Updated Proposal

8/3/2019 Updated Proposal

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Project Proposal on

Analysis of the Relationship between Intellectual Capital

and Total Quality Management


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CONTENTS OF TABLE

1. Abstract2.

Introduction

3. Literature Review3.1Concept of Human Capital3.2Concept of Total Quality Management3.3Integration

4. Problems of the Research5. Aims and Objectives of Research6. Research Hypothesis7. Research Methodologies8. References


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1. ABSTRACT

The main aim behind this research study is to present the framework which is nothing but the

integration of intellectual capital as well as total quality management (TQM) that resulted

into the best corporate performance. This report is based on conceptual theory and hence the

framework is built on the overall study of literature review. Depending on the comprehensive

study of existing literature survey over the total quality management as well as intellectual

capital, the six constructs of total quality management and intellectual capital both are

analyzed in order to find out the effects of their integration over non-financial and financial

corporate performance. This research study outcomes indicating that presence of close

relationship between the total quality management and intellectual capital hence their

integration resulted into the positive impact on corporate performance. In this research thesis,

we are presenting the significant contribution by proposing the framework of combination of

TQM and IC model as methodological example and this can be helpful for tracking the

degree of total quality management and IC influences over corporate performance. For the

sampling purpose in this research we used Iraq private banking sector, we selected four banks

such as Bank of Middle east, the investment bank, commercial bank of Iraq, Bank of

Baghdad.

Keywords: Intellectual Capital, Human capital, TQM, financial performance, non-financial

performance.


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2. INTRODUCTION

The concept of quality management is well known to academic literature as well as

practitioner. Even though total quality management is comprehensively examined since from

many years but still there is requirement for empirical studies over TQM due to fact that

several organizations and researchers are interested in this area as well as many firms are still

adopting and implementing the TQM and its diffusion is on the increase globally (Ehigie &

Mc Andrew, 2005; Sebastianelli & Tamimi, 2003). One of the minimum entry standards in

order to complete in the area of global market is quality and this is must to the organizations

survival, however, it may not be the source of competitive advantage (Fazli Idris, 2003; Fazli

Idris, 2004). As there is increase in economy based on knowledge, its become important to

manage such knowledge in the organizations as well as needed factor in gaining sustained

competitive advantage (Zhao & Bryar, 2001). The quality should not be effectively managed

by organizations. Rather organizations must manage and apply both new knowledge and

quality. The organizations those are adopting the TQM seems to require to develop the new

knowledge and integrate it and hence resulted into ways in order create customer values

according to Douglas & Judge (2001).

Numerous researchers have discovered that knowledge and quality management

should be integrated and for doing the same they have developed effective methods and

frameworks that consider new knowledge to be a complement or an alternative to the

philosophy of quality management like the TQM and R&D (Prajogo & Sohal, 2006), TQM

and innovation (Abrunhosa & Moura E Sa, 2008; Prajogo & Sohal, 2001), TQM and human

resource management (Jimnez- Jimnez & Martnez-Costa, 2009; Ooi et al., 2009), TQM

and ISO (Martnez-Costa et al, 2009), TQM and knowledge management (Colurcio, 2009;

Ooi, 2009; Ruzevicius, 2006; Adamson, 2005; Zhao & Bryar, 2001). There is no existence of


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any previous research that can be directly linked to the TQM and human capital. Here the

question arises that why do we use human capital?

The foundation for competition depends upon how the intellectual assets focus on the quality

performance including reducing costs, increasing speed and meeting customer needs (O'Dell

et al, 1999). The elementary confidence to succeed depends on the employees of the

company. The resourcefulness of the employees is the only way that the company can profit

and succeed in the market (Zivojinovic & Stanimirovic, 2009). It is important for the quality

management of the company to concentrate on rational competencies of human being

especially TQM which is people-orientated strategy (Dahlgaard & Dahlgaard-Park, 2006).

