Relationship of TQM on Managerial Perfomance: Evidence From Property Sector in Indonesia

Abstract

Purpose: This study seeks to bridge between the research by Lawrence (1999) and Retegan (1992), where the focus of TQM on his studies rests on customer satisfaction. Whereas in this study trying to recompile TQM by involving the variables Innovation and competitive advantage to stimulate managerial performance improvement where performance measurements include various measurements such as financial performance, marketing performance, and production performance in the property industry. Research design, data, and methodology: Total sample are 105 respondents coming from middle to top level of management in the property sector in Indonesia. To empirically prove the results of this study using multiply regression analysis as a test tool for analysis. Results and Findings: The results of this study confirm that TQM has a positive effect on market competition, innovation, and company performance indirectly. However, it does not have a significant impact if it is directly related to TQM on company performance. In this case, TQM for property companies in Indonesia would not have been possible without the role of innovation and market competition. So that the managerial implications of this study also confirm that TQM is essential and feels obligatory to be implemented optimally.

1. Introduction

Global competition is the trigger for many companies to talk about the concept of quality, especially those related to products or services produced as well as improving company performance. This phenomenon also applies to companies engaged in the property business. Global competition also has implications for infrastructure and business development in Indonesia. The rise of infrastructure development in Indonesia has a positive impact on the growth of the property sector. Besides, the passion for property is also supported by government policies that are pro-business and high expectations from the tax amnesty program. The economic growth target of above five percent is also considered to have helped stimulate the property sector.

Indonesian Statistics Bureau in 2018 show an increasing trend of growth. Several macros and microeconomic factors are considered to sustain the growth of the property industry in 2018. These factors include the impact of the tax amnesty policy, the birth of regulations for reducing housing construction permits, and lowering the rates. The value of the capitalization of Indonesia property in 2018 is estimated to reach IDR (Indonesian Rupiah) 318 trillion, an increase of 15% compared to 2017 which reached IDR (Indonesian Rupiah) 277 trillion. The fact is that until now, there are at least 14 million back-log housing needs in Indonesia. It is an evidence that the property business will continue to grow along with the community's demand for decent residences. The growth of housing needs and the growth of the property business will encourage competition for property businesses to meet the availability of property desired by the community.

Exciting property growth in Indonesia is also in line with the high level of business competition, which is marked by an increasing number of developers and property brokers. For that reason, as business actors, they must continually strive to improve quality and innovate to win the competition. In marketing the property business, the ability to negotiate and choose ways to be able to convince consumers through a personal approach is one of the critical factors. Next, is an effort to understand all the needs and desires of consumers so that they feel comfortable with the services offered. The entrepreneurs of the property industry in Indonesia believe that the property industry is one area that will not die because occupancy is a primary human need. The residential property apartment market segment in Indonesia is still classified as very broad for the middleclass consumer segment, whereas the upper-class property consumers, such as office buildings, shopping stalls, and real estate. The number of new property developers in the Indonesian property makes competition among developers increasingly fierce. However, in the course of several obstacles that are often faced by business actors in the property sector, it is difficult to convince potential consumers to buy, so that the level of transactions for the sale and purchase of property products cannot routinely occur every day.

