Total Quality Management in the Financial Service Provision Industry


Background of the study

Total Quality Management (TQM) can be defined as the process that involves the mobilization of different processes and functions within a certain financial service institution to ensure that quality products and services are provided and customer satisfaction is guaranteed (Ross & Perry, 1999, p.1). According to the market research carried out by the American Conference Board, it is recommended that total quality is essential in ensuring competitiveness in the global markets.

Total Quality Management is a continuous process that is governed by three main principles, that is; customer satisfaction, continuously improved business processes, and supplier satisfaction (Kurtus, 2001, para.1). Most American companies are facing stiff global competition from European companies most especially due to the increased decrease in the American corporate market’s ability to step up to this competition. Thus there is a need to consider implementation of the concepts of total quality including reduction of prices and maintaining uniformity in service provision (Ross & Perry, 1999, p.2). Due to the increasing global competition and customer demands, most companies need to embrace the philosophy of TQM and incorporation of TQM concepts should be the tradition among their employees.

The practice of total quality is becoming popular with most service companies mainly due to the management’s realization that this is the only way out to maintaining a powerful customer base. Implementation of the principles and concepts of TQM starts with the company management’s support and understanding of the concepts underlying the process. It involves the establishment of performance standards in every department inside the company; establishment of collective responsibility through teamwork and maintenance of continuous and improved quality service provision (Campanella, 1999, p.4).

This paper seeks to give a comprehensive review of the principles and applications of the Total Quality Management concepts in the provision of financial services. Additionally, the paper shall review the relevance of Quality and finance in the current business climates. Moreover, the ways of implementing TQM into financial service providers will also be discussed.

Principles of Total Quality Management in the provision of financial service

Total quality management is essential in ensuring that a service company maintains a vast customer base that will enable it to survive the stiff global market competition. In its most basic interpretation, TQM can be referred to as a philosophy of running a business under six basic principles that ensure customer satisfaction, supplier satisfaction and continuous quality improvement (Besterfield, Besterfield-Michna, Besterfield & Besterfield-Sacre, 2003, p.1). This basic concept that government the implementation of TQM include, “Satisfaction of customers (both internal and external), never-ending improvement, control of business processes, upstream preventive management, ongoing preventive action and finally leadership and teamwork” (Hakes, 1991, p.11).

However, it should be noted that introduction of quality into the financial service industry does not involve direct application of these concepts as they are employed in other industries. They need to be changed in one way or another. This is because, in this industry, customers are also buyers and suppliers at the same time. Additionally, on many occasions these institutions require to collaborate with competitors in service provision and most customers in the industry have no idea of the products are services that they are buying. In this case, it is hard to infer what the exact requirements of these customers are (Kanji, 1995, p.251).


Service companies should realize that one way of ensuring total quality is by adjusting the performance of every department in the institution such that the total output of the company exceeds the expectance of its customers (Hakes, 1991, p.11). In this context, a customer is defined as that person who pays for a product or service with the hope of getting his/her money’s worth in return.

A service company’s customers include external customers and users, and internal customers. In this case, the internal customer is the supervisor who monitors those employees who are involved in production and provision of products and services. Since the supervisor controls the wages of these workers, he expects to get his money’s worth from the products and services (Kurtus, 2001, para.8). In this way, a company is considered to have a chain of customers who are involved in the production and improvement of products before they reach the external customer and user.

Therefore, the worker and the company’s management should ensure that all its customers are satisfied with the services and products offered. It should also be noted that the process of providing products and services to external customers involves a chain of internal customers and suppliers who are working in unison towards ensuring that they meet or exceed the requirements of the external customers (Hakes, 1991, p.12).

Never-ending Improvement

This is a continuous process aimed at producing unique products and services as opposed to competitors. It involves setting up targets that must be met and after meeting them, new targets must be set that will enable the production of product, service and process efficiency. For instance, most Japanese industries have been employing this concept in service provision. This has enabled them to enjoy market dominance for the last forty years (Hakes, 1991, p.12). Incorporation of this concept into the financial service industry requires the introduction of some changes into the management procedures to ensure long-term and continuous improvement (Murray, 2010, para.6).

Control of Business Processes

The business processes in any service industry determine the quality of the services that the company in question provides. By improving the quality of the chain of processes in the industry, the company ensures provision of efficient and effective services. Poor services are products of defective processes. Therefore, when addressing such problems, the manager should target the root cause of the problem by inspecting the whole chain of processes involved in the provision of the service.