The major drivers of public and private sector performance are the investment in multi skills,

innovation and creativity, and increased competency which was stated by the Prime Minister

of Malaysia, Datuk Seri Mohd Najib Tun Haji Abdul Razak (2010). The global market has

the companies competing in it which are of greater productivity and who make use of

creativity and skills as well as better work coordination to attain competitive benefit.

The understanding of human being is the most significant resource for management and the

success of an organization depends on the people or employees for its existence (Lau & Idris,

2001). Tamimi & Sebastianelli (1998) cited by Lau Sc Idris (2001) indicates that people are

the most significant obstacle to TQM success, yielding 48 percent. The implementation

efficiency of TQM is based on the how well the employees are satisfied by the organization.

Therefore, the capital invested by human beings is treated as the whole and soul of the

business as they contribute to the knowledge and competency which plays an important role

in the corporate performance (Rampersad & ElHomsi, 2007) (Moon & Kym, 2006).

Therefore on the basis of the facts that are discussed previously we will determine existing

literature over both Intellectual capital and total quality management and also carry the

integration of TQM and Human resource and conduct the performance analysis of it over


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corporate performance. The major goal this research study is to present the structure of

incorporation of TQM and Intellectual capital which leads into the higher corporate

performance.


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3. LITERATURE REVIEW

3.1 Concept of Intellectual Capital

Intellectual Capital is similar to concrete properties in its potential for producing potential

cash flows, it is fundamentally different from tangible capital. Intellectual resources are non

competitor resources. Unlike physical resources which can only be used for doing one thing

at a time, intellectual resources can be multiplexed. For example, a customer support system

can provide support to thousands of customers at the same time. It is this capability to level

with requires that creates intellectual resources far better to physical resources. Structural

capital is an insubstantial resource that can be possessed and handled by managers. However,

it cannot be deal easily since no markets survive for this reason. Moreover, Customers do not

be concerned about the Structural capital of their Dealers since everybody likes dealing

directly with real human beings somewhat than with systems. Firms that leverage their

intellectual capital to do knowledge work are able to generate higher margin of profits than

those who provide mass-produced solutions. Human, Structural and Relational Capital often

work together in sensible combinations to give increase to core competencies that assume

strategic significance. Hence it is not enough to invest in people, systems and customers

unconnectedly, but in combinations that create end value. The Intellectual Capital of a firm is

the summation of its Human Capital, Structural Capital and Relational Capital. These

properties form a foundation of different spirited advantage and differentiate the performance

of one firm from the other. Having organized on such properties facilitates effectual internal

governance on the one hand and concise external communications on the other. Hence it

makes intelligence for firms to calculate, examine and report their Intellectual Capital.

Intellectual Capital can be purposeful? Because of some reasons which are as follows :

to help association invent their policy to estimate policy execution


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to help in the firms diversification and expansion results for use as a basis for management compensation to converse with external shareholders

The first three of these reasons speak about to internal decision making - the reasons is maximizing

operating performance for producing revenues at the lowest cost and the sustainability of dealer and

buyer relations and market share. The fourth point concerns to the decision-making inducement

system and the fifth concerns to signaling inspirations to external stakeholders. In order to

appreciate how Intellectual Capital fits into the system of things, lets look at Figure 1 below

to understand the characteristic business cycle from the firms viewpoint. The purpose of a

typical for profit firm is to use its resources for manufacturing goods and services which it

can sell for generating cash. Both concrete and insubstantial resources are utilized in this

process. It is the readiness of the insubstantial assets that decides the good organization of

this cycle. The cash so produced is used in general in one of three dissimilar ways. It is either

capitalized into more concrete resources or exhausted for the development of more

insubstantial resources or paid out as dividends. This is also the reason why concrete

resources come into view on the balance sheet whereas insubstantial resources dont.

