CHAPTER ONE

INTRODUCTION

1.1 background to the study

A total quality management practice is a firm – wide management philosophy of continuously improving the quality of the products / services / processes by focusing on the customers needs and expectations to enhance customer retention, satisfaction, and firm performance. Total quality management is defined in many ways and using different terminologies. Many different terms are used when discussing total quality management such as total quality control, strategic quality management and total quality improvement ( Leonard et al, 2012). The concept of total quality management has been defined by Deming, Juran, Ishikawa and Feigenbaum in different ways but the essence remains the same. According to Deming (1982), total quality management is a continuous improvement process towards predictable degree of uniformity and dependability. Deming also identifies 14 principles of quality management to improve productivity and performance of the organization. These 14 principles are seen as follows ; Creating of constancy purpose for improvement of product and service, Adopt quality management as the new policy, Stop dependence on mass inspection, End the practice of awarding business on price tag alone, Ending the emphases on the production cost in improving the system production and service, New methods of training, New methods of supervision, Drive out fear, Cooperation between staff areas, Eliminating of numerical goals for the workforce, Elimination of numerical quotas, Remove barriers that hinders the hourly workers, New program of education and training, Top management involvement of quality management.

Juran  defines quality as ” fitness for use. ” According to Juran (2001), every person in the organisation must be involved in the effort to make products or services that are fit for use. Juran also defines quality as conformance to requirements. Crosby, focuses mainly on zero defects and doing it right the first time. Similarly, Ishikawa also emphasises on the importance of total quality control to improve organisational performance.  Accordingly, quality does not only mean the quality of goods, but also of after sales services, quality of management, the company itself and the human life. Feigenbaum defines total quality as a continuous work processes, starting with customer requirements and ending with customer satisfaction and retention ( Forza et al, 1998).

According to Ranan ( 2005), total quality management is a way of doing things in an organisation which enables the organisation to plan and consistently achieve continuous improvement in the quality, activities,  process and have results of the purpose of satisfaction and even exceeding the need and expectations of both the internal and external customers. From this, one can deduce that the simple objective of total quality management is to ” Do the right thing the first time and every time “. Indeed, one of total quality management’s objectives is a never – ending push to improve, which is referred to as continuous improvement and the other is that of having satisfied and delighted customer which leads to customer’s retention which involves meeting or exceeding customer expectations ( Stevenson, 2007).

Successful total quality management programs are built through the dedication and combined efforts of everyone in the organization ( Brahet al, 2002). In order for an institution or organization to keep her already existing customers, top management must be committed and fully involved if not, Total Quality Management will become just another fad that quickly dies and fades. Companies gain competitive advantage through constant innovation, better targeting of customers and additional services McColl et al,2004). Those strategies cannot be applied to arm’s length type of customer relations. The higher the innovation and service component, the more the customer becomes part of the performance equation ( Ambroz, 2004). Customer relations then constitute an important asset that should be mentioned just like physical assets. To sustain the customer relations, service quality has become a cornerstone marketing strategy for companies. This highlights how important improving service quality is to organizations for their survival and growth, since it could help them tackle the challenges they face in the competitive markets. This means that service – based companies are compelled to provide excellent services to their customers in order to have a sustainable competitive advantag. There is  however, a need for these organizations to understand what service quality is in order to attain their objectives. In service marketing literature, service quality is generally defined as the overall assessment of a service by the customers or the extent to which a service meets customer’s needs or expectations ( Eshghi et al, 2008).