Market competition will undoubtedly have an impact on company performance; in fact, this competition is what forges entrepreneurs and companies should ideally be better. Locus of control company becomes a determinant of whether entrepreneurs can overcome and resolve all the problems they are facing so that the company they lead becomes more developed and advanced or vice versa. In essence, the performance of the company The company's performance is essentially an achievement achieved by a business organization that can be seen from the results. The researchers agreed that measuring business performance is not just enough to use a single measure (Jaworski & Kohli, 1993). Jaworski & Kohli (1993) and (Iqbal, Huq, & Bhutta, 2018) states that company performance is measured by overall business performance compared to last year and overall performance compared to its main competitors, while in research Narver & Slater (1990). Kristianto & Tarigan (2019) States that business performance is measured by profitability compared to predetermined targets. One effort to achieve excellent performance must also be through improving the process of proper quality management. To realize an improved quality management process, TQM practices are a standard requirement in modern management. TQM has played an essential role in developing management practices in an organization, where a concept of quality is now considered a major strategic factor in business success. To improve competitive position and improve business performance, companies around the world, large or small manufacturing and services are applying the principles of TQM (Kanji, 1996). The role of TQM, which aims to improve product quality is marked by the improvement in terms of innovation, creativity, and consistent productivity to produce valuable products. Also, the role of TQM means to give a touch to better service that aims to meet customer satisfaction. This perspective is based on the argument that TQM practices in both the human and technological dimensions and help create an environment and culture that supports innovation (Thai Hoang, Igel, & Laosirihongthong, 2006). The core of implementing TQM is customer satisfaction. The realization of TQM is continuous and continuous innovation. Innovation can be seen with a structuralist approach and a process approach. The structuralist approach views change as a unit with fixed parameters such as technology and management practices, while the process approach views innovation as a complex process, which often involves various social groups in organizations (Swan et al., 1999). Some studies also identify a positive relationship between TQM and innovation in terms of market penetration. Wiklund et al (2003) and (Baldwin & Johnson, 1996) in his study findings, the TQM have a positive impact on management improvisation in organizations. Other findings were also conveyed by Thai Hoang, Igel, and Laosirihongthong, (2006) which examines the effect of TQM and innovation on the manufacturing industry in developing countries. Thai Hoang, Igel, & Laosirihongthong Found that TQM was considered as a set of corporate tools that had a positive impact on corporate innovation. TQM, in addition to affecting innovation and company performance, also has an effect on market competition. The arguments for consideration of including market competition in this research model are based on the arguments presented by several previous studies. Chong dan Rundus (2004) indicates that the higher the level of market competition, the more positive the relationship between TQM practices with product design and organizational performance.

(Lawrence, 1999) In his research that raised the theme of the application of TQM in the property industry sector, defined the use of TQM diction as important concepts and elements that ended in increasing customer satisfaction through the implementation of ISO 9000. Opinions from Lawrence were agreed by Rategan, 1992, which stated the application of TQM was not just to improve competitiveness and performance. This study seeks to bridge between the results of research from Lawrence (1999), which focuses on enhancing the quality through indicators ISO 9000 and research Retegan (1992), where the focus of TQM on his studies rests on customer satisfaction. Whereas in this study trying to recompile TQM by involving the variables Innovation and competitive advantage to stimulate managerial performance improvement where performance measurements include various measurements such as financial performance, marketing performance, and production performance in the property industry. Where the results of this study can provide development in terms of theoretical scientific management and management strategies as well as an impact on company managerial.

2. Literature Review

2.1. Total Quality Management

Initially, the idea of TQM first appeared in the US, but later it was organized and implemented in several Japanese companies. Particularly after WW-II, TQM was summarized and applied in the form of training programs in various industrial sectors, W. Edward Deming and Joseph M. Juran as a pioneer TQM research (see. Kanji, 1990). TQM is an approach in running a business that tries to maximize the competitiveness of an organization through continuous improvement of its products, services, people, processes, and environment. The success or failure of TQM implementation is determined mainly by the competence of the company's human resource management (HRM) to realize it. (Powell, 1995). Evans (2002) explained that TQM is a philosophy that emphasizes sustainably improving manufacturing processes by eliminating waste, improving quality, developing skills and reducing production costs. Hackman & Wageman (1995) designate this aspect as a supervisory process, an approach where product quality is determined by employees. Creech (1996) Stated that there are five main pillars in TQM to drive an organization, i.e., products produced, processes carried out in providing products, then the organization is driven by a leader, and there is a commitment among the leaders in an organization.

