Factors Influencing the Use of Quality Costs in TQM Environments: Evidence from Japan

This paper examined some of the factors that influence the use of quality costs in TQM (Total Quality Management) environments by using survey data collected from Japanese manufacturing firms. The management accounting and quality management literatures suggest that TQM requires a greater emphasis on nonfinancial performance measures, such as defect rates, cycle time, and customer satisfaction, in order to identify the sources of defects, monitor the consequences of improvement activities, communicate strategic goals, and motivate employees to improve the quality of products and process. Some argue that traditional management accounting practices based on mainly financial performance data are too slow and aggregated to support TQM practices and nonfinancial performance measures should be emphasized to overcome the shortcomings of traditional financial based performance measures. Contrary to previous study, this study indicates that quality costs are used in particular situations even in TQM environments. Specifically, the results show that firms with high degree of quality risk, shortened product development cycles, inspections and interdependence among units are likely to use quality costs in TQM environments. This study contributes to existing literatures by providing empirical evidence on the factors influencing the use of quality costs in TQM environments. The results of this study provide a new insight about the choice of performance measures in TQM environments.