A Model For Evaluating Organizational in Quality Management

Decision Sciences
Volume 36 Number 2
May 2005
Printed in the U.S.A.
A Model for Evaluating Organizational

Competencies: An Application in the
Context of a Quality Management Initiative∗
Ana Belén Escrig-Tena†
Department of Business Administration and Marketing, Universitat Jaume I, Campus del Riu
Sec, 12080 Castellón, Spain, e-mail: escrigt@emp.uji.es
Juan Carlos Bou-Llusar

Department of Business Administration and Marketing, Universitat Jaume I, Campus del Riu
Sec, 12080 Castellón, Spain, e-mail: bou@emp.uji.es
ABSTRACT
Despite the important contributions made by the Competency-Based Perspective (CBP)
to strategic thought, certain issues on the operational definition of the theoretical concepts
that characterize this approach remain unresolved, thus limiting its empirical application.
In addressing this issue, the present study puts forward a procedure for measuring the
competencies that can be developed in association with a Quality Management (QM)
initiative and analyzes the reliability and validity of the resulting scale. This procedure
could be transferred to studies that aim to carry out an empirical analysis based on the
theoretical position of the CBP.
Subject Areas: Causal Models, Competencies, Measurement Instrument,

Quality Management (QM), Strategy.
INTRODUCTION
The development of new strategic approaches such as the Competency-Based Per-
spective (CBP) have shifted the emphasis in the analysis of what determines com-
petitive advantage from outside to inside the organization. The CBP emphasizes
company heterogeneity and its influence on gaining competitive advantage. Ac-
cording to this position, each company develops a unique combination of resources
and capabilities that enables it to obtain regular incomes based on the possession
of competencies (Wernerfelt, 1984; Barney, 1991; Grant, 1991; Peteraf, 1993).
However, authors such as Foss (1997) pose certain unresolved problems that
suggest future lines of research within this theoretical framework. Among them
one particular aspect, namely the difficulty of making this approach operational,
∗ We would like to thank the anonymous reviewers for their significant contributions to this article. This
work was carried out as part of a research project (reference GV99-58-1-8) which has been subsidized by
the “Valencian Government Programme Scientific Research and Technological Development Projects.” It
was also supported by a grant (P1.1A2002-06) from the Bancaixa Foundation.
† Corresponding author.
221
222 A Model for Evaluating Organizational Competencies
should be highlighted. To overcome this problem, objective, valid, and widespread

measurements of the resources and competencies must be found, as the traditional
indicators based on accounting information are not always appropriate.
In relation to this limitation, the operational definition of theoretical con-
cepts is a relevant issue for scientific research. If reliable and valid measurement
of constructs cannot be achieved, empirical relationships can be identified between
the measurements but they cannot be transferred to the construct level. In other
words, it is important to ensure that theoretical statements and relationships can
be empirically tested, and that they provide some source of explanation and pre-
diction (Bacharach, 1989). In fact, one of the main errors in empirical work on
strategy is the incorrect operationalization of variables (Montgomery, Wernerfelt,
& Balakrishnan, 1989).
In this context, we present the procedure used to evaluate competencies in a
Quality Management (QM) initiative. In line with Powell (1995) and Savolainen
(2000), we consider that the CBP provides a useful theoretical base to explain the
effects of a QM initiative on performance. Studies such as those by Belohlav (1993)
or Wruck and Jensen (1998) suggest that QM is regarded as an important source
of competitive advantages that leads to improvement in performance. The basic
argument is that QM can contribute to the sustainability of competitive advantage
by encouraging the development of competencies that are specific, produce socially
complex relationships, are imbued in the history and culture of the company, and
generate tacit knowledge.
The proposed procedure is offered as a possible way of providing basic
concepts derived from the CBP—essentially the concept of competencies—with
an empirical significance. This method will culminate in the development of a
measurement scale enabling the concept to be expressed in terms of empirical
measurements.
The development and presentation of our study follows the steps shown in
Figure 1. This is the procedure commonly used in social sciences to construct
measurement scales (Churchill, 1979; Lazarsfeld, 1958; DeVellis, 1991). It begins
with the delimitation and specification of the concept, in our case the competency
constructs, and the competencies associated with QM. The measurement model is
then established, enabling observable indicators to be generated and synthesized
on a measurement scale. From this scale, a questionnaire can be drawn up for the
collection of empirical data and evaluation of the scale’s measurement properties.
CONCEPTUAL DEFINITION OF THE COMPETENCIES

ASSOCIATED WITH QUALITY MANAGEMENT
The “Competencies” Concept in the Competency-Based Perspective
The CBP brings together a set of theoretical influences that highlight the role
of competencies in the achievement and sustainability of competitive advantage.
The arguments put forward by Foss (1996a, p. 2; 1996b, p. 195), Knudsen (1996,
p. 13), and Sanchez, Heene, and Thomas (1996, p. 1) are taken into account in
Figure 2, which shows a synthesis of the different approaches that have enabled
the development of the CBP conceptual framework.
Escrig-Tena and Bou-Llusar 223
Figure 1: Process to provide empirical meaning to theoretical concepts.
Specification of the domain of the

construct
Literary review
Elaboration of the
questionnaire
Identification of the dimensions
that form the construct
Sample design
Obtaining data from the sample
Generation of items
or observable attributes
Revision of the literature Measurement evaluation:
Dimensionality
Reduction of the battery of items: Reliability
Synthesis of measurement Validity
instrument
Delphi methodology
Figure 2: A synthesis of influences on the Competency-based Perspective (CBP).
COMPETENCY-BASED PERSPECTIVE
Classical Papers within the Strategic Management Field

Selznick (1957), Penrose (1959) and Andrews (1971) emphasise the strengths and
competencies of the company as limitations to their taking advantage of opportunities. The
organization is understood as a heterogeneous collection of resources, which could explain
the differences in firms’ competitive positions
The Resource-based View

This view centres on the analysis of the characteristics of assets or capabilities that enable a sustainable competitive position to be
achieved and maintained
Wernerfelt (1984), Dierickx & Cool (1989), Grant (1991, 1995), Barney (1991, 1997), Amit & Schoemaker (1993), Peteraf (1993)
The Evolutionary Perspective

Analyzes how the company adapts to the environment and changes through a stochastic process of searching for new and more
beneficial routines
Nelson & Winter (1982), Dosi et al. (1988), Nelson (1991, 1995), Winter (1995)
The Dynamic Capability Theory

Emphasizes the strategic value of superior order resources (dynamic capabilities) that facilitate the generation and renovation of
distinctive competencies and competitive advantages. Teece et al. (1997), Teece & Pisano (1998)
The Competency-based Competition

In addition to the analysis of resources and capabilities that allow competitive advantage to be sustained, these
contributions are concerned with the processes of generation and development of competencies.
Prahalad & Hamel (1990, 1994), Foss (1993), Hamel & Heene (1994), Foss & Knudsen (1996), Sanchez et al. (1996),
Heene & Sanchez (1997), Eisenhardt & Martin (2000), Winter (2000)
The Knowledge-based Theory

Regards the companies as heterogeneous entities, characterized by a unique basis
of knowledge.
Kogut & Zander (1992), Hedlund (1994), Nonaka & Takeuchi (1995), Grant
(1996, a,b)
The common thread running through all these articles is the attribution of
primary strategic importance to the firm-specific assets and competencies that are
knowledge related, tacit, difficult to trade, and shared among the agents of the firm.
Competencies have been understood from two different perspectives, namely:
(i) as assets, skills, or resources belonging to the company that allow an activity
to be performed systematically (Collis, 1994, p. 145; Winterscheid, 1994, p. 266;
Sanchez et al., 1996, p. 8; Sanchez & Heene, 1997, p. 7); (ii) as the activities
themselves, that is, the operations that the firm is able to carry out by integrating a
series of assets (Aaker, 1989; Hall, 1992, 1993; Hamel, 1994), emphasizing what
the company does as opposed to what the company has.
Bogner and Thomas (1994, p. 113) consider that both perspectives form part
of the concept of competencies. They identify the cognitive aspect, which is related
to the knowledge and the skills the firm possesses, and the action aspect, oriented
toward the activities the firm undertakes. Therefore, competencies can be defined
as the abilities and specific skills that the firm possesses in the deployment of
its resources, as well as its cognitive characteristics, which are geared toward the
accomplishment of activities that permit the attainment of certain objectives.
This definition is in line with that offered by Eriksen and Mikkelsen (1996,
p. 58), for whom competencies are just pools of resources capable of performing
a specific function. In the same way, Sanchez et al. (1996, p. 8) indicate three con-
ditions that competencies must meet to be considered as such, which are present
in our previous definition: (i) they must have an organizational component, in the
sense of the coordination and deployment of assets; (ii) they must have an intention
component, as they must imply certain premeditated activities to sustain the coor-
dinated deployment of assets; (iii) they must have a goal attainment component, as
the coordination of assets must help a firm achieve its goals.
The concept of competencies also considers both personal and corporate
competencies, as determined by Turner and Crawford (1994). Personal competen-
cies are those possessed by an individual or, at most, by a few people. They are
competencies held by individuals, such as their experience, their technical knowl-
edge, or their skills and abilities. Corporate competencies consist of a combination
of skills and knowledge that belong to the organization itself. They are embedded
in company processes and systems and absorbed by all its members and structures,
and they tend to remain even when individuals leave the company. Corporate com-
petencies are basically a set of routines, which form the organization’s main system
for storing knowledge and determine the regular patterns of behavior. As Nelson
and Winter (1982) point out, routines in an organization are what skills or abilities
are in individuals.
A Classification of Competencies
Having established the definition of competencies, the next step to delimit them
further involves their categorization. Identifying all competencies would be practi-
cally impossible because they can reside in any activity undertaken by the company
(Collis, 1994, p. 147). However, as Grant (1995) suggests, to examine competen-
cies we can begin by making a classification of activities according to either a
functional or a value chain classification.
Previous literature has identified various ways of categorizing competencies.