This picture also makes known one more facttouchable resources can be obtained by just

about any business which has sufficient money to buy such resources. However, insubstantial

resources have to be refined; encouraged and nurtured in a planned way before their give up

can be fully produced. The real differentiator between one firm and the next therefore, is the

willingness of the firms insubstantial resources for exchanging its tangible assets to cash in

the well-organized manner. This readiness is more frequently known as core capability in

business texts and it is the leader source of spirited benefit for companies.


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3.2 Concept of Total Quality Management

Many conceptual papers and empirical research will have a great quantity of definition of

TQM that can be found in studies. Kumar et al. (2009) and Demirbag et al. (2006b), state that

TQM is a holistic management philosophy looking forward to permanent improvement in all

functions of an organization and it involves all employees under the leadership of top

management to produce and deliver products/services that get ahead of competitors to meet

customers' needs or requirements and organizational objective. Oakland (2003) explains

TQM as a wide-ranging approach that improves competitiveness, flexibility and effectiveness

by planning and organizing every activity as well as involving everyone regardless of their

levels of position. Prajogo Sc McDermott (2005) explains TQM as a management model with


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the definitive objective of achieving and meeting customer needs and prospects within an

organization through continuous improvement of the quality of goods and services and by

integrating all functions and processes within an organization. Various features can be seen

based on the research done by many authors. The following are the features:

* Individual involvement

* Customer needs and expectation

* Continuous improvement

Therefore, considering the same features of the previous definition TQM can be defined as a

an approach that focuses on meeting and exceeding customers needs and expectations

through the integration of all organizational functions and involvement of all individuals to

improve continuously. TQM has been accepted as cohering a set of principles and widely

distributed in the form of practices, tools, techniques, and systems. Both the technical method

and human resource practices are used by the TQM to improve the quality of products and

services as well as meeting customers' needs (Forker et al., 1997).

Number of geniuses of the TQM and scholars and quality awards such as Malcolm Baldrige

National Quality Award (MBNQA), European Forum for Quality Assurance (EFQA) has

made an attempt to categorise TQM and there is a tendency towards a framework consisting

of top management leadership, human resource management, customer focus, information

system and analysis, strategic planning and process management. Hence these constraints are

benefitting highest coverage in the articles that are read and used to know more about TQMs

effect on the corporate performance, either financial or non-financial performance

(JimnezJimnez & Martnez-Costa, 2009; Kumar et al, 2009; Zakuan et al, 2009; Sila, 2007;

Demirbag et al, 2006a and 2006b; Sila & Ebrahimpour, 2005; Escrig-Tena, 2004; Brah et al.,


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2002; Brah et al., 2000; Samson & Terziovski, 1999; Winn & Cameron, 1998; Powell, 1995).

Following are the constraints that are used to study the TQM.

3.3 Integration

Recently, the ideas of integration have successfully attracted the attention of researchers and

practitioners. Some empirical and conceptual supports have found specific idea of

integration, such as TQM and R&D (Prajogo & Sohal, 2006), TQM and innovation

(Abrunhosa & Moura E Sa, 2008; Prajogo & Sohal, 2001), TQM and human resource

management (Jimnez- Jimnez & Martnez-Costa, 2009; Ooi et al., 2009), TQM and ISO

(Martnez-Costa et al., 2009) and TQM and knowledge management (Ooi, 2009; Ruzevicius,

2006; Zhao & Bryar, 2001).

Consequently, an organization that adopts TQM seems to need to develop and integrate new

knowledge and ways to create customer value, or else, it does not add values (Douglas &

Judge, 2001). Powell (1995) suggests that complementary organizational resources are

needed for some of the TQM practices to be effective and thus drive TQM success. However,

the author does not empirically investigate this relationship.

3.3.1 Integration of human capital and total quality management

In the following section, each aforementioned construct is defined and the relationship

between human capital and TQM and their integrated effect are investigated.