According to Parasuraman (1985), service quality is define as ” The discrepancy between consumers ‘ satisfaction / perceptions of services offered by a particular firm and their expectations about firms offering such services “. If what is perceived is below expectation,  customer judge’s quality as low and if what is perceived meets or exceeds expectation then customer sees quality to be high. Most emerging approaches to the measurement of intellectual capital agree on the importance of customer capital, as expressed in sales, satisfaction and reputation (Schneider, 2004). Accordingly, those approaches distinguish between reference customers (reputation), new customer or first trial customers (new sales) and repeated customers (satisfaction sale). Independently of approaches of measurement of intellectual capital, marketing literature has suggested a wide array of industry – specific models to monitor customer satisfaction based on their perception of total quality of service delivery (Hayes, 2012). According to Shahin (2005) it is very important to measure total quality of service because it allows for comparisons before and after changes have been executed, to identify quality related problems, and help in developing clear standards for service delivery. According to Stevenson ( 2007), ” the primary role of management is to lead an organization in its daily operations and to maintain it as a viable entity into the future ” and quality has become one of the driving forces of these two objectives. Though customer satisfaction became a specific goal in late 1980s, providing high quality was recognized as a key element for success. Stevenson ( 2007) defines TQM as a philosophy that involves everyone in an organization in a continual effort to improve quality and achieve customer satisfaction. Total quality management is a systems approach to ensure quality in an organization. In other words, TQM means that the organization’s culture is defined by and supports the constant attainment of customer satisfaction through an integrated system of tools, techniques, training stresses that TQM involves the among other components ( Himanshu, 2009). Himanshu continuous improvement of organizational processes, resulting in high quality products and services. TQM programs are planned and managed into systems and are oriented towards the achievement of complete customer satisfaction. In simple terms, the author defines TQM as the system of activities directed at achieving delighted customer, empowered employees, higher revenue and low costs. According to Vouzas (2013), TQM definitions, are associated with the management concepts and principles such as leadership, employee empowerment and customer focus, quality tool and techniques. The work of Fotopoulos and Psomas (2009) points out that achieving quality management is not only through leadership, employee management and involvement, customer focus, continuous improvement among other factors. However, quality management is achieved through the support of quality management tools and techniques like flow chart, relationship diagram, QFD, Paretto analysis and so on. They emphasize that TQM is different from quality assurance models in terms of customer focus, employee satisfaction, the protection of natural and social environment and finally in the spheres of internal and external business results. It is evident that many companies have successfully implemented TQM programs. Successful TQM programs are achieved through a number of elements coined as the features, principles or tenets of TQM. They are called core values which are also called in literature as dimensions, elements, or cornerstones (Hellsten & Klefsjo,2010). It is believed that if these values are missing, TQM will become just another fad that quickly dies and fades away (Stevenson, 2007). Customer retention is one of the main relationship marketing objectives and so its application is of great importance to organization of which microfinance institutions are not left out. The most important thing is customer satisfaction, which affects the relationship quality and switching costs. If the customer is satisfied with the company’s products and services offered and he / she has the already existing strong relationship with the company, the customer becomes delighted and would be inclined to ignore a single small frustration. Therefore, it can be said that a customer can either build the reputation of a company and brings more customers to the company as well as can also destroy the image of the company depending on their relationship with the company. That is if they are delighted, satisfied or dissatisfied customers. Monetary costs are also affected, but when the customer has a good relationship with the company, he / she is willing to pay more, but not to change the company. Consequently, customer satisfaction and relationship quality affects switching costs. In this case the customer finds the switching cost being higher for him / her than that of maintaining the relationship hence customer retention. However, this study will examine the effect of total quality management on consumer retention in microfinance institutions. Microfinance institutions are institutions that provides financial and non financial services such as savings, micro credit, money transfer, micro insurance and pension to the poor and those excluded from the traditional banking system and so there is need to continuous improvement on their services to be able to meet or exceed her customers needs. In terms of the Central African Economic and Monetary Union (CEMAC), the CEMAC defined microfinance as an activity carried out by institutions that do not have the status a bank as defined in the appendix to the convention of 17 January 1992 to harmonize and regulate the banking activities in the Central African State and which carry out on a regular bases loan operations and or service collection offers specific financial services to population who mainly operate outside the traditional banking channels with specialize services like training, health services and education. Microfinance origin is assessed in terms of internal and external causes of which the provision of total quality management effectively attracted workers and customers and serve as one of the internal causes A growing number of organizations use total quality management as a strategic foundation for generating competitive advantage and improving firm’s performance and customer retention and satisfaction (Reed et al, 2000). Firms that have won quality awards generally out performs other firms with respect to both income measures, customer loyalty and stock market value (Hendricks et al, 1997). It is no surprise that the links among market orientation, total quality management practices, and performance have attracted the attentions of marketing and operations management researchers like (Samson and Terziouski,1999). Total quality management have been shown to enhance organizational performance for both products and services organizations (Powel,1995). However, there is relatively little research on the difference between products and services offered by companies with respect to the effect of quality practices on customer retention and satisfaction. We know little about how these two different types of organizations view what they do, how well they do it, and its consequences. The concept of total quality management practices has been developed as a result of intense global competition. Organizations with international trade and global competitions have paid considerable attention to philosophies of total quality management, procedures, tools and techniques. According to Juran  2001), international competitions require higher levels of quality achievements by organizations. Total quality management is a popular area of research in management. Total quality management need practices in diverse manufacturing industries and how there is a growing interest in the service sector, even from nonprofit organizations ( Nwabueze, 1998). But the service industry differs from the manufacturing industry in a number of ways, such as service intangibility, simultaneity of production, delivery and consumption, perishability, variability of expectations of the customer and the participatory role of customers in the service delivery but the main aim by both sectors is to achieve customer retention and satisfaction. Several authors have proposed models of total quality management. However, most of the models are based on theories and practices that are primarily derived from the manufacturing industries where this has been effectively practiced in the recent decades. Customer Focus as a Feature of TQM Slogans for TQM programmes such as ” the customer defines quality”, “the customer is always right”, ” the customer always comes first”, ” the customer is king”, “quality begins and ends with the customer”, to mention a few, show the extent to which TQM schemes are customer focused. Customer focus is one of the eight quality management principles that form the basis of the latest version of ISO 9000 ( Stevenson, 2007). The TQM approach outline by Stevenson ( 2007) supports the fact that TQM is customer focused, find out what the customer wants; design a product or service that meets or exceeds customer wants ; design processes that facilitates doing the job right the first time ; keep track of results and extend these concepts to suppliers. Focusing on both internal and external customer needs or understanding the customers is the driving force behind TQM schemes. Furthermore, total quality management has become the buzz word in the management practice. It has been defined in many different ways. The international standards ISO8402, quality management and quality assurance terminology has defined total quality management as the management approach of an organization, centered on quality based on the participation of all its members and aiming at long – term success through customer retention and satisfaction and benefits to all members of the organization and the society (Ljungstrom et al, 2002). According to Solomon (2002), total quality management seeks continuous improvements in the quality of all processes. People, products and services of an organization. Total quality management is also a systematic approach to management that aims to enhance value to customers by designing and continually improving organizational processes and systems (Katha, 2004). The emphasis is on employee involvement and employment along with customers and customer’s satisfaction as the focal point. “The tenets of total quality are continuous improvement, top management leadership commitment, employees’ involvement and customer focus to the goal of the organization (Ugboro. 2000)