Hall (1992, 1993), Hamel (1994), Turner and Crawford (1994), Miller and Shamsie
(1996), and Durant (1997) provide valid criteria for distinguishing different types
of competencies. This article is based on the classification proposed by Lado,
Boyd, and Wright (1992) and Lado and Wilson (1994). They offer a typology
of competencies capable of sustaining competitive advantage. This classification
might prove more useful for evaluating the competencies associated with QM,
because it is constructed on a basis of distinguishing the activities that cover the
whole process of generating value to obtain results.
This classification distinguishes between four main types of competencies:
managerial, input-based, transformation-based, and output-based. It embraces the
competencies that stem from the process of development or acquisition of the inputs
(i.e., the resources and abilities needed to accomplish the activities), the compe-
tencies deployed in the process of transformation, and the competencies derived
from the outputs that result from these transformation activities, together with the
managerial competencies in the whole process of acquisition and the later trans-
formation of inputs into outputs.
This classification is based on the premise that managerial competencies and
strategic focus are responsible for attracting (and generating) specialized resources
that are combined, transformed, and channeled to market goods and services that
enable firms to attract and hold on to their customers. In this way it is possible to
sustain the firm’s competitive advantage.
The Competencies Associated with Quality Management

A review of some of the relevant studies in the available literature on QM (Dean
& Bowen, 1994; Sitkin, Sutcliffe, & Schroeder, 1994; Kanji, 1996; Wilkinson,
Redman, Snape, & Marchington, 1998; Oakland, 2000) helps us to identify four
dimensions which bring together the set of principles and practices that allow a
QM initiative to be introduced.
Customer focus
Customer satisfaction provides a common goal for all areas of activity within the
company. Contact with the customer is essential, and is promoted by flatter struc-
tures and the setting up of systems to gather information on customer satisfaction,
complaints, or suggestions.
Continuous improvement
The most effective means of improvement involves following a systematic process
of planning, implementation, and evaluation. In order to carry this out, standard-
ized process operations are essential, various tools for improvement should be
used, performance indicators must be obtained, and information must be gathered
through benchmarking and self-assessment.
Employee fulfillment
Efficiency at work is assumed to increase if the workforce is more motivated, takes
on responsibilities, and shows initiative. This involves the development of training,
participation, and teamwork as important factors that will lead to an increase in

worker job satisfaction and performance.
The organization as a total system

Quality strategies and policies affect the whole organization, which is managed
by processes rather than by functions. Management participation is vital, as is a
link between quality planning and overall business strategy. In this way, associated
relationships with suppliers and other external agents are promoted.
These four dimensions are consistent with a definition of QM presented
in the Report of the Total Quality Leadership Steering Committee and Working
Councils (Evans, 1992) sponsored by Procter & Gamble. In our view, this def-
inition considers the key elements of a QM initiative: QM is a people-focused
management system that aims at continual increase of customer satisfaction at
continually lower real cost. QM is a total system approach (not a separate area or
program), and an integral part of high-level strategy; it works horizontally across
functions and departments, involves all employees, top to bottom, and extends
backwards and forwards to include the supply chain and the customer chain. QM
stresses learning and adaptation to continuous change as key to organizational
success.
Winter (1994, p. 93) states that QM involves searching for improvement in the
organizational routines through a special problem-solving procedure that is based
on the active collaboration of all those involved. From this it can be deduced that
QM can generate the development of a set of routines, or ways of behaving, in the
organization that are the result of a process of learning and experimenting within the
firm itself. Likewise, following the line of thought set out by Rose and Ito (1996),
the creation of knowledge made possible by the activities linked with QM helps to
deploy the competencies within the heart of the organization. For Grant (1995), the
ability to manage quality would be considered an important interfunctional com-
petency, resulting from the integration of other competencies. Hamel (1994, p. 16)
considers quality to be an integrity-related competency that allows a company to
do things with a higher degree of reliability than its competitors. Thus, the basic
argument that guides our analysis is that the principles that direct the organiza-
tional activity in a QM initiative—customer orientation, continuous improvement,
focus on people, global vision of the organization—as well as the practices and
techniques that are derived from them, are capable of promoting a learning process
in the organization that is unique to each company. Hence, our research is directed
toward identifying and analyzing a set of competencies that may appear or be de-
veloped after the implementation of QM. The competencies that are associated
with QM are shown in Figure 3, grouped according to the Lado and Wilson (1994)
classification.
The introduction of a QM initiative allows for the enhancement of managerial
competencies stated by Lado and Wilson (1994), by influencing both the deploy-
ment of leadership abilities through the articulation and communication of a shared
vision, and the company’s ability to enact a beneficial adaptation to its environ-
ment through the selective identification of strategic issues (Webley & Cartwright,
1996).
Figure 3: Competencies associated with QM.
M A N A G E R IA L
L E A D E R S H IP
E N A C T IN G O R G A N IZ A T IO N A L E N V IR O N M E N T
I N P U T -B A S E D
E M P L O Y E E K N O W -H O W
E X T E R N A L C O O P E R A T IO N S K IL L S
T R A N S F O R M A T IO N B A S E D
C R E A T IO N O F A C O L L E C T IV E M IN D
O R G A N IZ A T I O N A L C O M M IT M E N T
E N H A C E M E N T O F O R G A N I Z A T IO N A L L E A R N IN G
S P E E D A N D F L E X I B I L I T Y I N T H E D E S I G N O F N E W P R O D U C T S A N D S E R V IC E S
O U T P U T -B A S E D
R E P U T A T IO N
Leadership
Managerial competencies include the unique capability of the organization’s strate-
gic leaders to articulate a strategic vision, communicate the vision throughout the
organization, and empower organizational members to realize that vision (Lado &
Wilson, 1994, p. 703). QM is considered to be a vehicle for the establishment of a
shared vision in the organization and provides the basis for effective leadership to
be achieved. As Webley and Cartwright (1996, p. 485) and Richbell and Ratsiatou
(1999) indicate, one of the most notable factors of a QM initiative is the establish-
ment of a common purpose so that all the individuals accomplish the corporate
mission. This will be possible because employee fulfillment, which characterizes
QM, derives in the construction of the corporate vision from the individual vision of
employees. This will enable all the individuals in the organization to be committed
and involved in this vision beyond mere obedience. According to Oakland (2000,
p. 33), shared vision and effective leadership are made possible by the following:
commitment to continuous improvement and an open, friendly style of manage-
ment encouraged by QM; the continuous training of individuals in the organization
to promote an understanding of the horizontal perspective of the organization; and
the management of processes through teamwork, improved communications, and
the removal of barriers and fears.
Enacting organizational environment

Customer focus, as a basic principle in a QM initiative, involves certain kinds of
organizational practices that enable better information about customers and the
environment to be obtained. The establishment of information systems that permit
continuous contact with customers, designed to detect their expectations and needs,
and their incorporation into the organizational processes, together with the use of
techniques such as quality function deployment, are regular practices in a QM
initiative (Smith & Angeli, 1995). This will provide the means to attenuate one of
the principal difficulties in responding to the exogenous change: the difficulty of
processing the information. Savolainen (2000, p. 223) states that the internalization
of the principles of quality (essentially customer orientation) provides protection

against the challenges from the environment and makes it easier to adapt to it.
Consequently, QM could provide an external orientation, which is one of the scarce
sources of advantage in a turbulent environment.
Employee know-how
QM brings about a change in the management of human resources, which takes
on a new perspective that allows the creation of suitable conditions for employees’
creativity to be displayed (Bowen & Lawler, 1992). Accepting continuous improve-
ment promotes a change aimed at incorporating the improvement of processes as
part of the work of all employees. This in turn leads to individual enrichment
through “learning by doing” (Schonberger, 1994) and contributes to the enrich-
ment of the know-how of the entire workforce. Likewise, the principles of QM will
encourage a more participative human resources management (Bowen & Lawler,
1992; Costigan, 1995).
Skills for external cooperation