3.3.1.1 Top management leadership

Top management leadership refers to leadership of senior executives and individual

involvement in setting strategic directions and building a leadership system that would

facilitate organizational performance and learning as well as individual development (Brah et


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al, 2002; Samson & Terziovski, 1999). It emphasizes on the focus of top management and

leaders on quality and assumes responsibility for quality and change in all aspects of

management including human resource management, strategic planning and customer

relationships (Tari et al, 2007; Sila & Ebrahimpour, 2005). The eminent role of top

management urges that they must have leadership, competencies and management capacities

which are categorized as the components of human capital (Martn-Castilla & Rodrgues-

Ruiz, 2008; Johnson, 2002; Bontis, 1998).

3.3.1.2 Human resource management

Human resource management addresses how well the human resource practices fit into and

develop employees to utilize their full potential in consistent with organization's strategic

directions in order to achieve high performance (MBNQA 2010; Brah et al, 2002; Samson &

Terziovski, 1999).

3.3.1.3 Customer focus

The definition of TQM proposed by many researchers has emphasized the ultimate goal of

satisfying and meeting customer needs and requirements as well as their changing

expectations (MBNQA 2010; Jung & Hong, 2008; Sebastianen & Tamimi, 2003; Samson &

Terziovski, 1999). Towards fulfilling the satisfaction of customers, the role of customer focus

construct should be strongly emphasized on TQM implementation. Customer focus addresses

how well an organization engages in its customers by ways of determining existing

customers' requirements and expectations, attracting new customers and ensuring customer

satisfaction (MBNQA 2010; Brah et al. 2002; Samson & Terziovski, 1999). This construct

may be employed as a guideline for human capital on building good relationship with

customers such as establishing communication with customers (MBNQA 2010), providing

excellent customer services, contributing efforts to become close with customers such as


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partnering and involving customers in the organization's internal processes (Easton & Jarrell,

1998). Customer feedbacks are used by human capital to adjust the process in order to modify

the organizational operations accordingly and thus improve the organization's products and

services (Tari et al., 2007).

3.3.1.4 Information system and analysis

Information and analysis refers to the utilization of procedures and information technology

which includes the internet to provide high quality data and information to all stakeholders,

quality tools, reliable and user friendly software and hardware systems, as well as

benchmarking to drive quality excellence and improve performance (Sila & Ebrahimpour,

2005). Brah et al (2002) defined this construct as the element that organization used to

analyze performance data and information to assess and understand overall organizational

performance (Brah et al, 2002). The data can be collected to understand the current processes

and provide inspection, various test results and verification records (Demirbag et al, 2006b).

3.3.1.5 Strategic Planning

Strategic planning is a process whereby an organization defines and develops vision and

mission in the organization to achieve broad objectives (Goetsch & Davis 2010; Oakland,

2003; Samson & Terziovski, 1999). A set of capabilities of human capital is required to align

with strategy (Martn-Castilla & Rodrigues-Ruiz, 2008). Strategic competencies that include

skills, talent, and know-how to perform activities are needed by strategist (Kaplan & Norton,

2004). While, Cater & Cater (2009) revealed that human capital positively affect differentiate

strategy. Creativity and competence of employees enables firms to achieve distinctive

capabilities and thus achieve differentiation advantage. On the other hand, strategy map that

also incorporate human resource management programs such as training and career planning

do develop the organization's human capital (Kaplan & Norton, 2004).


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3.3.1.6 Process management

This construct is concerned with how the firm designs and produces products as well as

provides service, integrates production and service requirements and manages performance of

suppliers (MBNQA 2010; Brah et al, 2002). Process management focuses on preventive

approach to quality management and improvement such as designing fool-proof, stable

production schedules and work distribution to reduce variation and thus improve the quality

of the product in the production stage (Kaynak, 2003; Saraph et al, 1989).

The review of literature indicates that human capital and TQM practices are complementing

each other and have effects on corporate performance. A conceptual framework will be

proposed in the next section.


