a softer or more social .
rganic and cultura.
procedure (McAdam 2000, cited in Sa and Abrunhosa 2007.
Bou and Beltran 2.
The mechanistic approach of TQM, by emphasizing stability, conformity, and discipline, as a matter of fact does not introduce enough looseness into the system for people to explore new possibilities and collaborate with In contrast, the organic approach of TQM, by stressing leadership, involvement, empowerment, partnerships, and comparison with the best in class .
, has encouraged people to scan the environment for new trends, information communication technology (ICT), knowledge management, and changes in mindsets .
ontinuous innovatio.
(McAdam 2004, in Sa and Abrunhosa Sustainability of TQM implementation is a comprehensive management philosophy, embracing all the aspects of organization and involving its entire workforce, including customers and suppliers (Dale 1.
Implementing sustainability of TQM program is expected to enhance organizational performance .
ustainable competitive advantag.
The effectiveness of this implementation however should be realized by accessing and utilizing the concerted knowledge and experience of managers and employees at all levels (Kossoff 1993, in Melan 1.
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Since TQM is an organization-wide function, organization theory should be used to describe, explain, and improve it.
Organization-theory research could significantly contribute to the practice of TQM and, in turn, improve quality performance and company performance (Benson et al.
One of the organization theories is the Aumechanistic-organicAy approach.
An effective sustain-ability TQM implementation program in an organization uses a combination of both mechanistic and organic approaches.
Organizations are viewed as the instruments designed to efficiently achieve several specified As the contingency theory posits, a mechanistic approach will be more useful in a more stable business environment, whereas an organic approach will be more effective in a turbulent, dynamic and complex business This contingency theory is supported by Paul Lawrence and Jay LorschAos work (Lawrence and Lorsch 1.
Figure 1.
The Proposed Structural Relations Model
Exogenous Variable Mediating Variable Endogenous Variable QMP
H1a
H2a
H1c
H1b
H2b
QMP
WCC
H3a-f
QMP
H2c
H1d
a H1e
H2d AA
QMP
CNFP
CFP
H4a-f
H2e
QMP
H1f
H2f
QMP
H1-5
Note:
A QMPs: Critical Factors of Quality Management Practices A OE: Operational Excellence Practice A WCC: World-class Company Practice A CNFP: Company Non Financial Performance A CFP: Company Financial Performance Ciptono et al.
Research Framework and Hypothesis The hypothesized overall structural relations model is portrayed in Figure 1.
It is important to recognize that Figure 1 represents a series of structural relations between six exogeneous variables (QMP.
and an endogeneous variable (CFP) through three mediating variables (WCC.
OE, and CNFP).
Relationships between QMPs and WCC, and QMPs and OE The critical factors of quality management practices (QMP.
have been defined as an approach to management made up of a Auset of mutually reinforcing principles, each of which is supported by a set of practices and techniquesAy (Dean and Bowen 1.
, which has achieved a discriminant validity with respect to other strategies for improving the organizationAos performance (Hackman and Wageman 1995, in Molina et al.
According to Hoskinsson et al.
in Molina et al.
, studies of strategic management explain an improvement in the firmAos performance along two lines: .
the classic studies of the industrial economy, which believe that improvement in a performance comes from a better position of the firm, that is, from finding an environment that favors the firm.
the vision of resources and capacities, which believes that the firm should focus on improving its contextual factors .
knowledge and abilities about critical factors of quality management practices, world-class company practice, and operational excellence practic.
to improve its performance .
ompany non-financial and company financial performance.
Accordingly, we argue that critical factors of quality man- agement practices (QMP.
lead to worldclass company practice (WCC) and operational excellence practice (OE).
We then hypothesize that:
H1a-f : All critical factors of quality management practices will significantly influence worldclass company practice.
H2a-f : All critical factors of quality management practices will significantly influence operational excellence practice.
Mediation Adapting the studies of Demirbag et al.
and Molina .
, the mediating role of world-class performance in operations .
orld-class company practice, operational excellence practice, and company non-financial performanc.
among critical factors of quality management practices and company financial performance will be found to be only partial .
artial mediatio.
In fact, the mediation role could be fully given .
as well.
In the present study, one of the objectives is to explore the mediating role .
artial mediatio.
of world-class company practice, operational excellence practice, and company non-financial performance between critical factors of quality management practices and company financial performance.