QM softens the boundaries of the organization and favors the creation of stable
partnership relations with both customers and suppliers. Customer orientation, as
one of the basic principles of QM, involves setting up long-term partnership rela-
tions with customers (Deming, 1986; Dotchin & Oakland, 1992). The organization
visibly establishes who its outside customers are and is ready to fulfill their require-
ments and expectations to the greatest extent possible. Suppliers are considered to
be yet another extension of the processes in the firm, agreements are drawn up
to control the quality of their materials and they even take part in formulating
and implementing a QM strategy (Grant, Shani, & Krishnan, 1994; Rao, Solis, &
Raghunathan, 1999).
Creation of a collective mind

Weick and Roberts (1993, p. 376) point out that the interventions needed to create
a collective mind involve a series of changes in the organization that foster a
collective behavior, such as greater interdependence between tasks and the creation
of a culture that goes against individualism. Furthermore, they consider that this
type of change is inherent to the initiatives undertaken in a QM strategy. QM
encourages the creation of an ethic of cooperation as opposed to a conflict ethic
among the members of the organization (Watson & Korukonda, 1995) by making
everybody aware that the organization is to be considered as a global system and
by promoting teamwork.
Organizational commitment
Studies such as those by Taylor (1995) and Allen and Brady (1997) claim that QM
initiatives involve attitudes that entail a strong internalization of the goals and values
of the firm, a predisposition to work hard for the organization, and a strong desire
to be one of its members. QM can act as a catalyst by targeting the efforts made by
the various stakeholders to the objectives of the organization, and thus promoting
their commitment to the organization. In this way, a company committed to a QM
initiative will undertake practices aimed at promoting employee autonomy and

providing job security, opportunities for promotion or acknowledgement of work
carried out. As Iverson and Buttigiec (1999, p. 313) point out, all these practices
would increase employee attitudinal commitment.
Stimulation of the organizational learning process

With a QM initiative, organizations learn by following a structured, scientific
problem-solving process and the generalized use of teamwork (Wruck & Jensen,
1998). For Cole and Mogab (1995) the practices and beliefs associated with QM
sustain an organizational model they call the Continuous Improvement Firm (CIF),
a firm whose organizational rationality is the internal generation of improvements
in all the products and processes of the organization, and the promotion of change.
This organizational model favors continuous learning because it develops a culture
that raises continuous improvement, innovation, and the acceptance of change, all
of which are key elements in QM.
Speed and flexibility in designing new products or services

QM also entails the ability to compete in terms of time and allows the lead times
of business operations to be shortened (in production, the development and in-
troduction of new products, and in sales and distribution). It therefore represents
a powerful competitive weapon which enables the organization to control costs,
quality, and stocks (Stalk, 1988), while allowing it to react faster to changes in
demand, thus increasing the firm’s flexibility. Sim and Curatola (1999) confirm
the positive effect of QM and its associated practices, such as those associated
with customer orientation or quality function deployment, reducing the variability
of processes, shortening the time needed to develop products, and lead time. QM
involves certain innovations that affect management, such as the delegation of au-
thority and the pursuit of continuous improvement, which, according to Sanchez
(1995), enables the firm to exploit the flexibility of new technologies in the devel-
opment, manufacture, and distribution of products. These practices also allow for
customers’ needs to be incorporated into design specifications (Youssef, Boyd, &
Williams, 1996).
Reputation
QM encourages reputation enhancement through good relationships with its cus-
tomers, suppliers, or the employees themselves, and by generating good perfor-
mance prospects (Lemak & Reed, 1997). First, through commitment to the princi-
ples of customer orientation, employee fulfillment, and the firm as a global system,
QM promotes the intangible aspects of the relations with customers, suppliers, and
workers and enables the firm to demonstrate a heightened awareness of social and
ethical responsibility. Second, the implementation of a QM initiative or the grant-
ing of a particular quality certification or award can be interpreted as an explicit
measure of excellence.
Thus, QM generates a wealth of competencies in a company that allows the
various organizational activities to be carried out more efficiently and effectively
(Cole & Mogab, 1995; Powell, 1995; Savolainen, 2000). This supports the gener-
ation of competitive advantages in the company and, therefore, better results.
This method of conceptualizing competencies gives rise to nine different
concepts, which correspond to the competencies associated with QM. Starting
with this approach to defining competencies, the next section analyzes the best
model to measure these concepts.
A MODEL TO MEASURE COMPETENCIES: CHOOSING

OBSERVABLE ATTRIBUTES AND SYNTHESIZING
THE MEASUREMENT SCALE
The consideration of competencies as unobservable concepts conditions the pro-
cess used to define them operatively. Several methods have been used to measure
competencies in the previous literature.
Some of the first competency measurement scales were constructed by Snow
and Hrebiniak (1980), Hambrick (1983), and Hitt and Ireland (1985). All of them
considered activities that might be regarded as company strengths and as having
a strategic relevance, and they were grouped according to functional criteria. As
McGee and Peterson (2000) rightly indicate, although these first attempts to mea-
sure competencies are very valuable, their major drawback is that they do not
generally include all the dimensions of the concept.
Other more recent attempts to define and evaluate competencies have fol-
lowed strategies for the measurement process essentially based on multi-item
scales. The bulk of this work focuses on measuring competencies in specific sectors
of activity, as is the case of Acar (1993) in the machinery sector, or Droge, Vickery,
and Markland (1994) in furniture manufacturing companies. Camisón (1999) con-
structs multi-item scales for measuring more generic competencies, but classified
according to their functional dimensions.
McGrath, MacMillan, and Venkataraman (1995) develop a measurement of
competencies by evaluating the fit between objectives and results. For their part,
Sharma and Vredenburg (1998) base their evaluation on the characteristics that,
according to the literature, competencies should have, namely, uniqueness, value,
causal ambiguity, or social complexity.
Following the solution adopted by Mosakowski and Mckelvey (1997, p. 73),
in this article the measurement of unobservable competency was achieved by ana-
lyzing the consequences that the possession of these competencies has for a com-
pany. Thus, in accordance with these authors, competencies can be measured by
seeking indicators that reflect the intermediate products or consequences derived
from them.
In the previous section, competencies were defined as comprising a compo-
nent of coordination and deployment of resources, a component of intention, and
a component of goal attainment. Hence, if a particular competency exists, it will
appear in the performance of certain activities and the achievement of certain re-
sults. Skills and knowledge cannot be observed; the only observable factors are the
efficiency and effectiveness manifested in the activities carried out by a company
and the consequences derived from this. Therefore, competencies can be related to
activities and can be deduced from the activities themselves and from the conse-
quences that arise from them. In this way competencies can be operationalized by
identifying and evaluating the activities and the results arising from them.
Generating and Selecting an Indicator Pool for Each Competency

As Camisón (1999, p. 11) indicates, two approaches have been used to mea-
sure competencies: (i) embracing substitutive, quantitative measurements; and
(ii) adopting suitable classification scales allowing the judgment and experience of
management to be transferred to subjective measurements of such intangibles.
Although some studies, such as those by Hamilton, Eskin, and Michaels
(1998) or Yeoh and Roth (1999) use quantitative approximations to measure com-
petencies, most have opted to measure competencies by means of a subjective
self-classification scale, as in the case of Snow and Hrebiniak (1980) or Conant,
Mokwa, and Varadarajan (1990). We also chose to follow this second approach in
our study. We therefore had to generate a set of indicators in order to obtain a wide
range of questions that included all the aspects and connotations of the concept to
be measured.
The generation of indicators to measure the competencies associated with
QM was based on: (i) a review of the literature on resources and competencies in
which examples of possible competencies are given and some indicators established
(Hansen & Wernerfelt, 1989; Hall, 1992, 1993; Henderson & Cockburn, 1994;
Turner & Crawford, 1994; Grant, 1995; Oliver, 1997); and (ii) an analysis of other
previous scales which, while not based on the same dimensions, are of interest
to the process of indicator selection. These included scales constructed by Snow
and Hrebiniak (1980), Hitt and Ireland (1985), Chandler and Hanks (1994), and
Camisón (1999). From this review, a total of 46 indicators were established to
evaluate the nine competencies associated with QM.
Following DeVellis (1991, p. 75), in order to verify the suitability of the
indicators used in the competency measurement scale and select the most repre-
sentative indicators, we consulted a group of experts specialized in the CBP. This
group was made up of 13 experts from a total of 20 academics consulted at various
Spanish universities.
These experts cooperated by replying to a questionnaire in which they were
asked to rate how relevant they thought each item (each of the 46 indicators)
was to the nine competencies we intended to measure. In the questionnaire, the
indicators were presented with the definition of each one of the competencies.
The experts assessed whether or not an indicator matched the definition provided
for each competency using a 5-point Likert-type scale, where 1 expressed total
disagreement and 5 total agreement on the inclusion of each indicator in the scale
of each competency. Following an analysis of the 13 replies, the indicators with
lower approval scores were eliminated and the remaining ones reformulated in
accordance with the experts’ suggestions. The final scales, after the evaluation by
the experts, were made up of a total of 37 indicators to measure all the competencies
associated with QM. These final scales are shown in Table 1.
Table 1: Items to measure competencies after the evaluation by the experts.