1.2 statement of the problem

The financial sector plays an important role as far as economic growth is concern. Due to the importance of financial institutions in the world today, there in an increase in the creation of financial systems of which Microfinance institutions are not left out. New banks and microfinance institutions are gradually making a head way into Bamenda, meanwhile existing competitors keep reinforcing their existence and in some cases are considering expansion opportunities. Due the growth of these financial institutions, there is high competition in the financial sector. Customers are now left with a variety of choices to choose from making it difficult for microfinance institutions to retain customers. The adoption of TQM by organizations has been hampered due to noncompliance with
the procedure and principles of TQM implementation. While some organizations, run TQM like
a program which they expect to function and perform the magic by itself, others have used halfhearted approach to it, by using some bits and pieces of the principles. This has counted for the
failure of most organizations in meeting their expected target from implementing this ideology
(Ugboro and Obeng, 2000). It is however been advised that MFIs should embrace quality
management principles and implement them successfully to be able to delight their customers
through efficient quality services. In comparison with manufacturing firms, the service sector has
lagged behind not only in terms of implementing the standard, but also in embracing the
associated concepts of total quality management and continuous improvement.
According to TQM experts proper implementation of TQM in institutions is a critical
determinant enhancing institutional performance (Coff, 1999). Ghobadian et al. (1998) postulates
that the quality management principles (QMPs) when consistently applied across an institution
should engender optimal overall performance excellence far more effectively than a series of
individually optimized activities. TQM principles must be seen as a “package deal”. To gain the
full potential of TQM, Microfinance institutions must implement all these TQM principles to the greatest extent possible.

However, there is an overlap of principles between researchers, and any of them if
neglected or not in place, can jeopardize the total effort. The purpose of this study is to establish
whether TQM principles employed in Microfinance Institutions have any effect(s) on
performance of the MFIs. An understanding of the various TQM practices employed by
Microfinance Institutions (MFIs) would aid to better the level of services quality
management that MFIs offer which would impact on its overall business performance.

1.3 Research Questions

Research questions consist of the main research questions and the specific research questions.

 1.3.1. Main Research Question

What is the effect of total quality management on costumers retention in microfinance institutions in Bamenda?

1.3.2. Specific research Questions

Specific research questions are as follows;

1. What is the effect of top management commitment (TMC) on costumers retention in microfinance institutions in Bamenda?
2. What is the effect of customer focus (CF) on costumers ‘ retention in microfinance institutions in Bamenda?

 iii. What is the effect of employee involvement (EI) on costumers retention in microfinance institutions in Bamenda?

1.4. Objectives of the study

1.4.1. Main objective

The main objective of this study is to determine the effect of total quality management on costumers ‘retention in microfinance institutions in Bamenda.

1.4.2 specific objectives of the study

1. i) To determine the effect of top management commitment (TMC) on costumer’s retention in microfinance institutions in Bamenda.
2. ii) To examine the effect of customer focus (CF) on the retention of customers in microfinance institutions in Bamenda.

 iii) To assess the effect of employee involvement (EI) on customers retention in microfinance institutions in Bamenda.