We- for this, propose the following hypotheses:
H3 : World-class company practice and company non-financial performance partially mediate the impact of critical factors of quality management practices on company financial performance.
H4 : Operational excellence practice and company non-financial performance partially mediate the impact of critical factors of quality management practices on company financial performance.
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Relationships between CNFP and CFP According to Ittner and Larcker .
, non-financial indicators of improvements in areas such as quality, customer or employee satisfaction, and innovation may be better predictors of future financial performance than historical accounting measures, and should supplement financial measures in internal accounting systems .
Deloitte Touche Tohmatsu International 1994, and Kaplan and Norton 1.
This same discussion has produced calls for disclosure of nonfinancial information on the drivers of firm value .
Wallman 1995.
Edvinsson and Malone 1997.
and Stewart 1.
A report by the American Institute of Certified Public Accountants .
, for instance, concludes that companies should disclose leading, non-financial measures on key business processes such as product quality, cycle time, innovation, and employee satisfaction (Ittner and Larcker Based on these reasons, the researcher finds that company non-financial measures are leading indicators of company financial performance (Hendricks and Singhal, 2003.
Dehning et al.
Skrinjar et al.
the basis of the above-mentioned relationship between company non-financial performance and company financial performance, we develop the following hypothesis:
H5 : Company non-financial performance will positively influence company financial performance.
Research Method A survey questionnaire was mailed and e-mailed to 2,800 oil and gas business unit managers of a random sample of 49 oil and gas companies in Indonesia chosen from the Directorate General of Oil and Gas of the Republic of Indonesia.
A total of 1,332 individual usable questionnaires were received for a response rate of 50.
19 percent.
The survey reveals that the respondents .
usiness unit manager.
were 354 top level managers, 447 middle level managers, and 531 low level Non-response bias was conducted between early and late responders.
In addition, the results of the structural relations model using the total 1,332 usable responses obtained from the initial mail- and email-out were compared.
Here no significant differences were found in any of the comparisons indicating the absence of non-response bias.
Variable Measurement Exogeneous Variables (Six QMP.
Six QMPs are applied by using a set of 50 items of quality management method .
These fifty quality management methods (QMM.
can be extracted .
by six meaningful dimensions of six QMPs using the exploratory factor analysisAiquality improvement program (QMP.
, supervisory leadership (QMP.
, supplier involvement (QMP.
, top management commitment (QMP.
, training to improve products/services (QMP.
, and cross-functional team relationships among strategic business units (QMP.
Fifty quality management methods are developed to measure DemingAos 14 points based on a thorough literature review focused on the writings of Ahire et al.
Saraph et al.
Tamimi .
5 and 1.
Mediating Variables (World-Class Performance in Operations: WCC.
OE, and CNFP) This study employed world-class performance in operations for the mediating construct.
Wright and Geroy .
argue that world-class performance in operations is de- Ciptono et al.
rived from a complex set of interacting practices between WCC and OEAithe contextual factors of oil and gas companies.
In developing world-class performance in operations, the managers consider that most of SBUs in the IndonesiaAos oil and gas industry are cost centers for relying much on the non-financial In addition, if a non-financial performance is excellent, it might be sufficient to gain a better financial performance and lead business to success.
According to Ittner and Larcker .
, non-financial measures are the leading indicators of financial performance.
Moreover, non-financial performance becomes the key business processes such as by offering quality of product and service, delivery of product and service, variety of products and services, customer satisfaction, employee satisfaction, and community involvement.
AuGenerally, non-financial performance has no any intrinsic value for company directors.
Rather, this can be used as a leading indicator of financial performance and, especially, future financial performance that is not contained in contemporary accounting measuresAy (Prieto and Revilla 2006: .
Aithe linkage between CNFP and CFP.
Oil and gas managers that wish to compete in the world-class competition must produce evidence of leadership and commitment, initiate verifiable cross-functional communications, address the happiness and wellbeing of the workforces through better nonfinancial performances, and, above all, work toward their sustainable competitive advantage achievement Aifrom TQM to corporate sustainability based on a stakeholder managementAy (Zink 2007: .
According to Prajogo and Sohal .
, sustainability of TQM implementation needs to be implemented and aligned with the companyAos business strategy.
Also, organizations need to simultaneously pursue several multiple aspects of performance-including quality and innovation.
