Advances In Management THE IMPACT OF TOTAL QUALITY MANAGEMENT ON BANKS PERFORMANCE IN NIGERIA By: ADEOTI JOHNSON OLABODE Business

Administration Department, University of Ilorin. ABSTRACT Banking authorities in every country of the world are paying great attention to the state of the three S (3S) - safety, soundness and stability in their different banking systems. The competitive nature of the banking system in Nigeria has increased the number of district banks from eight in 1992 to forty two (42) in 1994 and by the end of 1995 the figure has risen to fifty-one (51). Facts emerging from already distressed banks revealed that bad management is indisputably a major factor for distress. The concomitant effect of the distress situation is the general erosion of banks confidence. This article looks at the application of Total Quality Management as a panacea to many unethical practices that spell the doom of the distressed banks. The objective of the study is to examine the gains of application of total quality management in the service industry with particular reference to the commercial banks in Nigeria and also to see how the application of TQM can prevent future threats of distress in commercial banks. The entire commercial banking sub-system was partitioned into three categories, first, second and third generation. The first generation banks are defined as those having a track record of more than 50 years, second generation banks as those that emerged after the indigenisation act of 1976 and the third generation banks are defined as post - distress banks or New generation banks. Three banks were selected randomly one to represent each of the three generation banks. The selection of the three banks was based on their proximity to the author. The data analysis employed is ANOVA. The major results of the article shows that the quality and quantity of employees employed determine to a very large extent the survival of any bank, also that the application of TQM is not an immunity against distress but a preventive mechanism for distress. The TQM elements application determines the vulnerability of commercial banks to distress. Introduction Total Quality Management (TQM) is the management Philosophy and company practice that is aimed at harnessing the human and material resources of an organization in the most effective way to achieve the objectives of the organisation. These objectives include: (a) Customer satisfaction (b) Business objective such as growth, profit or market positioning and (c) Provision of service to the community. ADVANCES IN MANAGEMENT Vol. 3 No. 1 (2003) (A Journal of Department of Business Administration, University of Ilorin, Ilorin Nigeria).

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These objectives must always be compatible with the requirements of society, whether legislated or perceived by the organisation. Since there are regulations guiding the operation of every organisation, the conduct of such organization must conform to the requirements of the society or organization legislations. The ability to meet customer requirements is vital not only between two separate organization but within the same organization. The behaviour of a cashier in a bank can spell doom for the bank if it is negative to the customers. The word processor operator in a computer firm is a supplier to the boss. The number of errors per page will determine the quality of job done by the word processor. In which case, there is specified requirement. If the output is error free, we can then say that the output is of a high quality. Throughout and beyond all organizations, whether manufacturing concerns, banks, retail stores, universities or hotels, there are series of quality chains, which may be broken at any point by one person or one piece of equipment not meeting the requirement of the customer which could be internal or external. The interesting thing is that this failure usually finds its ways to the interface between the organisation and its outside customers, and the people who operate at the interface (like the cashier in the banks). Quality has to be managed. It will not just happen. Clearly, it must involve everyone in the process and be applied throughout an organization. Failure to meet the requirements in any part of a quality chain has a way of multiplying, and failure in one part of the system creates problems elsewhere, leading to a cycle of yet more failure and more problems. The price of quality is the continued examination of the requirements and our ability to meet them. This will lead to a continuous improvement philosophy. TQM is therefore a way of managing to improve the effectiveness, efficiency, flexibility and competitiveness of a business as a whole. Quality management, Quality assurance and Quality control are all embodied in TQM together with all other management activities. TQM involves the whole organisation, getting organized in every department, in every activity with every single person at every level. This involves putting in place processes and system which will ensure that every aspect of its activity is aligned to satisfying customer needs and the organizations objectives without waste of effort by releasing the full potential of every person in the organisation. For an organisation to be truly effective, every single part of it must work properly together because every person and every activity affect and in turn is affected by others. The motivation for quality improvement comes from conscious awareness shared by all members of an organization that every process can be done more effectively, giving increased value and satisfaction to customers, and more efficiently with less waste and resource consumption. This increase in effectiveness and efficiency benefit customers, the organization and its members and the society in general. For almost every service, particularly the banking sector there is more than one bank trying to woo customers for patronage. The rate of interest (price) may be a critical factor for patronage, but another factor is the quality of the service. Infact, quality is often the major issue. And poor quality service can lead to erosion of goodwill, which could be very costly for any bank. One of the reasons for the distress in the baking sector in the early 90s was increased appreciation of poor quality to the producer, customer and the society, which has resulted in emphasis on quality. Quality of service is more difficult for customers to measure than quality of manufactured goods. Generally, though a user of a service has a few characteristics and attributes in mind that he or she uses as a basis for comparison among alternatives. Lack of one