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4. PROBLEMS OF REASERACH

The main problem which we can define for this research is role of intellectual capacity as

well as role of TQM and their relationship. We have to examine the correlation between

TQM and Intellectual capacity.

- Is there a role for the intellectual capital to apply the principle of focusing on thecustomer in TQM?

- Is there role for the intellectual capital to apply the principle of continuesimprovement in TQM?

- Is there role for the intellectual capital to apply the principle of focusing on theprocess in TQM?

- Do the individuals working in the organization have a clear perception about theintellectual capital and TQM?

- What is the nature of relationship between intellectual capital and TQM in theorganization?


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5. AIMS AND OBJECTIVES OF REASEARCH

The main aim of this research study is to discuss and present the integration framework for

integrating the intellectual capital and TQM and analyze their influences over corporate

performance. Apart from this following are basic objectives of this research:

- To present the detailed review of concept of Intellectual capital and human resources.- To present the detailed review of concept of TQM.- To discuss the framework of integrating the both IC and TQM and ways to analyze

their effects.

- To conduct the sampling and testing using the four Iraqi Private Limited Banks byconducting the interviews with their bank managers, customers and employees.

- To test correlation between intellectual capital and total quality management in theorganization.

- To make conclusions based on the sampling results.


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6. RESEARCH HYPOTHESIS

The main hypothesis behind this research study is that correlation of statistical significance

between the intellectual capital (like structural capital, customer capital and human capital)

and total quality management (like continues improvement, customers and focus on process.

- There is a correlation of statistical significance between TQM and human capital.- There is a correlation of statistical significance between structural capital and TQM.- There is a correlation of statistical significance between customer capital and TQM.


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7. RESEARCH METHODOLOGIES

This section, we will present the details of techniques which are used for this research study.

We used basically two research methodologies such as qualitative research methods and

quantitative research methods.

7.1 Qualitative Research Methodologies

The tern Qualitative research is having the different meanings in the case of educational

research studies. For example, in 1989 Gall and Borg introduce that qualitative research if

frequently considered with concepts like ethnographic, naturalistic, post positivistic or

subjective interchangeably. In 1984, LeCompte and Goetz selected the method ethnographic

as complete rubric for the research by using qualitative research methods and for

ethnographies.

Thus, we can define the mechanism of qualitative research as the research which is devoted

in order to developing the human systems understanding, may be they small or larger. These

kinds of research methodologies include the case studies, descriptive studies and

ethnographies. Frequently called it as ethnographies, however these are more specific

sometimes. LeCompte and Goetz, for example, on the basis of working of McCurdy and

Spradkey in 1972, defining the ethnographies like analytic descriptions or reconstructions of

intact cultural scenes and groups". This kind of case studies may be viewed as the

ethnography, but the investigator needs to set out the answer for the particular question rather

than describing whole matter.

For the collection of data, qualitative research methods used the observations, interviews as

well as may include the surveys, case studies, document and historical analysis. Survey


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researches as well as case study are commonly used methods for the data collection in

various researches. Case study and survey research are also often considered methods on their

own.

There are multiple hallmarks associated with the qualitative research. This is carried out

under the natural settings instead of manipulating the environment intentionally. This can

includes the rich descriptions of opinions and human behaviors in detailed format. The major

perspective is that their own reality is constructed as well as the understanding of what they

do on the basis of why they believe. Multiple realities allowance are there, thus individuals

may constructed in environment. Frequently, research questions evolve like study, due to the

reason that most of researchers needs to know What is happening, as well as may not want

to bias the study done by concentrating over the investigation study narrowly. Also,

researcher sometimes interacting closely with study subjects and hence becomes the part of

study.

Thus in orders use this research method for determining the research problem, researcher

must need to raise some questions their self, and such questions are below:

a. What is the area of interest of this research topic?b. Is this a problem that is amenable to scientific inquiry?c. Are all possible sources available in order to do the investigation of this research

topic?

d. Will my research problem or the methods which used for solving research problemleads to any ethical issues?

e. Is the research topic and methods used of theoretical interest?