World-Class Company Practice (WCC) is applied by using sixty-seven .
Hayes and Wheelwright dimensions.
Hayes and Wheelwright .
developed their concept of world-class manufacturing based on six principles.
Specifically, a confirmatory factor analysis is employed to determine whether Hayes and WheelwrightAos 67 dimensions possess a positive and significant effect on their six principles.
The study develops a secondorder confirmatory factor analysis to test whether a set of Hayes and Wheelwright principles lands on an overall construct that may be termed as a WCC.
The measure is developed by Flynn et al.
The term WCC is applied since these firms are associated with outstanding performance in the global oil and gas industry.
Operational Excellence Practice (OE) is applied by using five dimensions of operational excellence practices in the oil and gas industry: safety, environment, health, reliability, and efficiency.
The measures are adapted from Parker .
and Chevron TexacoAos program .
It is the policy of Chevron-Texaco Corporation to protect the safety and health of people and the environment- and to reliably and efficiently conduct the operations.
The systematic management of safety, environment, health, reliability, and efficiency to achieve world-class performance is defined as an OE.
Company Non-Financial Performance (CNFP) is applied as an ability of a company to increase its financial performance by increasing its non-financial performance.
The measures are adapted from Carpenter and Sanders, 2007.
Cook and Verma 2002.
Demirbag et al.
CNFP consists of six Gadjah Mada International Journal of Business - January - April.
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namely product/service quality enhancement, delivery performance, delivery of product/service, customer satisfaction, employee satisfaction, and community development impacts that can be better indicators of future financial performanc.
By implementing non-financial measures, oil and gas managers can communicate its vision and mission and provide incentives for managers in achieving profitability, competitive strength, and longer-term strategic goals (Knowledge@wharton 2.
Endogenous Variable (Company Financial Performanc.
Company financial performance (CFP) or monetary-gain performance consists of three items: profit, market-share enhancement, and cost reduction.
The measures are adapted from Carpenter and Sanders 2007.
Cook and Verma 2002.
and Demirbag et al.
Financial measures generally focus on a short-term performance against financial/ accounting data.
Richardson et al.
argued that although improvement in financial performance is critical to many organizations, firms may also regard paying attention to the significance of non-financial performance Banker et al.
reported that few studies have addressed a correlation between non-financial and financial performance (Dunk 2.
In response, this study develops a linkage between non-financial and financial performance as an integral part of the structural relations between QMP and CFP.
As the financial and non-financial data in this study were collected from oil and gas managers on the basis of their subjective evaluations .
, objective financial and non-financial performance indicators are not employed in the analysis.
Overall financial and non-financial performances were measured subjectively.
In organizational re- search subjective performance measures are widely accepted (Lawrence and Lorsch 1967.
Dess 1987.
Powell 1992 in Powell 1.
This research included 47 privately-held oil and gas firms that would not have provided confidential financial information as a matter of policy.
Results Table 1 and Figure 2 show the revised .
structural model.
After eliminating the paths.
QMP3 to OE.
QMP6 to OE were iteratively used to determine whether the structural model fit the data well.
The criteria for assessing overall fit support a well-fitting model (X2/df <2.
GFI.
AGFI.
CFI >
RMR and RMSEA < 0.
and p-value > 0.
Sub-hypotheses H2c and H2f were not supportedAiQMP3 and QMP6 did not have a strong positive impact on OE.
With some modifications, the results of the final model support sub-hypotheses H2a, b, d, e .
ee Figure .
The revised .
model surpasses the hypothesized model on all fit criteria, which confirms that the modifications were meaningful.
There were no examples of parameters exhibiting the unreasonable estimates .
correlations greater than 1.
0 and negative This result also provides several important insights into all the lowest and smallest ECVI (Expected Cross-Validation Inde.
values from the initial model (ECVI = 0.
, and final causal model (ECVI = According to Byrne .
the structural model having the smallest ECVI values exhibits the greatest potential for replication.
In assessing the hypotheses for the structural model (Final Causal Mode.
, the researchers compared ECVI value of 0.
079 with that of both the saturated model (ECVI = 0.
and the independence model (ECVI = 3.
Ciptono et al.
Table 1.
SEM Results (Revised Model/Final Causal Mode.
Hypotheses Structural Relationship Standardized Regression Weight Error (A.