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attribute in a bank may make the customers to prefer another. Berry, Zeithaml and Parasuraman (1985) conducted extensive in-depth interviews will 12 customers focus groups to try to identify general attributes or determinants of service quality. These include reliability in terms of consistency of performance and dependability. Responsiveness as it relates to willingness on part of the employee to provide the service, competence, access, courtesy, communication, credibility, security and understanding. Service quality is therefore judged on the basis of whether it meets customers expectation. Objectives and Methodology This article is aimed at considering the relative application of total quality management in Union Bank Plc. Soceite Generale Bank Ltd; and Zenith Bank international Ltd. This article intends to provide ways by which the quality of service rendered by the three banks can be improved. The long queues usually at the peak period call for serious management effort. The article seeks to investigate the reason for the bank runs and to offer solution on how a distress situation could be averted in any event of economic mishap using TQM. Specifically the following objectives will be diligently pursued; (a) Finding out the inter relationship among departments in banks in the delivery of services. (b) To assess the involvement of top management, middle and supervisory levels in wholesale implementation of total quality management. (c) To determine the effect of TQM information on the level of patronage The instrument used for this work is the questionnaires. This instrument. of data collection has been chosen in order to enable the author reduce the problems that usually occur in the process of data collection and ensure validity and reliability. For this article, the structured questionnaires were used. The questions were designed for manager, Bank staff and Bank Customers of the selected banks within Ilorin metropolis. The questions were simple and arrange logically for easy understanding and quick administration. A total of 75 bank staff, 12 managers and 300 customers were served the respective questionnaires. All the questionnaires were filled and returned because it was administered at the banking Hall of the selected banks. This shows a high response; hence the adequacy of the information collected. The Quality Concept und Customer Satisfaction The quality concept has been expanded and evolved from the product oriented one which can satisfy the customers needs and expectations. TQM as an important source of the quality competition especially is a tool for the firms growth in the long run. TQM is a strategic tool for the growth of the firm in the long run. Myoung- Ho lee etal (2000) says TQM focuses on customer orientated approach so as to pursue strategically the continuous improvement of the results from all process. There are various models that have been developed to evaluate customers judgment about service experience. Croning and Taylor (1994) perceived a performance model but the exclusion of the sacrifice factor like price is a severe weakness in the customer satisfaction evaluation model; this is because most customers pay attention to the monetary or non-monetary sacrifice in decision making of their purchase. Robert Heller (1995) in the leadership imperative defines the concept of TQM as a