This also calls for employees’ involvement since these are the people involved in the day-to-day service provision process and can be very resourceful in contributing ideas that are crucial to problem resolution (Murray, 2010, para.6). Process assessment and control should also affect the supporting processes in service provision. These include, “Administration, secretarial and personal services such as typing, greeting visitors, receiving telephone calls, presenting invoices among others” (Hake, 1991, p.14).

Upstream preventive management

Total Quality management as stated earlier is a continuous process and involves looking out for areas that need to be improved or potential opportunities. Upstream preventative mechanisms seek to prevent events that may occur in the future but not those that have already occurred. These mechanisms provide the necessary information that can be employed in anticipating future problems and which can also help in process control. Adequate planning and prevention of potential problems will ensure timely problem resolution or avoidance and a successive company (Goyal & Lalitha, n.d., para.8).

On-going preventive action

Total quality improvement involves identification of the root cause of a problem that is hindering workers from attaining their potential targets. This also calls for the participation of the workers in identification of the root causes. This will ensure that decisions are made and implemented in a corrective and preventive manner in preventing or minimizing the root causes of the problems.

Leadership and Teamwork

Quality management can also involve empowering employees by allowing them to make decisions over the services that help provide. This empowerment can also be achieved through their participation in teamwork activities that enable them to make significant contributions as to how they would like the business to be run. Through teamwork, employees get information concerning the accepted methods and concepts of quality improvement. Quality management also encourages contribution from all the participants in the business and it also ensures that these people are oriented towards attainment of the same goal (Almansour, 2007, p.8).

Applications of Total Quality Management in financial service provision

As noted in our earlier discussion, the financial service industry is characterized by stiff competition as customer demands increase in the same proportion. Thus an environment is created whereby the financial institution with the best quality of services thrives over its competitors. These unfolding events have forced most Banks and other financial institutions to turn to the implementation of TQM concepts to survive in the global market (Almansour, 2007, p.7). In the context of a financial service provider, total quality is defined as satisfaction of the customers’ expectations and requirements. It should also be noted that customers of the Banking industry are warier of how services are delivered and their quality than those in the manufacturing industry.

However, according to Zairi (1996, p.6), TQM can be achieved in financial service provision if, “Customer satisfaction is the goal of everyone in the organization, everyone shares the same objective, and if everyone sees him or herself as a link in the entire production process.” He also suggests that quality can be guaranteed if everyone had treat the immediate individual above or below in rank as an internal customer. Internal customers should also be treated with the same degree of quality as their external counterparts. Banks can benefit significantly from implementation of the six concepts of TQM as discussed above since the success of these institutions depends on the establishment and maintenance of a chain of loyal customers.

In most cases, the customers’ demands and requirements come into play during development of new product services since most of these new services must comply with the customers’ requirements. Most banks are known to hire market researchers to survey customers’ needs (Walton, 1986, p.7).

However, this practice is not encouraged since the management and the bank personnel should interact with their clients so that they get first-hand information on what they expect of the institution. As stated earlier, the financial institution’s customers are the buyers and suppliers of the banks’ products. Therefore, the bank should develop a close relationship with the customers if they expect them to sell their services and products to their friends and family members. This can only be achieved through implementation of TQM to the customers’ satisfaction. This will then encourage the customer to tell a friend about this who will then become a customer and thus expanding the customer base.

Through the establishment of total quality among the bank personnel and the management, the bank stands a better chance in ensuring that the customer chain that its customers do not only buy services and products but also recommend these services to friends, co-workers and family members. This will also ensure that the bank does not lose its customer base to others.

The impact of TQM on financial service provision

In the recent past, it was difficult to implement the concepts of TQM in the financial service industry mainly due to the intangibility of the industry’s services as compared to the manufacturing industry. This then takes control of the quality of services before delivery to the customer very difficult. Currently, the banking institutions have started to implement some concepts of TQM in the control of quality in leadership, customer care and human resource management. According to Almansour (2007, p.7), “The application of TQM in the service industry has emphasized the human factor which is regarded to be the major determinant of the implementation success in a service organization.” Thus human factors have been observed to play a central role in ensuring successful implementation of the concepts of TQM and efficient service delivery.

Incorporation of TQM into financial service delivery

Many businesses and most especially the financial service organizations are facing stiff competition in the global market today mainly due to the increased customer demands for superior quality products and services (Al-jalahma, 2009, p.3). This calls for speedy implementation of the total quality management concepts coupled with continuous improvement of the qualities of service provision at all levels in the financial service industry.

