An Integrated View of the Use of Quality Cost Information, the Improvement of the Quality Management System and Effects on Performance: A Study in Portuguese Companies

Abstract

The literature focusing on quality costs has placed great importance on issues related to identifying, measuring and reporting quality cost information. Less attention has been paid to how this information is used in the management process and how it can enhance internal capabilities and thereby improve company performance. In addition to addressing this question, we analyse how the extensive use of quality costs can boost organisational learning and innovation in organisations’ internal processes, thus leading to an overall improvement in the quality management system that is reflected in financial and non-financial performance. The conceptual model developed involves these relationships and has been tested using the structural equation modelling technique. To this end, a questionnaire survey was conducted in Portuguese companies with the ISO 9000 certification. The results shed light on the causal links between the variables, and thus validate the conceptual model indicating that the use of quality cost information has a positive effect on both the development of quality management systems and performance.

Appendices

Appendix 1: Questionnaire and Results Extracted from the Statistical Analysis

6.1.1 Panel 1: Profile of Use of Information About Costs and Other Quality Indicators Provided by the Information System

Indicate in which way the information provided by the information system about costs and other quality indicators is used for the following actions: (1—Not used; 5—Used extensively)

Diagnostic use	Interactive use
Setting targets and objectives.	Signalling key strategic areas.
Negotiating targets and objectives.	Implementing new ideas and ways for doing tasks.
Following up significant exceptions and deviations.	Debating data assumptions and action plans.
Following up pre-set plans and goals. Aligning performance measures with strategic goals.	Developing, implementing and operating evaluation and control systems.
Involvement in systematic contact with employees.	Learning tool.
	Allowing the company to focus on the critical factors for success.

1. Diagnostic profile of use: Cronbach’s alpha = 0.957; Interactive profile of use: Cronbach’s alpha = 0.939

6.1.2 Panel 2: Improvement of QMS

Indicate the degree of agreement with the following statements: (1—Completely disagree; 5—Completely agree)

Innovativeness

There is a culture of innovation and therefore a predisposition to innovate and to deal with the risks and uncertainties associated with innovation processes.

The company encourages and values the innovation processes (emergence of new ideas, improving current processes, etc.) of its employees.

The ideas and innovation processes suggested by people in the company are often implemented.

The company is on the “front line” in terms of developing new products, processes, techniques, etc.

There are routines in the company to exploit and/or consult the market with the aim of identifying opportunities to develop new products /services and /or improve existing products /services.

Senior managers develop and communicate a vision focused on continuous quality improvement.

In the company there are routines that involve members from several areas (marketing, production, quality, etc.) in the development of new products/services and/or improvement of existing products/services.

The company encourages the participation of people in the development processes of new products/services and/or in the improvement of existing products/services.

Organisational learning

Learning as a way of taking action to improve is one of the company’s core values.

The ability to learn is a key factor for improvement actions in the company.

Learning is understood as a basic capacity that ensures the company’s future.

In-company learning is seen as an investment.

1. Innovativeness: Cronbach’s alpha = 0.936; Organisational learning: Cronbach’s alpha = 0.866

6.1.3 Panel 3: Performance

With reference to the last 3 years, how do you evaluate the degree to which the following organisational goals were attained: (1—Much lower than expected; 5—Greater than expected)

Financial performance

Cost (e.g. implementing policies to reduce costs; reaching target costs for the period; etc.).

Sales (e.g. meeting the figures forecast for sales/services or market share).

Profitability (e.g. reaching the expected levels for indicators such as profitability, contribution margin, net income, etc.).

Non-financial performance

Service (e.g. ensuring the performance of products/services, adapting them to customer requirements; assessing the level of consumer satisfaction and meeting deadlines with clients).

Quality (e.g. significantly decrease the percentage of defective products; meet the desired standards of services provided; assessment and the monitoring of QC, etc.).

Productivity (e.g. elimination of waste, productivity of raw materials and human resources).

Human resources (e.g. improvement in indicators such as employee satisfaction, absenteeism, learning, professional and academic training, development of technical capabilities, etc.).

Innovation (e.g. improve levels of sales/services by placing new products/services in the market; expansion into new markets; rate of introduction of new products and/or services; evolution of these indicators in comparison with competitors).

1. Financial performance: Cronbach’s alpha = 0.784; Non-financial performance: Cronbach’s alpha = 0.861

Appendix 2: Regression Coefficients in the Final Causal Model

Independent variables	Dependent variables	Estimate	Standardized estimate	Standard errors	Critical ratio	P
Use of QCI	Organisational learning	0.618	0.667	0.038	3.331	***
Use of QCI	Innovativeness	0.525	0.614	0.051	3.225	***
Organisational learning	Innovativeness	0.481	0.545	0.071	2.340	***
Organisational learning	Performance	0.213	0.246	0.077	4.664	***
Innovativeness	Performance	0.430	0.451	0.056	4.267	***

1. Note: ***Significant at the p < 0.001 level (two-tailed)