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practical methodology for continuously improving all business processes. Emphasis here is on practical and continuous. The basic philosophy is to see the management of men and material resources as a business whether it is at the level of the firm or in a macro set-up. In a nutshell, TQM concept, holds that no matter how well you are already doing you can always do better. Dobyns and Crawford (1994) expatiate further that TQM involves deep understanding of three basic components namely; the system, the process and the philosophy from which the organisation or entity is extracted. For Nigeria, the system could be rendered as follows: an ever changing world, fierce, international competition, a system of world information which does not believe in people in African origin or descent and a world full of opportunities. The process here approximate to the necessary economic transformation from an underdeveloped economy to a modern industrial state. The process also involves the uplifting of the basic quality of life and its people through education, improved health care, modern processes of production and more equitable distribution of wealth. It involves still, the harnessing of the human and material resources for the goal of fitting into the system above. The philosophy involves the identification of goals, which have been partially addressed under the process, as well as the means of attaining the goals. Applying the concept of TQM therefore entails a thorough grounding by both the leadership and the led in three components, which are common to all organization. TQM involves attempt to improve quality at every phase of an organizations work, whether it is on corporate plan, initiation, implementation, personnel selection or customer satisfaction. TQM ELEMENT The six element identified as crucial to successful TQM implementation are: a. Quality of personnel: The degrees of personnel employed by the banks will go a long way to determining the extent of TQM application. If the quality is high, there is the probability that they will quickly grasp the training in TQM and vice versa. b. Computerization:- This is said to hasten the processing of data and transactions such that customers spent less time on questions as opposed to the ledger cards that were used hitherto . Computerization engenders fast service time. c. Attitude to work by employees:- The attitude to work by employees also go a long way to influencing the TQM implementation. If the attitudes of the workers are negative, it is not likely that the TQM will be successfully implemented. d. Awareness of organization objectives:- If the employees are aware of organizations objectives they will work towards achieving the objectives. But a situation where the objectives are not communicated to the employees, the employees will only believe that whatever they are doing is the right thing. e. Level of Motivation:- This factor is about reward compensation for hard work and promotion as the case may be. The higher level of motivation the greater the commitment of the employees f. Participation and involvement in decision-making: - This refers to the extent to which jobs are delegated to the employees. Hypothesis Testing H0 : There is no significant difference in the application of TQM elements among first, second and third generation Banks. H1 : There is significant difference in the application of TQM elements among first, second

Adeoti Johnson Olabode 83 and third generation Banks The analysis of variance is used to test this hypothesis. The respective TQM elements are as defined above. A. = Quality personnel B. = Computerization C. = attitude of employees to work D. = awareness of organizations objectives E. = level of motivation F. = Participation in decision making Banks A B C D E Union 3 5 8 6 2 SGBN 7 8 6 2 4 Zenith 8 2 2 4 6 Total 18 15 13 12 12 TA =18, TB= 15, TC=13, TD=12, TE = I2, TF = 5. T =18 + 15 + 13 + 12 + 5 = 75 T = 75 = 75 = 312.5 Rk 3(6) 18 2 2 2 X j = 3 + 5 + 82 + 62 + 22 + 12 + 22 + 22 + 42 + 62 + 32 = 415 SSC = 415 -312.5 = 102.5 SSC = 182 + 152 + 132 + 122 + 5 - 752 3 3 3 3 3 18 = 108 + 75 + 56.3 48 + 8.3 - 312.5 = 343.6 - 312.5 = 31.1 SSE = SST SSC = 102.5 - 31.1 = 71.4 Source D.F SS Among column 5 31.1 Error (within) 17 71.4 Total 22 102.5 FC MSC = 6.22 = 1.48 MSE 4.2 Let = 0.05 we have K = 6, r = 3 = F 1 1 3 5 Total 25 25 25 75