Products are the focal point for organizational goals and achievements; quality in commodities is not possible without merit in the process. Quality in the process is not possible without the right organization. The right organization is meaningless without adequate leadership. A strong commitment, from the bottom-up, is a supporting pillar for all others. Each pillar depends on the other four components, and if one is weak by itself, the other is also weak. The principles in the TQM system must be sourced from the top down and operate from the bottom up if the desired everything works excellently. The principle of TQM is to focus on the customer. Customer focus means placing the customer at the center of activity and no longer as a production-oriented company. Do it right (term number one) is necessary to continuously improve and make quality an attitude that all people must be responsible for the quality. Communicate and train (term number two). Communicating means telling employees what is happening. For this reason, it is necessary to improve communication channels and make it easier for employees to convey something (Arfah & Putra, 2019). Finally, Measure the results achieved and record (term number three). Measurements were taken to maintain standards and processes to be within agreed tolerance levels.

2.2. Innovation

Innovation can be defined as the process and / or results of developing the utilization / mobilization of knowledge, skills (including technology skills) as well as experience to make or make improvements to new products / services, processes or systems, which provide value which has meaning or significantly. Innovation has four characteristics i.e., having a particular / specific means that a change has features that are unique in the sense of ideas, programs, order, systems, including the possibility of expected results. Having the characteristics or elements of novelty, in the sense of innovation must have the attributes as work and thought that has a degree of originality and novelty. Innovation programs are implemented through planned programs, in the sense that innovation is carried out through a process that is not rushed, but the innovation activities are prepared carefully with a clear agenda and planned. The innovation that is rolled has a goal; the innovation program that is carried out must have the direction to be achieved, including the leadership and strategy for achieving that goal. Grover, Agrawal, & Khan (2004) High product quality will increase the company's competitive advantage, which will ultimately have an impact on company performance. Innovation is a technological, managerial and social process, where new ideas or concepts are first introduced to be put into practice in a culture and are a determining factor in industrial competition and a formidable weapon against competition.

2.3. Performance

Performance is the result of work that can be achieved by a person or group of people in an organization, following their respective authorities and responsibilities, in the context of efforts to make the organization's objectives legally, not violating the law and per morals and ethics. There are several ways to measure company performance, namely: Assessment system, which is an evaluation that provides information about the state or position of the order. Evaluation using this model can produce information about the final position of all elements of the promotional program is completed. Program planning, which is an evaluation that helps assess activities in a particular program that might be successful in meeting their needs. Program improvement, which is an evaluation that provides information about how the program functions, how the program works, how to anticipate problems that might interfere with the implementation of activities. The certification program, which is an evaluation that provides information about the values or benefits of the program. In the example of the promotion program above, this model is intended to evaluate whether it has an impact on potential customers, that is, getting more interested in buying products or encouraging consumers to subscribe.

2.4. Resource Based View (RBV) Approach and Hypothesis Development

Resource-based view Theory (RBV) is a concept that was born from the research of economists around the world, where this theory is believed to provide answers in creating a competitive advantage for a company (Commer et al, 2016), (Kaufman, 2015), (Madhani, 2009). The creation of sustainable competitive advantage allows companies to use their resources through innovation to encourage better performance (Mansur et al., 2019). On the other hand, a good management process through the TQM mechanism to create innovation and improve performance is also related to market competition.

The management of an organization that relies on resources owned by the company encourages the company to maintain its competitive advantage, which causes a company to improve its performance. Competitive advantage itself arises from the resources owned by a company, and this is in line with a theory called RBV. Chong & Rundus (2004) found that the higher the level of market competition, have positive relationship between TQM. Besides, the results also confirm that the higher the level of market competition, the more positive the relationship resulting from TQM implementation. Agus & Hassan (2011) shows that manufacturing and retail companies must emphasize more considerable attention to aspects of measuring the quality of TQM and a higher level of management support for TQM initiatives to ensure a sustainable strategic competitive advantage. Apart from that, TQM content can produce cost-based leads or differentiation. The inherent complexity of the TQM process has the potential to provide superior products and is difficult to emulate by competitors suggesting that manufacturing and retail companies must emphasize more considerable attention to aspects of measuring TQM quality and higher levels of management support for TQM initiatives to ensure competitive advantage strategic sustainability. Apart from that, TQM content can produce cost-based advantages or differentiation. the inherent complexity of the TQM process has the potential to provide superior products and are difficult for competitors to emulate. (Reed, Lemak, & Mero, 2000). So the hypothesis is built:

H1: TQM has a positive effect on market competition.

The extraordinary impact of process management and information and analysis of innovation systems can be demonstrated by improving the quality of integrated management (Wiklund et al, 2003), (Kanji, 1996). Powell (1995) concluded that open culture, employee empowerment, can affect company performance, but not TQM tools and techniques, such as process improvement. Anderson & Sohal, (1999) also found only organic elements that showed an impact on innovation. (Yusr, 2016) Argued that TQM had a positive impact on corporate innovation. So the hypothesis is built:

H2: TQM has a positive effect on innovation.

(Tang, 2006) states that the company's perception of a competitive environment is essential for realizing innovation and shows that the relationship between innovation and market competition can be positive or negative, depending on the understanding of specific game and specific innovation activities. (Dereli, 2015) states that Innovation will be a strategic tool in this prestigious competition for the improvement, creation, and improvement of businesses to create competitive advantages that are equal or better than those in foreign countries to realize sustainable development. (Distanont & Khongmalai, 2018). So the hypothesis is built:

H3: Innovation has a positive effect on market competition

Corredor and Gozni (2011) Designate this aspect as a supervisory process, an approach whereby product quality is determined by the employees who work. Whereas Performance can be interpreted as "a periodic determination of the operational effectiveness of a company, a part of the company and its employees based on predetermined targets, standards, and criteria. The quality management is recognized as a strategic tool for achieving performance and highest competitive advantage; TQM practices are also found to be interrelated to help achieve organizational performance goals (Ramlawati & Putra, 2018). These arguments provide the basis for the following hypothesis.

H4: TQM has a positive effect on the Company's performance.

(Kaufman, 2015) Argues that the company's performance can be encouraged if faced with the situation of market competition, whether free or tight. But the results of the study (Gupta & Krishnamurti, 2016) Different from the results of Kaufman's research. Gupta believes that market competition has a indirect effect on company performance. So the hypothesis that is built:

H5: Market competition affects the company's performance.

Al-Naser & Mohamed (2017) In his research concluded that organizational performance increases with the quality management practices that are explored. In this case, the development of innovation becomes essential to improve performance. The ability of a company to innovate is critical when striving for a competitive advantage (Porter Michael 1985). Innovation and performance will differ between companies. So, the hypothesis put forward:

H6: Innovation has a positive effect on Company Performance.

TQM can have an impact on company performance while implementing a great system based on technology that continues to be developed in each of its activities (Brah, Tee, & Madhu Rao, 2002). The purpose of implementing the system provides the level of readiness of the company to be ready to compete (Corredor & Goni, 2011). The application of the system is also one of the innovations in terms of production. These arguments provide the basis for the following hypothesis.

H7: TQM has a positive effect on company performance by making the market competition as intervening

H8: TQM has a positive impact on company performance by making innovation as intervening.