Leadership (LEADER)
C1. The way management acts makes it easier for employees to accept proposed
changes voluntarily.
C2. Management is skilled at reaching agreements on objectives and/or important
projects.
C3. Management behaves in such a way as to allow the integration and mobilization of
members of a team.
C4. Management continually acquires and updates valuable knowledge for the
organization.∗
Enacting Organizational Environment (ENEN)
C5. All the members of the firm have a clear idea about what the firm’s position in the
market should be.
C6. All the members of the firm have a clear idea about what is expected of them,
making their contribution to the company as beneficial as possible.∗
C7. All the members of the organization know and share the firm’s mission and goals.
C8. We know the type of products and services the client requires.∗
C9. We know the type of resources, competencies, abilities, and technologies
the company requires.∗
C10. We identify new customer and market opportunities because an information
system about the environment has been set up.
Employees’ Know-How (K-H)
C11. Employees are able to identify and offer solutions to the problems that may arise
in their workplace.
C12. Employees at all levels are kept up to date on the progress made in their respective
fields (new abilities, knowledge, usage of new technologies, and so forth).
C13. Employees learn skills and knowledge in the workplace itself as a result of
measures made available to them for that purpose.
External Cooperation Skills (EXCOO)
C14. Thanks to the cooperation we maintain with our suppliers we have raw materials,
resources, or services that are better than those of our competitors.
C15. Our close relationships with suppliers and clients enables us to find out about new
products or services, needs, resources, new technologies, or machinery before our
competitors.∗
C16. When we want to make some kind of improvement, we can collaborate with other
firms in such a way that they help us to improve.
C17. In general our capacity for outside cooperation is very high.
Creation of a Collective Mind (COLMI)
C18. Communication between employees is kept smooth, which goes beyond the
formal structure of the organization.
C19. Employees have been working together for a long time, which ensures they are
well-coordinated.
C20. Internal communication is totally open and transparent.
C21. Employees voluntarily transmit useful information to each other.
Employee Commitment to the Organization (COMMI)
C22. If necessary, employees devote more time to the firm than those stipulated in their
normal working hours.
C23. Employees play an important part in deciding what work is to be carried out.
C24. Employee participation in setting goals and how they are to be achieved is high.
C25. We consider workers’ level of loyalty to the organization to be high.
Table 1: (continued)
Capacity to Stimulate the Organizational Learning Process (LEARN)
C26. Work processes have been designed in such a way that they are capable of
developing standards of conduct at all levels of the firm.
C27. Employees are capable of taking the initiative and assimilating better ways of
doing their job.
C28. There is an important spirit of dialogue and acceptance of diverse opinions in all
areas of the firm.
C29. Any one person’s knowledge is transmitted and made readily available to the rest
of the employees.
Speed and Flexibility in Designing Products or Services (SPEED)
C30. We are capable of keeping a step ahead of competitors when developing a new
product or incorporating a new service.
C31. We are capable of making fast changes in design and/or quickly introducing new
products or services.
C32. The way the firm operates is characterized by being able to provide the customer
with a service more quickly.
Reputation (REPUT)
C33. We have the ability to attract, develop, and maintain valuable personnel.∗
C34. We are able to apply a higher price than our competitors.
C35. The reputation of the products or services offered by my firm is better than that of
my competitors.
C36. We give guarantees of all our products.∗
C37. My firm has built up a better brand image than that of its competitors.
∗
Indicators estimated.
Figure 4: Factorial model of competencies.
COMPETENCY i
Indicator i1 Indicator i2 Indicator in
A MODEL FOR MEASURING COMPETENCIES

We constructed a measurement scale to assess each of the nine competencies as-
sociated with QM. Figure 4 shows the relationship between a competency and its
indicators. Each competency is considered as a latent factor that can be evaluated
through a set of observable indicators that are conceived as the consequences deriv-
ing from the possession of these competencies. A confirmatory factor model (CFA)
(Jöreskog, 1971) was estimated to analyze the fit of each measurement model.
Figure 5: Aggregate model of the wealth of competencies.
WEALTH OF
COMPETENCIES
Leadership Collective
Know-how Mind Reputation
Ind 1 Ind n Ind 1 Ind n Ind 1 Ind n Ind 1 Ind n
An overall measurement of the competencies, which we called “the organi-

zation’s wealth of competencies” was also drawn up. The wealth of competencies
is an aggregate multidimensional construct, where each dimension represents one
of the competencies. It is an index that reflects the level of competencies achieved
by the firm. The path diagram for this model is shown in Figure 5. The wealth
of competencies was measured as a composite variable (Bollen & Lennox, 1991;
Law & Wong, 1999), that is, an outcome created as an aggregation or addition of
all the competencies.
ANALYSIS OF THE RELIABILITY AND VALIDITY

OF THE MEASUREMENT SCALE
Starting from the scales constructed to evaluate each type of competency, in this
section we carry out the analysis that enables their properties to be evaluated.
Table 2 summarizes the procedure used to analyze the various properties.
Sample
The data required to evaluate these properties were obtained from a sample of com-
panies extracted using the information provided by the Spanish national ARDAN
database. ARDAN is an information service that provides access to a database of
more than 100,000 firms in Spain. Firms can be accessed and selected according
to various classification criteria such as sector, name, or place.
In order to avoid possible bias in the selection of firms in the sample, we
used the stratified sampling method. The sample was divided in various strata by
splitting it into various sections in proportion to the population of each stratum by
sector and size.
The selection of sectors was made according to two criteria: the importance
of QM in each one; and the sectoral characteristics that represent relevant variables
Table 2: Procedure used to test the properties of measurement instrument.

Analysis Procedure Used
Dimensionality analysis Estimation of a model from which the measurement instrument
is derived, through Confirmatory Factor Analysis.
Reliability Individual reliability of each indicator ≥ 0.5.
Composite reliability coefficient ≥ 0.7.
Convergent validity Bentler-Bonett coefficient ≥ 0.9.
High value of loadings
t-values (t ≥ 1.96; α = 0.05).
Discriminant validity Test of differences of chi-square between models where one of
them considers a correlation between factors = 1.
Predictive validity Analysis of relationship between the measurement scale and
another variable taken as criteria.
to evaluate the importance of quality, while differentiating between service and