Residual (A) Hypothesis H1a QMP1 Ce WCC Yes H1b QMP2 Ce WCC Yes H1c QMP3 Ce WCC Yes Au1 = 0.
Au2 = 0.
Au3 = 0.
Au4 = 0.
Au5 = 0.
Au6 = 0.
A1 = 0.
A2 = 0.
A3 = 0.
A4 = 0.
H1d QMP4 Ce WCC H1e QMP5 Ce WCC H1f QMP6 Ce WCC H2a QMP1 Ce OE H2b QMP2 Ce OE H2d QMP4 Ce OE H2e QMP5 Ce OE Yes WCC Ce CNFP Yes OE Ce CNFP Yes CNFP Ce CFP Yes Goodness of Fit Measures Yes Yes A1 = 0.
A2 = 0.
A3 = 0.
A4 = 0.
Yes Acceptable Parameter Level (Hair et al.
1998, and 2.
Desirable Parameter Level (Hair et al.
1998, and 2.
Degree of Freedom .
Normed Chi-Square (X2/d.
1<x<5 1<x<2 X p-value > 0.
> 0.
GFI
Close to 1 is better
AGFI
> 0.
CFI
Close to 1 is better
RMR
Close to 0 is better
RMSEA
< 0.
ECVI
Yes Yes Chi-Square Statistic (X.
Yes < 0.
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Figure 2.
The Revised (Fina.
Model of the Structural Relations of Sustainability of TQM Implementation Exogenous Variable Mediating Variable Endogenous Variable QMP
QMP
WCC
QMP
QMP
CNFP
CFP
a QMP
QMP
Note:
A QMP
: Critical Factors of Quality Management Practices A OE: Operational Excellence Practice A WCC: World-class Company Practice A CNFP: Company Non Financial Performance A CFP: Company Financial Performance Ciptono et al.
Given the lower ECVI value for the hypothesized model, compared with both the independence and saturated models, the researchers conclude that it represents the best fit to the data.
Decomposition of Effects in Path Analysis To test hypotheses 3 and 4, the researchers use the decomposition of effects in path analysis to examine the total effect of QMP1-6 on CFP through two mediating variables (WCC and CNFP.
OE and CNFP).
Table 2 presents the estimated coefficients of regression equations used to interpret the structural relations in TQM implementation in Figure 2.
Table 3 illustrates the result of the decomposition of effects in path QMP1-6 g WCC A CNFP A CFP (H4a-.
and in path QMP1-6 A OE A CNFP A CFP (H5a-.
is important to interpret patterns of direct and indirect causation in structural relations model (Figure .
These results imply that H4a-f and H5a, b, d, and e were accepted.
Hence.
WCC and CNFP partially mediate the impact of six QMPs (QMP1-.
on CFP.
and CNFP similarly partially mediate the impact of four QMPs (QMP1, 2, 4, .
on CFP.
To learn how a particular mediating variable exercises its effect, the researchers decompose the indirect effects into their constituent parts.
To determine hypotheses 3, for example, the result shows that QMP1 has the total effect of 0.
227 on CNFP, of which 129 is transmitted via WCC.
and QMP1 has an indirect effect of 0.
196 on CFP through CNFP.
There is no direct effect of QMP1 to CNFP and CFP.
The same ways that QMP2,3,4,5,6 have total effects of 0.
039, 0.
066, 0.
177, and 0.
068 on CNFP, of 037, 0.
039, 0.
033, 0.
061, and 0.
are transmitted via WCC.
and QMP2,3,4,5,6 Table 2.
Coefficients of Variables Based on the Final Model of the Structural Relations of TQM Implementation Equation and Dependent Variable Predetermined Variable .
WCC
CNFP
CFP
QMP1
QMP2
QMP3
QMP4
QMP5
QMP6
WCC
CNFP
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have indirect effects of 0.
066, 0.
034, 0.
101, 0.
059 on CFP through CNFP.
There are no direct effects of QMP2,3,4,5,6 to CNFP and to CFP.
These results imply that H3a,b,c,d,e,f were acceptedAiWCC and CNFP partially mediate the impact of QMP1,2,3,4,5,6 on CFP.
To determine hypothesis 4, the results show that QMP1,2,4,5 have total effects of 227, 0.
076, 0.
066, and 0.