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Thus, once researcher finalized with his/her research questions, researcher then can use the

proper qualitative methods for the data collection from the categories like interviews,

document, artifact analysis and observations. But the qualitative research methods, forming

continua over different dimensions, as well as researchers espouse multiple views of how the

different methods are categorized as well as conceptualized.

7.1.1 Methods of Data Collection

For this our proposed approach basically we focused on the following data collection

methods of qualitative methodologies.

Interviews: As compare to the observation methods for the data collection, according to our

research area, we frequently conducted the interviews with Iraqi banks managers and

customers. An interview introduces the classic qualitative research method which is directly

interactive. Also, the interview methods are vary in way they may be classified, especially

mostly vary in certain dimensions across continua. Finally, an interview is nothing but the

conversation form in which the main purpose is for the researcher to collect the data which

address overall research study questions and goals.

Document and Artifact Analysis

This is most important way which is used for independent research study by most of the

researchers for the collection of data related to research problem. Such things are following

roughly into document categories as well as artifact analyses, however, overlapping with

other methods. In our case, we identified various artifacts over the Intellectual capital and

TQM, its principles, with some kind of correlation among them to answer the proposed

research questions.


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7.1.2 Methods of Data Analysis

In this section, we will discuss over the data analysis methods which are used during this

research studies.

The data which is collected using above qualitative data collection methods is nothing but

just the rough materials that researchers gathering from different aspects of world related to

their research problems and questions. Qualitative data is collected in different forms like

objects, photos, video recordings of behaviors, choices patterns in computer materials. But

words are frequently are raw materials which are further analyzed by qualitative researchers

using the different techniques of data analysis. There many methods are available for the

researchers to analyze the qualitative data depending on qualitative researcher basic

philosophical approach. According to Huberman and Mile, the process of qualitative data

analysis is made up of three parallel flows of activities such as data display, data reduction, as

well as conclusion verification or drawing. Hence most of the qualitative analysis researchers

use the technique data reduction method for the analysis of collected data in order to seek the

correct meaning of it for particular research.

7.2 Quantitative Research Methodologies

In this section, we will discuss over the data analysis methods which are used during this

research studies.

In the previous section, we discussed qualitative research methods, in this section one more

method which we used is quantitative research method. Quantitative and qualitative research

methods are mutually exclusive. This both types of research are basically carried out with the

different purposes as qualitative methods for getting the detailed insights of research problem


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and quantitative research for getting measurements. In short, quantitative analysis is concern

with practical and different measurements studies rather than theoretical insights of research

problem.

Using the quantitative research, we can obtain three various classifications of numbers like

customer profiles, attitudinal data and market measures. For the data collection in case of

quantitative research, there are different ways:

1) By asking questions related to the research problem either using telephone, face toface, postal or computer medium.

2) By observing the things like person, diaries or instruments.3) WHAT the people think and WHY must be determined by asking different questions.

Research Community and Sample:

This research included a community on the Iraqi private banking sector, the banks have been

selected because of its important role in the national economy, on the other hand the nature of

activities and functions that practiced by the banks. The chosen Iraqi banks are 4 which are

selected from 23 banks listed below:

- Bank of Middle East.- The Investment Bank.- Commercial Bank of Iraq.- Bank of Baghdad.

Following are the sample classes selected below:

- Branch Managers.- Department Directors.- Head of Departments.


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These are parts of various decision making processes in those banks.


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8.REFERENCES

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[4] Bontis, N., William Chua, C. K., & Richardson, S. (2000). Intellectual capital and

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[7] Brooking, A. (1999). Corporate Memory: Strategies for Knowledge Management:

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[11] Colurcio, M. (2009). TQM: a knowledge enabler? The TQM Journal, 2(3), 236-248.

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Updated Proposal