Based on the arguments presented in the introduction, prior research, and literature review sections, the theoretical framework of this research can be formulated in the following diagrams:

Figure 1: Research Framework

3. Research Methods and Materials

3.1. Samples

The number of samples in this study was 105 responden from 43 property companies in Indonesia, with positions as project manager, General Manager, Head of Marketing, Supervision, Brand Manager, Project Director, Marketing Staff, Finance Staff, Sales Executive, and Project Coordinator. Sample of criteria who have held these positions for at least two years (see. Table 2). The selection of property companies in Indonesia as the subject of this study is based on companies that have been listed on the Indonesia Stock Exchange until 2019. Based on demographic data, there were 73 male respondents (69.5%) and 32 female respondents (30.5%). Based on the level of education, respondents with the bachelor education level were the most dominant 73 person (69.5%), Masters = 21 person (20%), Diploma = 7 person (6.6%) and others = 4 people (3.8%). Based on the age distribution of respondents. The dominant age range of respondents was 31 - 40 years = 48 person (45.7%). Age 41-50 years = 33 person (31.4%), age <30 years = 17 person (16.1%), age> 50 years = 7 person (6.6%).

3.2. Measurement

This study uses electronic surveys, filling out survey results using a Likert scale 1-5 (Strongly disagree - Strongly Agree), such as measurements used in research. The measurement of the results of the study was carried out in several stages before entering data analysis and hypothesis testing. First Section; Validity testing, reliability testing with Cronbach alpha criteria> 0.60, Testing for normality with Kolmogorov-Smirnov criteria. Sig> 0.05. The Glesjer Test with criteria> 0.05. Multicollinearity test with criteria VIF> 10. Hypothesis testing stage through two stages, namely a direct relationship using regression with the criterion P <0.05 and an indirect relationship with the Sobel test. Second Section, namely the test of influence and structural relationship models as well as hypothesis testing (see Table 2). While the operational measurements of the variables and dimensions are explained as in table 1.

Table 1: Measurement of Variable

4. Results and Discussion

4.1. Demography of Respondent

Table 2: Data Demography (N = 105)

4.2. Statistics Result

In the first stage of statistical testing, as shown in table 3.

Where the validity test for all items of the variable states valid. The most dominant item forming the TQM variable is the TQM10 item (0.734), while for the Innovation variable the most dominant item is IN5 (0.764), the dominant item forming the market competition variable is MC3 (0.768), and the dominant item creating the performance variable is P3 (P3 (0.771). Reliability test also shows that all items are declared reliable> 0.60. Testing for normality using the Kolmogorov-Smirnov> 0.05 method so that it can be concluded that all data are normally distributed. Likewise, in the heteroskedasticity test using the glesjer test method also showed that the glacier test value> 0.05 so that it can be stated that there is no heteroscedasticity in the statistical analysis of this study. The multicollinearity test showed that all the relationships of the VIF variable <10, so it was also concluded that the statistical tests in this study did not have multicollinearity.

Table 3: Statistics Test

Table 4: Hypothesis Test

Hypothesis testing, as shown in table 4 states that of the eight hypotheses previously raised in the literature review and the objectivity of this study, most of them have a significant effect <0.01. Except for the H4 explanation on the direct relationship of the TQM variable to performance showing a significance value of 0.966> 0.05 so it can be stated that H4 has no significant effect. Indirect effects such as H1 - H6, it is indicated that TQM is positive and has a very substantial impact on market competition (t = 11,156).

while the Indirect effect relationship such as H7 and H8 states that TQM also has a positive effect on performance by making the market competition variable an intervening variable.

4.3. Discussion

Hypothesis (H4) shows that TQM does not have a direct influence on performance. The results of this empirical test reject a variety of previous research literacy that supports it as stated by (Chong & Rundus, 2004), (Reed et al., 2000) But besides that, the results of this study confirm the research results from (Raja & Wei, 2014) and (Terziovski & Samson, 1999) Also believes that TQM does not have a significant direct effect on performance. The implication of TQM on company performance does not always have a positive impact as in previous studies that took samples of the manufacturing industry. Several categories of companies will give different results, for example, as in the research in this study, namely companies engaged in the property industry. There are insignificant results besides being found in this study, and it also indicates that the application of TQM is not yet optimal in the property industry in Indonesia, thus requiring that the implementation of TQM be truly optimized so that the results of the TQM implications have a real impact directly on company performance. Whereas in the indirect relationship variable on hypothesis H7 and H8 states that TQM has a positive and significant effect on performance if it is moderated by market competition and innovation. The assumption that can be formed is that the property companies examined in this study still focus on innovation entities and how tight the competition space is. So it can be justified that without innovation, the company will not describe a good company performance appraisal.

