First urgent Total Quality Challenge to MSMEs in the Philippines

By MIFLORA MINOZA- GATCHALIAN, PhD., PFT

CEO, Quality Partners Company, Ltd.

Academician Emeritus, International Academy for Quality

Introduction

The Philippines is a country of many islands with a population of over 100 million and still fast increasing, but not as fast as its economy. At this point of time, perhaps the country’s most urgent need is to find the means to augment people’s income through business upliftment. Currently, 99.5 % of the enterprises in the Philippines are micro, small and medium scale based on size of capital and/or manpower as shown in Table 1. As observed through time, Micro enterprises are mostly transient and difficult to monitor. For this reason, the discussions would be focused more on the plight of the SMEs.

Table 1. Classification of Micro, Small and Medium Enterprises

Enterprise Size           Number of Manpower             % of Total Employment

Micro                           9 maximum                             89

Small                           10 - 99                                     10

Medium                       100- 200                                  0.5

Source:  Philippines Department of Trade and Industry https://www.dti.gov.ph/resources/msme-statistics

To see how they could meet the urgent challenge to move-on fast, at least three major sequential business directions can be followed through such as: First – “Obtain Baseline Data”; Second – “Focus on Improvement” and Third - “Monitor Growth and Stability”. The overall expected measure of success after implementation of the series is the start on the quest for Total Quality Management (Gatchalian, M.M. 2015; Goetsch and Davis, 2000). This article will present the first urgent total quality challenge which is designed to “Obtain Baseline Data”.

The author’s Team experiences plus other information gathered through time, indicated that the major problem of most SMEs is how to start, then sustain their quality development and improvement efforts considering the nature of their employees and sources of capital investment. For instance, commonly observed situations in MSMEs include: a) absence of long-term planning; b) lack of appreciation on the need for organisational structure, functions and measurement; c) no time allocated for proper documentation and related activities; d) lack of capability for systematic review of data for use in continual improvement and; e) generally, MSMEs have poor leadership capability.  In view of these observations, some form of intervention was deemed most needed to accelerate quality improvement of the SMEs. Among the many interventions from both public and private sectors, the DOST-SET-UP had shown considerable successes although they acknowledged the urgent need for Innovative management in SMEs to sustain growth and development of their quality and productivity aspirations.

Public sector intervention through DOST

Almost 20 years ago today, the Department of Science and Technology (DOST) started implementation of the Science and Technology (ST)-based, Small Enterprise Technology Upgrading Program (SET-UP) which served as their flagship program for the micro, small, and medium enterprises (MSMEs). This had proven enormous successes in making the MSMEs more productive and competitive as evidenced by several successful SET-UP-assisted projects all over the country especially in MSMEs at the grassroots level. The MSMEs are continuously challenged by the constantly changing business landscape and the problem of quality practices sustainability. This situation underscores the urgency for innovative management which could accelerate the quest for total quality companywide, desirably on a national scale.

Private sector initiative towards total quality

Since early 1996, Quality Partners Company Ltd (QPCL) had been testing a culture-based approach to Total Quality following their experiences with companies whom they had helped recover from business downtrend (Gatchalian, M.M. and Gatchalian, J.C. 2008). From the many cases QPCL mentored/coached through the years, they developed a culture-based innovative Management approach with an acronym SUGOD (Survey, Unite, Grow, Operationalise, Develop). In Filipino, SUGOD literally means “move-on together fast” and this was deemed a feasible response to the DOST-SET-UP’s identified shortcoming. A project proposal was prepared by QPCL and submitted to DOST for possible support to assist the SME SET- UP recipients nationwide in their quest towards total quality. The project proposal entitled “Knowledge Transfer to DOST Technical Staff Accelerating SME’s Application to the Philippine Quality Award (PQA)“ was approved for implementation by DOST on August 2021 under the leadership of then Secretary Fortunato T. dela Pena with RD Martin Wee of Region IX as Project Leader and QPCL, the project proponent , as Consultant. Unlike many government projects, this one continued to completion as planned even after the first semester implementation when the term of DOST Sec FT de la Pena ended. The new DOST Secretary Renato U. Solidum continued to provide full support towards the project’s successful completion on March. 2024.

First Total Quality Challenge

The three “urgent quality challenges to SMEs” will be presented sequentially in the succeeding issues (September and November) of this Journal. But due to space limitations, only the most important points will be presented in the articles. Details, if needed, can be requested from the author. The FIRST Urgent Quality Challenge which is “Obtain Baseline Data” includes three major considerations that the SME must focus on when making an assessment of their current situation. Information gained by the interested company will provide the starting point for effective and efficient changes towards business improvement, a part which would be tackled in the September Journal article with the title “Second Urgent Quality Challenge”.