For such organization to implement quality management, the organization’s culture has to be modified to allow for the incorporation of new dimensions in service provision. It is also advisable for the management team in any financial service organization to carry out an extensive study on the program to be implemented to single out those ideas which can be beneficial to the subject organization upon implementation.

The first step towards implementing the TQM program is to introduce a training program in which the employees will be continuously be trained in an effort of improving their professionalism and empowering them with necessary skills (Almansour, 2007, p. 8). Training programs should start with the managers who will be supplied with copies of the TQM program so that they get to choose what they think will be workable for the organization and make recommendations. The junior staff can undergo training through the organization of seminars and workshops, business trips and on-the-job training sessions.

The success of the implementation process is dependent on the organizations’ commitment towards ensuring the establishment of process innovation procedures that are aimed at improving the quality of services and customer satisfaction. The junior staff will be helpful at this stage since they have direct contact with the organizations’ customers and first-hand information on what the customers expect of their company. The information should be passed up the management chain so that the top management team is in a position of implementing those concepts that will ensure customer satisfaction in the long run.

According to Almansour (2007, p.9), several banking services need continuous evaluation to ensure quality improvement. These are, “The processing time of key products and services such as loans, new accounts, ATM cards, credit cards among others; Waiting times such as queuing time; Customer complaints (written or verbal); Friendliness and efficiency; Accuracy and timeliness of statement of accounts and records; Effective interest rates, inclusive of all service and hidden charges; Promptness in responding to customer inquiries such as in answering the phone calls, the number of rings before the phone is picked up, and the number of transfers before the caller talks to the right person; and finally the Lost customers and accounts.” The program should also target to expand the role of the internal auditor to include the assessment of the extent to which the set targets have been followed.


The paper has provided a comprehensive review of the principle and applications of the total quality management concepts in the financial service provider industry including their relevance in the current business environment. It has been shown that these concepts if implemented adequately can put the organization in question in a position of participating in a healthy competition with other industry players.

The paper also gave a brief discussion on the impact of incorporating these concepts into the financial service providers. Finally, the paper highlights the basic principles of implementing and incorporating quality into the financial service industry. It is worth noting that in today’s competitive business environment and increased customer demands for superior quality services, the organization management must ensure that the implementation of these concepts is underway in due time to ensure the survival of the business establishment in the global market.

Reference List

  1. Al-jalahma, R. (2009). Measuring the importance and implementation of TQM practices and identifying TQM implementation barriers in Bahraini Industries using Baldrige criteria of performance excellence.
  2. Al Mansour, A. H. (2007). Application of TQM to financial services.
  3. Besterfield, D. H., Besterfield-Michna, C., Besterfield, G. H. & Besterfield-Sacre, M. (2003). Total quality management. (3rd ed.). Upper Saddle River, N.J: Pearson Education.
  4. Campanella, J. (1999). Principles of quality costs: principles, implementation and use. (3rd ed.). Wisconsin: Quality Press.
  5. Goyal, N. & Lalitha, B. (n.d.). Improving financial services through TQM: a case study.
  6. Hakes, C. (1991). Total quality management: the key to business improvement. London: Chapman & Hall.
  7. Kurtus, R. (2001). Basic principle of total quality management (TQM). Web.
  8. Kanji, G. K. (1995). Total quality management: proceedings of the first world congress. London: Chapman & Hall.
  9. Murray, M. (2010). Total quality management (TQM). Web.
  10. Ross, J.E. & Perry, S. (1999). Total quality management: text, cases and readings. Florida: CRC Press LLC.
  11. Walton, M. (1986). The Deming management method. New York: The Berkley Publishing Group.
  12. Zairi, M. (1996). Benchmarking for best practice: continuous learning through sustainable innovation. Woburn: Reed Educational and Professional Publishing Ltd.

Cite this paper

Select style


BusinessEssay. (2022, December 14). Total Quality Management in the Financial Service Provision Industry. Retrieved from


BusinessEssay. (2022, December 14). Total Quality Management in the Financial Service Provision Industry.

Work Cited

"Total Quality Management in the Financial Service Provision Industry." BusinessEssay, 14 Dec. 2022,


BusinessEssay. (2022) 'Total Quality Management in the Financial Service Provision Industry'. 14 December.


BusinessEssay. 2022. "Total Quality Management in the Financial Service Provision Industry." December 14, 2022.

1. BusinessEssay. "Total Quality Management in the Financial Service Provision Industry." December 14, 2022.


BusinessEssay. "Total Quality Management in the Financial Service Provision Industry." December 14, 2022.