To this day, based on the results of studies in the case of the Property Industry in Indonesia, the innovations that occur are still limited to product innovations, not yet optimal and entirely property companies that access the latest innovations through service innovation models. However, if we look closely at technological advancements and digital access, it becomes an opportunity for companies 

to be able to compete through the latest digital technology-based distribution and service channels. Property companies in Indonesia should also try this. In an environment of global competition, innovation is the key to success for companies. While technology and research and development (R&D) activities significantly influence the organizational structure and have an impact on the right competitive innovation giving a competitive advantage (Dereli, 2015). Innovation will be a strategic tool in this prestigious competition for the improvement, creation, and improvement of businesses to create a competitive advantage to realize sustainable development. (Distanont & Khongmalai, 2018).

Ideally, the application of TQM should build a company image and professional company performance without innovation. This opinion is also in line with the justification of what was said by Laitinen et al., (2016) That there are still many companies that still see product innovation as a method of competitive advantage instead of making TQM as a clear guideline as a tool to realize competitive advantage. In its journey, TQM produces effective and efficient ways and efforts through the experience that the company has gone through. Departing from this, of course, the output from TQM itself can produce two superior innovations, namely product innovation and service innovation. This statement is in line with what has been stated previously by (Reed et al., 2000). Market competition can enter well as long as the products produced by property companies are based on consumer needs, consumer tastes, market segmentation, and the application of intricate management patterns. The role of TQM has a complex influence on the sustainability of a company's operations, especially property companies, but the implementation of TQM at the beginning, of course, has a high price in terms of costs because it demands improvements in all lines in which the role of capital and technology play that role. But the impact on cheap and controlled all cost effectively and efficiently and effectively in business activities in the future. TQM can be realized not only through products produced, initiated by commitments from all internal. Competency enhancement for HR, which is the party that implements TQM itself and the implementation of compliant the standard operational procedure (SOP). Because without improving the quality of human resources and a clear vision and mission, TQM can not run well. With the complex management elements that are passed through TQM, of course, the products produced should be based on market segments, consumer tastes and of course the trends that are rife among consumers primarily for property consumers in Indonesia. The application of TQM to the product will undoubtedly result in product innovation while other innovations produced by TQM activities that are integrated are increasing the company's HR competencies through training, and also developing other skills that aim to sharpen the company's actions further.

5. Conclusions

Application of TQM for internal organizations will certainly produce innovation in terms of skills and work skills, whereas the implementation of TQM based on the marketing channels and the development of product distribution will result in distribution innovation. Innovation in product distribution for the property industry in Indonesia can be further maximized if property companies can reach all aspects of distribution channels and chains, including distribution channels based on digital technology. Of course, this must be more also strengthened through the fabric of competent and professional cooperation with various parties. In entering the market competition, the patterned corporate strategy can guarantee the company's future performance to the maximum. Of course, to achieve these objectives, the company's strategy must be able to reflect the company's vision and mission. TQM as a part that prioritizes continuous improvement and development in all aspects will lead the company to develop various strategies intended to face competition, for example: for the marketing department, evaluation of marketing aspects must be directed in detail to assess the targets set previously. For the production section in facing market competition requires product quality that is attempted zero defect and zero mistakes because it is one of the considerations in product pricing. Strategies for marketing and production should be combined and combined to create synergy because the products made by the production department and the products sold by customer-focused marketing are the key to success in winning the competition. Of course, this does not only apply to the field of production and marketing because TQM focuses on all the internal joints of the company. The company's performance can be said to be achieved if all work activities go as planned.