177 on CNFP, of 098, 0.
039, 0.
033, and 0.
056 are transmitted via OE.
and QMP1,2,4,5 have indirect effects of 0.
066, 0.
034, 0.
057, 0.
059 on CFP through CNFP.
There are no direct effects of QMP1,2,4,5 to CNFP and to CFP.
The results imply that H4a,b,d,e were supportedAiOE and CNFP partially mediate the impact of QMP1,2,4,5 on CFP.
Hypotheses H3c,f were not supportedAiOE and CNFP do not mediate the impact of QMP3,6 on CFP.
Table 3.
Interpretations of Decomposition of Effects in Path Analysis Indirect Effects via Dependent Variable Predetermined Variable Total
Effect
WCC
CNFP
Direct
Effect
WCC
QMP1
QMP2
QMP3
QMP4
QMP5
QMP6
QMP1
QMPA2
QMP3
QMP4
QMP5
QMP6
CNFP
QMP1
QMPA2
QMP3
QMP4
QMP5
QMP6
WCC
Ciptono et al.
Continued from Table 3
Indirect Effects via Dependent Variable Predetermined Variable Total
Effect
WCC
CNFP
Direct
Effect
CFP
QMP1
QMPA2
QMP3
QMP4
QMP5
QMP6
CNFP
pact of four critical factors of quality management practices on company financial performance.
Conclusion The summary of the quantitative research findings of the study is about the testing results from the research hypotheses:
Hypotheses 1a-f: determining six critical factors of quality management practices have positive impacts on world-class company practice.
Hypotheses 2a-f: determining four critical factors of quality management practices have positive impacts on operational excellence practice.
Hypothesis 3:
world-class company practice and company non-financial performance partially mediate the impact of six critical factors of quality management practices on company financial performance.
Hypothesis 4:
operational excellence practice and company non-financial performance partially mediate the im- Hypothesis 5:
company non-financial performance has a strong positive impact on company financial performance.
Discussion Overall, the results of SEM indicate that six QMPs .
uality improvement, supervisory leadership, supplier involvement, top management commitment, training to improve products/services, and cross functional relationships among strategic business units or SBU.
significantly and positively are related to WCC.
Four QMPs .
uality improvement, supervisory leadership, top management commitment, and training to improve products/service.
are significantly associated with OE.
Furthermore.
WCC and OE significantly affect CNFP, which in turn has a strong significant effect on CFP.
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In this study, it is found that six QMPs (QMP1-.
had significant positive impacts on WCC simultaneously suggesting that there are synergies among six QMPs (QMP1-.
possible to oil and gas companies, which employ WCC.
This is in line with the work of Flynn et al.
, who determined that WCC- significantly- is related to QMP .
ost, quality performance, product flexibility, and volume According to Flynn et al.
QMPs allow competition on the basis of dependability, which WCC- separately- was not able to achieve.
The relationship among four of six QMPs (QMP1, 2, 4, .
is presented in Figure 2.
This study observes that OE is always becoming essential in developing oil and gas business based on the QMPs.
Findings indicated that quality improvement program, training to improve products/services, supervisory leadership, and top management commitment, are positively associated with operational excellence in the oil and gas industry.
It asserted that the adoption of QMPs into OE could help to alter an oil gas company to understand the controls from a pointin-time crude oil/natural gas exploration project implementation mindset to a sustainable approach embedded into day-to-day operational processes.
Hence, the need to adopt QMPs is vital to promote OE.
To make OE successful, the integration of quality improvement program, training to improve products/ services, supervisory leadership, and top management commitment must be in harmony.
It is observed that there is a strong relationship between a set of WCC .
ix dimensions of Hayes and WheelwrightAos practices:
workforce skills and capabilities, management technical competence, competing through quality, workforce participation, rebuilding manufacturing engineering, and incremental improvement approache.
and a set of CNFP .
uality of products/service offerings, delivery of products/service offerings, and variety of products/service offerings, customer satisfaction, employee satisfaction, and community involvemen.
This is consistent with the findings of Flynn et al.
stating that WCC was related to cost, quality, and flexibility (CNFP).
The study also observed that there is a strong relationship between a set of OE .
afety, environment, health, reliability, and efficienc.
and a set of CNFP .
uality of products/service offerings, delivery of products/service offerings, and variety of products/service offerings, customer satisfaction, employee satisfaction, and community involvemen.