industrial sectors. Within each of these sectors, at the same time, small, medium,
and large companies were analyzed. In line with the classifications used in several
QM studies (Dotchin & Oakland, 1994; Silvestro, 1999), service sectors could be
classified according to two main aspects: the degree of interaction and adjustment
to the customer, and the intensity of labor. This classification distinguishes four
types of services: services factory (low adjustment to the customer and low labor
intensity), services workshop (high adjustment to the customer and low labor inten-
sity), massive service (low adjustment to the customer and high labor intensity), and
professional services (high adjustment to the client and high labor intensity). Thus,
in our study we included three service sectors, each one representing a different
category of services—hotels (massive service), dealerships (services workshop),
and transport companies (services factory). In relation to industrial sectors, dif-
ferent sectors are studied according to the degree of complexity of the transaction
(De Vasconcellos & Hambrick, 1989), a relevant variable to evaluate the impor-
tance of quality in the sector. In line with these selection criteria, the sectors chosen
were industrial ceramics (low transactional complexity), paints and glazes (average
transactional complexity), and machinery (high transactional complexity).
Three segments were defined for each sector, based on company size. The
classification of firms into the three groups was made according to European Union
criteria (European Commission, 1996). Following these criteria, firms were divided
into three intervals: 10–49 workers (small companies), 50–249 workers (medium-
sized companies), and 250 or more workers (large companies). In order to carry
out this classification, the number of employees was taken from the ARDAN
database.
The fieldwork was carried out during October and November 2000, by means
of personal face-to-face interviews and using a structured questionnaire. We inter-
viewed one manager per firm, either a member of high-level management (CEO)
or the quality manager. Information was obtained for each indicator from the inter-
viewees’ assessments, shown on a 7-point Likert scale, where 1 represented a very
low score and 7 a very high one. The final sample was made up of 231 companies,
46% from the industrial sectors, and 54% from the service sectors. With regard
to size, 104 (45%) were small firms, 106 (46%) medium firms, and 21 (9%) large
firms. The average number of employees per firm for the whole sample was 114.94
(SD = 266.398). The predominance of small and medium-sized firms is representa-
tive of Spanish industry. According to ARDAN the population is made up of 2,695
firms, which considering a confidence level of 95% and in the worst-case scenario
(p = q = 50%), implies a sample error of ±6.1% for the overall sample.
Dimensionality
In this study, we have considered the wealth of competencies as a composite con-
struct formed by the nine competencies identified. In this way we consider nine
latent factors for evaluating the competencies, each of them measured using a set
of indicators. Figure 6 represents the factorial models of each of the nine com-
petencies. As can be seen in this diagram, all the competencies are considered as
first-order factors.
Taking this model into account, the question is to assess whether the idea can
be maintained that each competency forms a unique dimension. To evaluate the
existence of the dimensions considered, a confirmatory factor analysis was carried
out from which the model theoretically deduced from each scale was estimated.
The estimation was made with the EQS 5.7 statistical program (Bentler, 1995).
Taking the initial indicators for each scale, detailed in Table 1, as a starting
point, successive modifications were made to some of the scales until the parameters
and the fit indices reached values within the recommended limits. As Jöreskog
and Sörbom (1996) advise, only one parameter was altered for each iteration to
avoid overmodifying the model. As a result of this process, some indicators were
eliminated from one of the scales depending on their individual reliability and the
Lagrange multiplier test (LMTEST). The LMTEST is a procedure provided by the
EQS program that suggests possible changes to improve the model. This test is
useful to evaluate whether the model can be improved by leaving free parameters
that are fixed in the existing model (Bentler, 1995). The indicators eliminated
appear with an asterisk in Table 1.
Table 3 summarizes the factorial loadings, the measurement errors, and the
random disturbances in each of the adjusted competency models. Once these pa-
rameters are calculated, it can be seen that the indicator loadings are high and
statistically significant and that there are no symptoms of poor fit, such as nega-
tive error variances, standardized coefficients greater than 1, or very high standard
errors.
To draw any conclusions about the dimensionality of the scales, the quality
of fit of each of the models must be analyzed. As can be seen in Table 4, in general
the goodness of fit measurements are good. These results therefore allow us to
demonstrate that each of the competencies identified are unidimensional constructs,
which supports the measurement of competencies based on the distinction between
these nine constructs.
Although the purpose of this article is not to test the equality of the parame-
ters of the models in each sample group, it would be worth presenting the results
from the application of our measurement instrument in our different sample groups
separately: industry, and service sectors; small, and medium firms (an analysis of
Figure 6: Initial models to measure competencies.
C1
C11
C2
LEADER
C12
K-H
C3
C13
C4
C14
C5
C15
EXCOO
C6
C16
C7
C17
ENEN
C8
C9
C10
C18 C26
C19 C27
COLMI LEARN
C20 C28
C21 C29
C22
C30
C23
C31
COMMI SPEED
C24
C32
C25
C33
C34
C35
REPUT
C36
C37
COLMI: Creation of a collective mind

Where: COMMI: Organizational commitment
LEARN: Enhancement of organizational learning
LEADER: Leadership process
ENEN: Ability to enact a beneficial relationship with the SPEED: Speed and flexibilityin the design of new
environment
products and services
K-H: Employee Know-how
REPUT: Reputation
EXCOO: External cooperation skills
the models in the subsample of large firms was not possible due to the small number
of firms in this group). In the Appendix, we present a summary of the quality of the
fit of the model of each competency in each of the demographic groups formed in
the sample selection. The results obtained show that the measurement instrument
for each competency satisfactorily fits the data in all the groups, since the p-value
associated to the chi-square statistic is not significant (in all cases the p-value ≥
0.05) and the values of the goodness-of-fit indices fall within the commonly ac-
cepted limits. These results support the unidimensionality of competencies in each
subgroup, and illustrate that the same measurement instrument could be valid at
the subsample level.
Table 3: Standardized factors loadings, measurement errors, and disturbances in factorial models of
competencies.
Errors
and
Distur-
Items LEADER ENEN K-H EXCOO COLMI COMMI LEARN SPEED REPUT bances
C1 0.718 0.484
C2 0.783 0.386
C3 0.837 0.300
C5 0.845 0.285
C7 0.866 0.250
C10 0.683 0.532
C11 0.694 0.518
C12 0.927 0.141
C13 0.828 0.313
C14 0.509 0.741
C16 0.600 0.64
C17 0.987 0.025
C18 0.816 0.443
C19 0.732 0.465
C20 0.836 0.301
C21 0.830 0.311
C22 0.624 0.152
C23 0.840 0.497
C24 0.888 0.210
C25 0.682 0.216
C26 0.725 0.275
C27 0.904 0.667
C28 0.790 0.389
C29 0.779 0.368
C30 0.880 0.224
C31 0.908 0.175
C32 0.832 0.306
C34 0.649 0.579
C35 0.902 0.185
C37 0.621 0.614
All the estimated parameters are statistically significant at 95% (t > 1.96).
Reliability Analysis
Analyzing the reliability indicates the degree to which the different indicators that
make up the scale are inter-related and that the measurements are free of random
errors. An alternative for measuring the reliability of a particular dimension is to
use composite reliability (Fornell & Larcker, 1981), calculated from the following
equation:
(Standardized loadings)2
Composite reliability = 2 . (1)
Standardized loadings + (Measurement errors)
A threshold value commonly used to accept the reliability hypothesis is

0.7, although this is not an absolute standard. Likewise, in the framework of
confirmatory factor analysis, Bollen (1989) and Mueller (1996) propose estimating
Table 4: Goodness of fit indices in factorial models of competencies.
Satorra-Bentler
Model Chi-square df p BBNFI BB-NNFI RCFI GFI AGFI RMSEA NC
LEADER 0 1
ENEN 0 1
LEADER-ENEN 11.2459 8 0.18815 0.980 0.983 0.991 0.983 0.956 0.054 1.40
K-H 0 1
Escrig-Tena and Bou-Llusar
EXCOO 0 1
KH-EXCOO 14.3068 9 0.11182 0.977 0.979 0.987 0.978 0.948 0.063 1.58
COLMI 3.7902 2 0.15031 0.990 0.980 0.992 0.990 0.949 0.082 1.89
COMMI 0.1489 1 0.69958 0.999 1.009 1 0.999 0.995 0.000 0.14
LEARN 1.8493 1 0.17387 0.996 0.987 0.997 0.996 0.957 0.071 1.84
SPEED 0 1
REPUT 0 1
SPEED-REPUT 6.3635 8 0.60658 0.991 1 1 0.991 0.975 0.000 0.79
Where recommended values are:
BB-NFI = Bentler-Bonett normed fit index ≥ 0.90,
BB-NNFI = Bentler-Bonett non-normed fit index ≥ 0.90,
RCFI = Robust comparative fit index ≥ 0.90,
GFI = LISREL Goodness fit index ≥ 0.90,
AGFI = LISREL adjusted goodness fit index ≥ 0.90,
RMSEA = Root mean square error of approximation ≤ 0.08,
NC = Normed chi-square (normally between 1 & 2, although values of up to 5 are considered acceptable).
Since the latent factors of leadership (LEADER) and the ability to enact a beneficial relationship with the environment (ENEN) are only measured with
three indicators, the degrees of freedom are equal to 0, the model is saturated, and the fit is perfect. Because of this, the program only computes the BB-NFI
index. To further adjust these two models, we execute another model (LEADER-ENEN), which considers these two factors and their correlation. The esti-
mation of this model confirms the existence of two separate, mutually interrelated dimensions. The same procedure was used in the case of (a) know-how
(K-H) and external cooperation skills (EXCOO); and (b) speed and flexibility in the design of new products and services (SPEED) and reputation (REPUT).
239
Table 5: Reliability of competency measurement scales.