For this First Urgent Quality Challenge, the three major areas to assess in one’s current business include: (1) Company’s Business Plan; (2) Creation of the Organisational Structure and; (3) Focus on the Contributors to Customer Satisfaction.

Business Plan (1) and Organisational Structure (2). Most SMEs do not have a documented plan for their business. Verbally, they can easily explain what their business is all about but they seldom have their ideas in writing nor can they show a documented plan for the long-term business direction. Table 2 shows the basic content of a “Business Plan” which seems simple and understandable yet may be difficult for SMEs to use as guide for planning purposes of their own business, unless properly guided. It is thus, recommended they seek assistance to insure they have prepared a good working plan to guide them. Furthermore, if the plan is well-developed, this can be used to monitor and review business progress. From the plan, the SME will realise the need for an organisational structure to make work assignments easier to implement following the business plan. Fig.1 presents a simple organisational structure for a small manufacturing firm showing activities at the start like: Marketing and Sales (M&S), Research and Development (R&D); Quality Assurance and Production.

Table 2.  Business plan content for SMEs (Based on UP-ISSI, 2017)

I. EXECUTIVE SUMMARY (prepared by CEO.)

II. MARKET STUDY

III. PRODUCTION PLAN

IV. ORGANISATIONAL PLAN

V.  FINANCIAL ANALYSIS

These titles may not be utilised as such despite the fact that their functions are expected to be done by the persons assigned by management under the “Technical Operations” group (see Fig. 1). For example, the owner who improves or develops new products could be doing the R&D work aside from other managerial functions. The SME workforce could also be multi-tasking especially if there are few trusted employees at the current work situation. However, at a later time when business begins to pick-up, the need to review the current structure would be deemed urgent. This is especially so when there are other important tasks necessary to be performed in the company as shown under “Later” in Fig. 1. It is important for the Company owner to carefully study the requirements of the business which is better seen in a well-planned organisational structure where functions are also defined. Thus, at a later time, the leadership may add to the structure “support functions” as identified in Fig. 1.

Contributors to Customer Satisfaction (3). Once the Business Plan is made clear and properly understood, the business leaders will realise the importance of understanding first their customer requirements and then the important contributors to achieve them. Fig. 2 shows the linkages between the business resources (“5Ms of quality”) and their role towards meeting Customer Satisfaction. With a good Business Plan, the capability to achieve this goal is assured. Of the “5Ms of Quality”, it is the Manpower that controls all the other Ms which make-up the components of the resources needed for the manufacturing process to progress into an output known as the product. But to successfully compete in any business, one must make sure that customer satisfaction is achieved. As seen in Figure 2, meeting the customers’ desired product can be grossly affected by the peoples’ or the workforce’s “mind-set”. This underscores the importance of a well-designed organisational structure (Fig.1) where people at work know their responsibility and are, therefore, expected to have both the understanding and capability to perform their tasks well.

Conclusions and recommendations

The realisation that people or manpower are the most important contributors to business success requires that their mindsets be carefully developed to remain attuned to the company’s quality expectations. This can only be realised if the business leadership is able to have a clearly understood and documented Business Plan (Table 2) which should lead to the development of an effective organisational structure (Fig.1), necessary to ensure meeting customer satisfaction (Fig.2). It is highly recommended that the business leadership carefully study this “First urgent quality challenge” and then make sure that the necessary Baseline Data and Information about the company are obtained at the earliest time possible.

This would provide the foundation for the approaches to Business Improvement which will be shared in the “Second urgent quality challenge” to be published in the next issue of FoodPacific Manufacturing Journal.

References

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Gatchalian, M.M. and J.C. Gatchalian. 2008.  Workplace Partnerships for Quality: Best Practices in Selected Companies. Proceedings. TQM Uz-2008 International Quality Forum, April 23-25, 2008. Tashkent, Uzbekistan.  

Gatchalian, J.C. Gatchalian, M.M; Mamon, M.O; and Torres, L. 2004. “Partnerships for quality,

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Goetsch, David L and Davis, Stanley B. 2000. Quality Management- Introduction to Total Quality

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2022 Philippine MSME Statistics. https://www.dti.gov.ph/resources/msme-statistics  

U.P.I.S.S.I. 2017. Business Plan Format. Start Your Own Business Course. UP Institute for

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