OE is necessary for oil and gas industry survival, which will be a source of sustainable competitive advantage (Thompson et al.
The study determined that CNFP has a strong positive impact on CFP.
Performance is a multifaceted concept and this study tried to capture performance dimensions from both financial .
inancial performance, market performance, and operating cost.
and non-financial .
uality of products/service offerings, delivery of products/service offerings, and variety of products/service offerings, customer satisfaction, employee satisfaction, and community involvemen.
Rather than individual practices, these findings were interpreted only by sets of CNFP and CF- due to the use of the first-order constructs as indicators of the second-order construct.
Limitations and Suggestions for Future Research Despite the fact that this study develops a sustainability of TQM implementation model in the fields of TQM and sustainability Ciptono et al.
strategic, it should also be acknowledged that the study is subject to some methodological by other techniques such as path analysis.
Basically.
SEM expects a large sample size to achieve a more accurate solution.
First, the data in this study were collected from managers at top, middle, and low level on the basis of their subjective evaluations, and objective performance indicators should be employed in an analysis.
In order to conduct this type of study, researchers need to keep in mind four crucial elements: first, researchers must carefully design a research model to minimize the problem in reliability and validity.
This type of research needs to be precise enough to demonstrate that a potential cause and effect could have covariance.
In addition, all research constructs that are confounding variables must be ruled out.
Second, the research reported here is of a purely cross-sectional snapshot.
The researchers were unable to test and account for the lags between the existence of practices and performance changes, nor to trace the progress of particular oil and gas companies in this study, which is a limitation of all such The researchers also encourage thinking about whether the model of the study variously changes at certain times, either because the constructs are theoretically important in other times or because the theoretical effect is unstable for some reasons.
Future research should be conducted longitudinally to observe the progress of improvement efforts.
Third, there is a need for further research to develop further TQM dynamics model both in theory and in practice.
To do so, the neural network model and triangulation method could be utilized in future studies to gain additional insights in exploring the structural relationships among quality management practices, contextual factors of an organization, and company performance.
Second, a cross-cultural comparative study can be suggested as another promising research topic based on the same measurement scales.
Since the measurement scales for this study are largely focused on the managerial elements related to sustainability of TQM implementation model and organizational improvement, the assessment and analysis of management activities in a different cultural setting may prove quite interesting.
To accomplish this cross-cultural comparative study, researchers must carefully select the sample country so that sustainability of TQM implementation model is already in place At a minimum, very similar principles of TQM should be employed organizationwide.
The promising benefit of this type of study is that researchers can identify how cultural differences affect the same management philosophy.
Finally, in this study.
SEM was employed to examine more complicated structural relations among one or more dependent .
variables and two or more predicting .
ediating or independent/exogenou.
variables simultaneously .
sustainability of TQM implementation model for oil and gas industry in Indonesi.
that cannot be handled Third, it is reasonable to assume that firms reserve the capability to choose among various contextual factors of a firm, which may affect sustainability of TQM implementation model, and have not been given much consideration in TQM implementation (Shah et al.
2003 cited in Sadikoglu, 2.
The future researches should provide an empiri- Gadjah Mada International Journal of Business - January - April.
Vol.
No.
1, 2011
cal examination of an integration between the successful sustainability of quality, innovation, and knowledge management practices and their impact on the success on sustainable development program using a longitudinal research design.
Fourth, in IndonesiaAos oil and gas industry, the TQM principles have been implemented since the mid 1980s.
In spite of actual utilization of TQM principles in most oil and gas companies, the pros and cons of numerous TQM elements, techniques, and real benefits are still not clearly identified and From this point of view, any future research that might develop a correct measurement instrument and reinforce TQM principles with advanced concepts will be To date, there have been very few researches aimed at providing empirical evidence of the linkages in the implementation of TQM criteria.
This research model is explicitly required in establishing the relations among the various criteria .
QMPs.
OE.
WCC.
CNFP and CFP).
This step of study should provide the realization of this research framework that enables researchers and managers to gain an improved insight into the successful sustainability of TQM program by providing a generic framework for TQM implementation model.
An empirical test of the linkages among the ten constructs of this research framework can help to provide a roadmap for firms from multiple industries seeking to progress towards total quality cultures and quality of life (Curkovic et al.
References