Composite R2 of
Model Reliability indicators
Leadership 0.823 C1 C2 C3
0.515 0.613 0.700
Enacting organizational environment 0.843 C5 C7 C10
0.715 0.750 0.467
Know-How 0.860 C11 C12 C13
0.482 0.859 0.686
External cooperation skills 0.757 C14 C16 C17
0.259 0.360 0.974
Creation of a collective mind 0.871 C18 C19 C20 C21
0.666 0.535 0.698 0.688
Organizational commitment 0.890 C22 C23 C24 C25
0.390 0.705 0.789 0.465
Organizational learning 0.857 C26 C27 C28 C29
0.525 0.817 0.624 0.607
Speed and flexibility in the design 0.906 C30 C31 C32
of new products and services 0.775 0.825 0.693
Reputation 0.773 C34 C35 C37
0.421 0.814 0.386
the reliability of a measurement by analyzing the squared multiple correlation co-

efficient associated with each indicator (R2 ). We can consider that values of the
correlation coefficient equal to or greater than 0.5 represent a high level of relia-
bility.
Composite reliability shows acceptable values, always above the minimum
of 0.7 (Table 5), which indicates that each set of indicators explains most of the
variation in the concept as compared to the error measurement. In addition, the
observation of the individual reliability of each indicator shows that, together,
the indicators used to measure each of the competencies are representative of
that theoretical concept, given that these values are greater than the value of 0.5.
However, in the case of some of the indicators, their individual reliability does not
reach the minimum value. Despite this, it was decided to keep them in the model,
since leaving them out would affect the content validity and, in addition, their
factorial loadings are high and significant, and composite reliability in all cases
exceeds the minimum value of 0.7. Thus, based on the values shown in Table 5,
each scale can be considered to have a high level of reliability for measuring the
corresponding competency.
Content Validity and Convergent Validity

The extensive bibliographical review carried out to construct the competency mea-
surement scales allows us to maintain that the indicators making up the measure-
ment cover all the important aspects of the latent variable we are trying to measure,
which supports the content validity of the scale. In addition, the phases followed
in the process of developing the scales ensure the use of a suitable methodology,
in accordance with that suggested by the literature.
Convergent validity exists when various measurements that are used to eval-
uate the same concept really are correlated between one another. To evaluate con-
vergent validity, we can consider each indicator on a scale as a different approach
to measuring the same concept and analyze whether they are convergent. We have
therefore calculated this property using the Bentler-Bonett coefficient (BBNFI)
(Bentler & Bonett, 1980). A scale with a BBNFI value equal to or greater than 0.9
demonstrates strong convergent validity. The use of this indicator is justified be-
cause its calculation relates the chi-squared value of a null model (which assumes
the indicators are not related) with the chi-squared value of the specified model, in
accordance with equation (2).
In addition, we have verified the magnitude and statistical significance of the
factorial loadings.
χ 2 Null Model − χ 2 Suggested Model

BBNFI = . (2)
χ 2 Null Model
Considering these criteria, a high level of convergent validity is shown, given

that the Bentler-Bonett coefficient values for all the factorial models exceed the
value of 0.9 (see BBNFI in Table 4). In addition, the factorial loadings of all the
competency measurement models (Table 3) have acceptable magnitudes and are
statistically significant, as can be deduced from their t values (above 1.96).
Discriminant Validity
Finally, we must evaluate the existence of discriminant validity between the con-
structs that make up the proposed aggregate model for measuring competencies.
This aims to demonstrate that each variable really does represent a different con-
cept. One way of testing discriminant validity is to bring two concepts together and
to study the dimensionality of the new concept. The two concepts are considered
to be different if the hypothesis that together they form a single concept can be
rejected.
To test the discriminant validity of the measurement scale, we conducted
a “pairwise test” (Bagozzi & Phillips, 1982) of all competencies. The pairwise
analysis tests whether a confirmatory factor analysis model representing two com-
petencies with two factors fits the data significantly better than a single-factor
model. A statistically significant difference between the chi-squared values for the
two models (degree of freedom = 1) will enable us to support the existence of
discriminant validity.
For the nine competency measurement scales a total of 36 chi-squared differ-
ence tests were carried out. All of them showed statistically significant differences
between the chi-squared values (in all cases the value p = 0.000; Table 6). There-
fore, although the nine constructs are interrelated (according to the correlation
values), it can be stated that they are concepts that differ from one another. The
existence of discriminant validity can thus be affirmed.
Table 6: Chi-square test to analyze discriminant validity.
242
LEADER ENEN K-H EXCOO COLMI COMMI LEARN SPEED REPUT

LEADER
ENEN 91.3292 (9)
11.2459 (8)
0.520
K-H 105.3888 (9) 44.5541 (8)
8.5332 (8) 11.2459 (89)
0.548 0.520
EXCOO 145.4294 (10) 189.4037 (9) 176.5 (10)
13.3769 (13) 17.9759 (8) 16.5583 (9)
0.534 0.363 0.465
COLMI 99.7119 (14) 116.6416 (14) 81.42 (14) 256.97 (15)
13.3769 (13) 12.1077 (13) 22.68 (13) 17.07 (14)
0.534 0.692 0.808 0.410
COMMI 154.6414 (13) 104.2882 (13) 37.95 (12) 125.9 (13) 37.57 (18)
26.0388 (12) 17.9885 (12) 12.87 (11) 22.20 (12) 16.78 (17)
0.368 0.682 0.805 0.518 0.846
LEARN 112.5368 (14) 107.2893 (14) 70.57 (13) 234.96 (13) 70.03 (20) 37.09 (19)
20.2848 (13) 20.8404 (13) 23.89 (12) 9.6867 (12) 22.94 (19) 29.95 (18)
0.528 0.688 0.815 0.505 0.853 0.922
SPEED 173.5230 (9) 142.0435 (8) 137.44 (9) 210.83 (9) 187.7 (14) 209.2 (13) 186.9 (13)
9.9293 (8) 18.2358 (7) 14.7956 (8) 13.1370 (8) 15.18 (13) 12.62 (12) 23.58 (12)
0.455 0.541 0.638 0.471 0.590 0.532 0.655
REPUT 170.5987 (9) 84.7593 (8) 73.3921 (8) 42.1251 (8) 169.11 (14) 172.27 (13) 72.447 (12) 100.082 (9)
15.3959 (8) 16.8131 (7) 14.2479 (7) 16.2129 (7) 16.038 (13) 25.124 (12) 11.912 (11) 6.3635 (8)
0.253 0.561 0.534 0.633 0.383 0.373 0.519 0.596
For each pair of dimensions we present: first, the χ 2 value of the model where the correlation between the two factors was fixed to 1, and second, the χ 2
value of the model where the correlation was left free. The degrees of freedom for each case appear in parentheses. The third value shows the correlation
between the two factors. In all the cases, these values are significantly different from 0, to a reliability level of 95%.
A Model for Evaluating Organizational Competencies
Finally, in order to analyze predictive validity, in the next section we present

the results of applying the competency measurement instrument to evaluate the
relationship between the wealth of competencies and results.
APPLYING THE SCALE: EFFECT OF THE WEALTH

OF COMPETENCIES ON RESULTS
Predictive validity evaluates to what degree predictions made from the theory are
confirmed (Venkatraman & Grant, 1986). That is, it analyzes whether the construct
measured with the scale behaves as theoretically expected compared with certain
conceptually related constructs. Thus, we have evaluated the predictive validity of
the measurement instrument by analyzing whether the relationship between the
wealth of competencies and the results is as predicted by the CBP.
The CBP understands that a company achieves a sustainable competitive
advantage when the possession of certain resources and competencies allows the
organization to establish a strategy that creates an advantageous position for the
company vis-à-vis its competitors and, additionally, the benefits of this strategy
cannot be imitated or taken advantage of. That is, the resources and competencies
the company has are the source of economic rents and, therefore, responsible for the
achievement of a competitive advantage and of good results (Prahalad & Hamel,
1990; Bogner & Thomas, 1994). In the words of Brumagin (1994), the exploitation
of resources and capabilities (what we call the wealth of competencies) leads to
a competitive advantage, which will be reflected in (and can be measured by) the
achievement of better results.
Consequently, to analyze predictive validity, we examined the influence of
the wealth of competencies associated with QM on two performance variables: cus-
tomer results (CURES) and economic results (ECRES). First, as Agus, Krishnan,
and Kadir (2000) or Porter and Parker (1993) state, customer satisfaction is an
implicit goal in a QM initiative. Hence, it may be expected that QM will improve
CURES. Second, ECRES are usually the most widely measured results when the
success of a QM initiative is the point of interest. Some articles argue that QM
influences economic performance through internal effects (improvement of pro-
ductivity) and external effects (improvement of image and purpose intention). To
analyze this influence, we estimated a structural model that relates the wealth of
competencies to both result variables, in accordance with the model shown in
equations (3) and (4) and in Figure 7.
3. CURES = β1 WEALTH + D1.
4. ECRES = β2 WEALTH + D2.
In this model, the wealth of competencies was measured in accordance with
an aggregate model, as previously explained. Therefore, the wealth of competencies
is incorporated into the structural model as a factor (WEALTH) measured as an
index formed by the nine competencies (from leadership to reputation). Following
Edwards (2001), we considered the least restrictive model which introduces a
residual for the aggregate construct (wealth of competencies). In addition, each
competency was considered to have the same weight. In order to reduce the number
Figure 7: Relationship model between the wealth of competencies and

performance.
LEADER
ENEN D1
K-H
β1 CURES Vc
EXCOO
COLMI
WEALTH D2
COMMI
LEARN β2 ECRES Ve
SPEED
REPUT
Table 7: Items used to measure results.