Mean SF 6.22 4.2

The impact of total quality management on banks performance in Nigeria 84 F (r-l) U(r-1) and F.O.O(5.12) = 6.0711 Since Fc < Ft we accept Ho that there is no significant difference in the application of TQM elements by first second and third generation banks. SUMMARY, RCOMMENOAT1ONS AND CONCLUSION From the study of the three Commercial Banks - Union Bank, SGBN and Zenith International Bank, we discovered that TQM confers excellence on organisation. The organizational goals of the three Commercial banks are written in clear simple language and communicated to the employees of each of the commercial banks. From the analysis it was also hound that each of the commercial banks has a method of feed back where banking operations is diametrically opposed to quality goals. Quality standard is to the advantage of all the customers of the respective banks. SGBN claimed that it sends bank statement to their customers on request and on monthly basis, but from the study this claim was found not to be true. Rather the results show that it is purely on request. Union Bank claims to send bank statement to their customers on quarterly basis. The method of complaints by customer of Union and SGBN shows that the implementation of TQM by both banks is low compared to the third generation bank - Zenith. The level of education of the bank customers as well as the bank staff determines to a large extent the success of TQM implementation. It was also found that the year of service of bank staff determines the level of their commitment to achieving the organisational goals. The banks - Union, SGBN and Zenith have quality-training programme that is aimed at achieving the quality goals of the organisation. From the questionnaire responses by the bank staff of the three Banks, customers complain about service quality. This is an indication that the quality of the service by each of the commercial banks studied can be improved. Promotional activities that influence customers patronage should be embarked upon by Union, SGBN and Zenith Banks respectively. The quality of personnel, computerization, attitude of employees to work, awareness of organizations objectives, the level of motivation and the involvement of the employees in decision making all determine the quality of banking transactions from the case studies. A lot of responses from the three banks show that inaccuracy of banking transaction and poor customer relation have been the major quality problems that are raised by the various customers of the banks. The availability of funds (Liquidity) is one critical performance rating that the customers of all the case study banks felt is crucial to the solvency of the banks. Once there is a liquidity question on the credibility of the banks, if appropriate cash injection is not made, that may spell doom for the banks. Profitability of operation; Asset structure and achievement of target and the cost of operation are also the factors that are very important for rating the performance of the banks. TQM is an operation management philosophy that involves all the employees of the banks. The business environment determines the TQM development and implementation. Recommendation On the basis of the summary highlighted above the following suggestion are recommended to strengthen the achievement of the quality goals in each of the banks used as a case study. There is no gain saying the fact that TQM has positive influence on union Bank, Societe Generale Bank and Zenith Bank International. For sustenance of the concept, top management should continue to monitor the progress of TQM in different departments. To fully reap the full benefits of TQM the following are recommended for the three banks used as case studies.

Adeoti Johnson Olabode (a) (b) (c) (d) (e) (f) (g) (h)

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The banks should initiate a company wide awareness of TQM through seminar and workshop. The content of training of bank employees should be such that will enhance the implementation of the TQM. Employees quality awareness and involvement through well-developed programme should be given wide publicity. Top management should be involved in continuous monitoring of the progress of TQM at different department of the banks. Review procedures should be established in each of the banks. Quality improvement strategy should be evolved to cover all the aspect of banking transaction. International Quality standard like the ISO 9000 could be invented to judge the acceptability of the service of the commercial banks. External consultants can be employed on the criteria to be used for the international standard for measuring the quality of service of the banks

Conclusion The wealth of a nation according to Deming depends on its people, management and government. The nature of government that a nation has will determine to a large extent the quality goals to be pursued by the government. The announcement effect of the CBN on the service of Savannah bank on the 18th of February, 2002 suggests that CBN is controlling the quality of service rendered by the commercial banks. There is operational modalities within which the commercial banks should operate. The bank examination is carried out by staff of the CBN and the Nigerian Deposit insurance corporation. Onsce any of the criteria for TQM implementation is absent in any banks it is not likely whether the bank will not be axed down by CBN as distressed. From the test conducted, organizational goals should be such that is circulated so that every employee will be able to personally assess their input. This article submits that the bank customers, bank staff and management must work together to achieve the quality standard expected of them by the baking public. References 1. Agada, S. (1993) NDIC: Battling distress in banks business Time, Vol. 18 no. 2 2. Almaraz, Y (1994) quality management and the process of change. Journal or organisational change management 2, No 1:141149. 3. Annual Reports of Union Bank, SGBN and Zenith Bank (1997-2001). 4. Beer Michael (1980) organisational change and development: a system view: Calif Good year Publishing Company. 5. Benson, P.G, J.V Savaph (1991) The effects of organisational context on TQM: an empirical investigation. Management Science 37, No 9:11071124. 6. Christopher, M (1994) customer service and logistic strategy in the marketing book. Third Edition Torrent. Butter worth Heinemann pp 23. 7. Crosby, P.B. (1979) quality is free new York; McGraw Hall. 8. Dale, B.G and J.J Plunkeh (1995) Quality costing 2~ edition. London: Chapman and Hall. 9. Deming, W.E (1986) Out of the crisis Cambridge mass: MIT centre for Advanced Engineering study. 10. Fayol, H. (1949) General and industrial management: New York Pitman.