Customer Results (CURES)
R1. Improvement in customer satisfaction
R2. Customer retention
R3. Improvement in the communication with customers
R4. Reduction in the number of complaints or claims from customers
Economic Results (ECRES)
R5. Improvement in the market share
R6. Increase in sales per employee
R7. Improvement in earnings, as a percentage of sales
of parameters to be estimated and to reduce the complexity of the model, we

decided to use the formation of composite variables (Gribbons & Hocevar, 1998;
Landis, Bela, & Tesluk, 2000). In other words, to measure each of the individual
competencies, we considered a single indicator that resulted from the calculation
of the “factor scores” (Jöreskog & Sörbom, 1996) for each one of the competencies
(Figure 7).
CURES and ECRES were estimated as a latent variable from the development
of a series of indicators of company performance. The indicators to measure each
of these results were determined following a thorough review of the literature that
evidences the main benefits derived from QM, such as Powell (1995); Lee, Adam,
and Tuan (1999); Anderson and Sohal (1999); or Zhang (2000). Table 7 shows the
items used to measure performance variables.
We obtained information on the indicators by performing a subjective mea-
surement. Firms taking part in the study were asked to show the extent to which they
agreed with the statements that make up each scale. To do so, a 7-point Likert scale
was used, on which 1 meant absolute disagreement and 7 showed total agreement.
As Edwards (2001, p. 165) suggests, measurement error was taken into account
by measuring each latent results variable using a single indicator, formed as the
mean of all items used to assess the corresponding latent variable. The loading of
this single indicator was set to 1 and the variance of its measurement error set to
1 minus the reported reliability of the measurement multiplied by the variance of
the measurement.
Model fit should be assessed by analyzing the significance of χ 2 and using
indices recommended in the structural equation modeling literature. The fit indices
for this model (χ 2 = 25.198; df = 15; p = 0.047; BB-NFI = 0.977; RCFI =
0.989; RMSEA = 0.070; the 90% interval for the RMSEA included 0.05) show
the goodness of fit for the model proposed, as the values they obtain are within the
usually accepted limits (Bollen, 1989; Mueller, 1996).
Likewise, the structural coefficients showing the influence of the wealth of
competencies on the two results variables obtain values of 0.925 (CURES) and
0.559 (ECRES) and they are statistically significant (t = 2.543 and t = 2.524, re-
spectively), which demonstrates the effect on results of the wealth of competencies,
as the theory predicts. On the other hand, the EQS program provides a coefficient
(R2 ), similar to the coefficient of determination in regression, from which we can
analyze the goodness of fit or the reliability of each structural equation. These val-
ues are of varying intensity in the two equations of our structural model. The causal
relationship between the wealth of competencies and CURES is best represented,
with an R2 coefficient of 0.855. However, in the case of the causal relationships be-
tween the wealth of competencies and ECRES, the coefficient is the lowest (0.313).
This result suggests the existence of other variables that are not taken into account,
but could exert an influence on the ECRES.
DISCUSSION
The main methodological contribution of this article is to propose a suitable
methodology for measuring competencies. The CBP provides increasing guid-
ance to the development of competitive advantage. Nevertheless, it suffers from
the problem of unobservability because, by definition, the less observable a compe-
tency is, the higher the barriers to imitation will be. This problem of unobservable
competencies represents an obstacle to the measurement of competencies and, con-
sequently, to empirical research. In this context, the measurement scale developed
in this article may serve as an illustration to researchers with an interest in compe-
tencies by making it easier to define this construct operationally, thus enabling its
use in empirical research. In this sense, the recommendations for the construction
of scales in social sciences were considered in the design of our measurement in-
strument. The methodology used in the elaboration of the measurement instrument
has enabled us to take into account a wide revision of the literature and the opinion
of a group of CBP experts to synthesize the set of indicators that form the mea-
surement instrument. Similarly, other scales such as those developed by McGee
and Peterson (2000) or Camisón (1999) have used a comparable methodology in
the construction of competency measures.
The theoretical contributions of this article are related to two issues: (i) the
Competency-Based Perspective, and (ii) the implantation of a Quality Management
initiative.
On the one hand, it is interesting to note that the use of the scale of competen-
cies to analyze the relationship between the wealth of competencies and ECRES
has enabled us to confirm the relationship predicted by the CBP concerning the in-
fluence of competencies on the achievement of better results. The effects of firms’
idiosyncratic competencies account for more than 30% of the variance in ECRES,
as is shown by the value of R2 analyzed. This finding suggests that the strategies to
enhance competencies lead to improved performance, and thus supports the logic
suggested by the resource-based view, as it backs the results from others studies
such as Henderson and Cockburn (1994) or Ray, Barney, and Muhanna (2004).
Moreover, this study provides a valuable insight into the multidimensional char-
acter of firm resources and competencies in line with the conclusions drawn by
McGee and Peterson (2000).
Our study also has other implications for the CBP in relation to the con-
sideration of competencies as assets—competencies determine what firms are—
or as activities—competencies determine what firms do. We have considered that
both perspectives need to be taken into account, in line with other studies such
as Bogner and Thomas (1994) or Ray et al. (2004). Competencies have a compo-
nent of assets, related to the resources, knowledge or skills a firm owns, but at the
same time they have a component of action since they need to be translated into
activities or routines to have a positive impact on a firm’s performance. The recog-
nition of this common basis has enabled us to measure competencies by analyzing
the consequences that the possession of certain skills or knowledge has on firm
actions.
On the other hand, most previous studies that have analyzed the influence
of a QM initiative on organizational performance have only considered the exis-
tence of direct relationships between these two variables. They have not dealt with
the identification of the variables that intercede in the relationships between QM
and performance. However, it is interesting to explain how, and through which
variables, the positive effects are exercised. In this sense, our study suggests the
suitability of using organizational competencies as variables that mediate in the
relationship between QM and performance. We propose the suitability of the the-
oretical approach of CBP for research into QM, as it allows us to identify the
variables through which the influence of QM on performance is exerted.
Our research also has managerial implications. The scale drawn up from the
methodology outlined in this article can be used in companies that have established
QM as an approximation of the benefits obtained from the introduction of the
initiative carried out. The use of this instrument could shed light on the extent of
a QM initiative’s success, since it could be used to measure whether QM is able
to enhance certain competencies that, as studies such as Winter (1994) or Powell
(1995) suggest, lead to improved performance. In this respect, the application of
our measurement instrument could point to areas for improvement in which action
should be taken in order to make progress in the development of a QM initiative.
Consequently, its use might be appropriate in the decision making process.
The measurement instrument may also be suitable for use in different kinds
of firms, of different sizes or sectors. The possibility of generalizing the results of
our study is guaranteed by the representativeness of the sample used at aggregate
level, and by the fact that the measurement instrument is made up of items not
specific to any sector or firm size, which therefore, are suitable for all sectors and
types of firms. Additionally, the measurement models of competencies fit correctly
in each of the subsamples and support the tests of dimensionality, reliability, and
validity of the measurement instrument, indicating that the same measurement
instrument could be valid at both the whole sample level and at the subsample
level. Previous literature has not investigated whether the influence exerted by the
competencies generated from a QM initiative is the same in firms with different
sizes, sectors, as well as other contextual variables such as the length of time
that firms have been operating a QM initiative, and so on. The existence of these
differences could be the subject of additional analysis, because these variables
might influence the implementation profile of QM initiatives, and may condition
the kind of competencies this initiative is able to develop. Future research should
study these differences, which do not fall within the objectives of this work.
CONCLUSION
The main objective of this study has been to present a procedure for evaluating the
competencies associated with QM.
Thus, in this research we have delimited the concept of competencies as the
company’s skills (aptitudes for solving a certain type of problem in a suitable and
systematic way) or specific abilities to deploy its resources, which are directed
toward carrying out activities that enable certain goals to be achieved. Based on
this conceptual definition, competencies were operationalized as the intermediate
results expected to be achieved from the possession of these competencies.
The literature on the CBP and on QM has enabled us to analyze nine differ-
ent types of competencies that are recognized as usually being associated with the
introduction of QM and that could be aggregated to represent the wealth of compe-
tencies. Taking these nine competencies as a base, we have developed an instrument
to measure the different competencies, which has proved to be a reliable and valid
instrument for evaluating the existence of these different competencies within a
company. Moreover, the application of the measurement instrument developed for
evaluating the competencies associated with a QM initiative has highlighted that
these competencies enhance both CURES and ECRES. Consequently, QM can be
conceived as an initiative to increase results in the organization.
Our study is far from being free of limitations. We have attempted to reduce
them in our empirical analysis, but additional questions still remain unresolved
which should be addressed in future research. For example, our study relies on
subjective measure of results. Future studies should replicate this by using objec-
tive measures of performance. The cross-sectional study may also be a limitation
in analyzing the causal effects of competencies associated to a QM initiative on
performance. Longitudinal research could enable us to better understand the pos-
sible causal relationship between competencies and results. Additionally, we have
conducted an analysis in manufacture and service firms, and on firms of different
sizes, but these results can be extended by considering contextual factors such
as when firms implemented their QM initiative. Moreover, future research must
go more deeply into the most relevant competencies in a particular sector of our
multi-sector sample. Findings from single-sector studies would provide a greater
degree of control over sectoral specificity. [Received: February 2003. Accepted:
November 2004.]
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Management, 7(1), 127–144.
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ing their effects on business performance. Total Quality Management, 11(1),
129–137.
256
APPENDIX: SUMMARY OF GOODNESS-OF-FIT INDICES IN FACTORIAL MODELS OF COMPETENCIES IN EACH

SAMPLE GROUP
Model Industry Service Small Medium
LEADER-ENEN (χ 2 = 10.5764; df = 8; (χ 2 = 7.3123; df = 8; (χ 2 = 90.851; df = 8; (χ 2 = 10.5482; df = 8;
p = 0.22687; BB-NFI = p = 0.50334; BB-NFI = p = 0.33517; BB-NFI = p = 0.22864; BB-NFI =
0.964; RCFI = 0.985) 0.975; RCFI = 1) 0.972; RCFI = 0.993) 0.963; RCFI = 0.984)
KH-EXCOO (χ 2 = 13.4744; df = 9; (χ 2 = 10.0413; df = 9; (χ 2 = 7.9883; df = 9; (χ 2 = 14.2436; df = 9;
0.955; RCFI = 0.979) 0.966; RCFI = 0.995) 0.974; RCFI = 1) 0.953; RCFI = 0.976)
COLMI (χ 2 = 0.4990; df = 2; (χ 2 = 2.9854; df = 2; (χ 2 = 3.4055; df = 2; (χ 2 = 0.4167; df = 2;
0.998; RCFI = 1) 0.989; RCFI = 0.993) 0.978; RCFI = 0.987) 0.998; RCFI = 1)
COMMI (χ 2 = 0.9365; df = 1; (χ 2 = 0.3685; df = 1; (χ 2 = 1.0373; df = 1; (χ 2 = 0.9327; df = 1;
0.992; RCFI = 1) 0.996; RCFI = 1) 0.989; RCFI = 1) 0.992; RCFI = 1)
LEARN (χ 2 = 1.5137; df = 1; (χ 2 = 1.5137; df = 1; (χ 2 = 3.3174; df = 1; (χ 2 = 1.1543; df = 1;
0.995; RCFI = 0.995) 0.995; RCFI = 0.995) 0.985; RCFI = 0.986) 0.996; RCFI = 0.999)
SPEED-REPUT (χ 2 = 11.1694; df = 8; (χ 2 = 11.1694; df = 8; (χ 2 = 7.3460; df = 8; (χ 2 = 10.1616; df = 8;
0.967; RCFI = 0.989) 0.967; RCFI = 0.989) 0.980; RCFI = 1) 0.970; RCFI = 0.993)
Because the latent factors of leadership (LEADER) and the ability to enact a beneficial relationship with the environment (ENEN) are only measured with
three indicators, the degrees of freedom are equal to 0, the model is saturated, and the fit is perfect. Because of this, the program only computes the BB-NFI
index. To further adjust these two models, we execute another model (LEADER-ENEN), which considers these two factors and their correlation. The
estimation of this model confirms the existence of two separate, mutually interrelated dimensions. The same procedure was used in the case of (a) know-how
(K-H) and external cooperation skills (EXCOO), and (b) speed and flexibility in the design of new products and services (SPEED) and reputation (REPUT).
A Model for Evaluating Organizational Competencies
Ana Belén Escrig-Tena obtained a PhD in business administration from the De-
partment of Business Administration and Marketing at Universitat Jaume I, Spain.
Her main area of interest is quality management and determinants of organizational
competitiveness. She is an expert in the Resource Based View. She was presented
with various awards for her doctoral program research project. She is currently
analyzing the contribution of Strategic Human Resource Management (SHRM) to
the implementation of quality management.
Juan Carlos Bou-Llusar is an associate professor of management and organiza-

tion at Universitat Jaume I, Spain. He obtained his PhD in business administration
from the Department of Business Administration and Marketing at Universitat
Jaume I. He has been a visiting professor at the University of Modena and Reg-
gio Emilia, Italy. His primary research interests cover total quality management
(TQM) and business strategy. He has worked on the theoretical and methodological
adaptation of quality management to theories from the literature on strategic man-
agement. Another of his main interests relates to the methodological issues involved
in constructing social science measurement instruments. He is the main researcher
in the Total Quality Management and Strategy Research Group at Universitat
Jaume I.

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Decision Sciences

A Model for Evaluating Organizational

Juan Carlos Bou-Llusar

Subject Areas: Causal Models, Competencies, Measurement Instrument,

should be highlighted. To overcome this problem, objective, valid, and widespread

CONCEPTUAL DEFINITION OF THE COMPETENCIES

Figure 1: Process to provide empirical meaning to theoretical concepts.

Specification of the domain of the

Figure 2: A synthesis of influences on the Competency-based Perspective (CBP).

Classical Papers within the Strategic Management Field

The Resource-based View

The Evolutionary Perspective

The Dynamic Capability Theory

The Competency-based Competition

The Knowledge-based Theory

Previous literature has identified various ways of categorizing competencies.

The Competencies Associated with Quality Management

participation, and teamwork as important factors that will lead to an increase in

The organization as a total system

Figure 3: Competencies associated with QM.

Enacting organizational environment

of the principles of quality (essentially customer orientation) provides protection

Skills for external cooperation

Creation of a collective mind

initiative will undertake practices aimed at promoting employee autonomy and

Stimulation of the organizational learning process

Speed and flexibility in designing new products or services

A MODEL TO MEASURE COMPETENCIES: CHOOSING

Generating and Selecting an Indicator Pool for Each Competency

Table 1: Items to measure competencies after the evaluation by the experts.

Figure 4: Factorial model of competencies.

Indicator i1 Indicator i2 Indicator in

A MODEL FOR MEASURING COMPETENCIES

Figure 5: Aggregate model of the wealth of competencies.

Ind 1 Ind n Ind 1 Ind n Ind 1 Ind n Ind 1 Ind n

An overall measurement of the competencies, which we called “the organi-

ANALYSIS OF THE RELIABILITY AND VALIDITY

Table 2: Procedure used to test the properties of measurement instrument.

to evaluate the importance of quality, while differentiating between service and

Figure 6: Initial models to measure competencies.

COLMI: Creation of a collective mind

A threshold value commonly used to accept the reliability hypothesis is

Table 5: Reliability of competency measurement scales.

the reliability of a measurement by analyzing the squared multiple correlation co-

Content Validity and Convergent Validity

χ 2 Null Model − χ 2 Suggested Model

Considering these criteria, a high level of convergent validity is shown, given

LEADER ENEN K-H EXCOO COLMI COMMI LEARN SPEED REPUT

Finally, in order to analyze predictive validity, in the next section we present

APPLYING THE SCALE: EFFECT OF THE WEALTH

Figure 7: Relationship model between the wealth of competencies and

Table 7: Items used to measure results.

of parameters to be estimated and to reduce the complexity of the model, we

Bowen, D. E., & Lawler, E. E. (1992). Total quality-oriented human resources

Knudsen, C. (1996). The competency perspective: A historical view. In N. J. Foss

(Eds.), Competence-based strategic management. Chichester, UK: Wiley,

Venkatraman, N., & Grant, J. H. (1986). Construct measurement in organizational

APPENDIX: SUMMARY OF GOODNESS-OF-FIT INDICES IN FACTORIAL MODELS OF COMPETENCIES IN EACH

Juan Carlos Bou-Llusar is an associate professor of management and organiza-

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