QUALITY AWARENESS AIDED BY BROAD DISTRIBUTION OF GUIDELINES
"The Baldrige Award process is the most powerful catalyst I've seen for making the necessary organizational and cultural changes to compete in today's environment."Jerry R. Junkins
"Years from now, the record books will probably say that the Baldrige did more to advance the cause of quality in America than anything else. ..."Rosetta Riley
"To me, TQM consists of those actions needed to get to world-class quality. Right now, the most comprehensive list of those actions is contained in the Baldrige Award criteria."Quality pioneer
"The program [Malcolm Baldrige National Quality Program] is a powerful catalyst for change, for improvement and for growth. It is a shining example of the positive role government can and must play in developing and advancing American business."Earl A. Goode
"Running a business with a Baldrige methodology does not solve all your problems. It helps you identify them and understand how to approach them. You still have to innovate change or processes, make strategic choices. .. But, if you want to be a sustainable, competitive company in this global economy ... you have to have a sustained set of business processes. And this is about as good as they come."Joseph P. Nacchio
The organizational chart at Ames Rubber Corp. of Hamburg, N.J. (1993 Malcolm Baldrige National Quality Award winner, small business category) is the tipoff to this company's view of how to do business: "external customers" are on top, then the firm's unit and other managers, and then President Joel Marvil. In fact, the company's entire business strategy is designed to ensure that the customer drives operations and goals. Ames Rubber's culture of "Excellence through Total Quality," is paying off in reduced defect rates, from over 30,000 parts per million in 1989 to under 11 today; in above-industry-average delivery performance; and in productivity. On approximately level sales, every financial and operational metric has shown dramatic improvement.
Meeting customers' needs with high-quality products and services has always been a top priority for Eastman Chemical Co. of Kingsport, Tenn. (1993 Malcolm Baldrige National Quality Award winner, manufacturing category). The company's Quality Management Process is based on focusing on the customer; establishing a mission, vision, and indicators of performance; understanding, standardizing, stabilizing, and maintaining processes; and a continual improvement cycle of plan, do, check, and act. The company's no-fault return policy on its plastics products is believed to be unique in the industry. In addition to its strong customer ties, Eastman is equally proud of its community links and has made environmental concern a top priority. Eastman helped to develop and has adopted the Chemical Manufacturers Association's Responsible Care principles, which require member companies to assume responsibility for health, safety, and environmental protection in everything they do.
Based in St. Peters, Mo., Wainwright Industries, Inc. (1994 Malcolm Baldrige National Quality Award winner, small business category) is constantly on the lookout for ways to improve, searching inside and outside the organization for ideas and examples on how to streamline processes, cut delivery times, make training programs more effective, or enhance any other facet of its customer-focused operations. Its empowered workforce is a rich source of ideas, with each associate averaging more than one implemented improvement per week. Since 1992, overall customer satisfaction has jumped to 95 percent, up from 84 percent. Over the same span, defect and scrap rates, manufacturing cycle time, and quality costs have ratcheted downward, attesting to improving levels of operational efficiency. Since initiating its continuous improvement process in 1991, the company reports steadily growing market share for its major products, productivity gains exceeding industry averages, and increasing profit margins.
In today's worldwide business environment, the competition is relentless and fierce. The Malcolm Baldrige National Quality Award, developed and managed by NIST with the cooperation and financial support of the private sector, has become increasingly important in helping American companies achieve success in this aggressive global economy.
The award program was established by Congress in 1987 not only to recognize individual U.S. companies for their quality achievements but also to promote quality awareness and to provide information on successful quality strategies.
The Baldrige National Quality Program has proven to be a remarkably successful government and industry team effort, starting in 1987 with industry's assistance in raising more than $10 million to help launch the program. Since that time, NIST has worked closely with a wide variety of groups to extend the benefits of quality management and stimulate activities nationwide. These organizations run the gamut from trade, professional, and business groups such as the National Association of Manufacturers and the U.S. Chamber of Commerce, to state and local government organizations such as the National Governors' Association, to broad-based interest groups like the National Education Association.
The cooperative nature of this joint government/private-sector team is perhaps best captured by the award's board of examiners. More than 250 quality experts from many industries (along with a smaller contingent from universities and governments at all levels) volunteer many hours reviewing applications for the award, conducting site visits, and providing each applicant with an extensive feedback report citing strengths and areas to improve. In addition, board members have given more than 10,000 presentations on quality management and the award program.
The award-winning companies, too, have taken seriously the charge to be quality advocates. Company efforts to educate and inform other companies and organizations on the benefits of using the Baldrige framework and criteria have far exceeded expectations. To date, the winners have given approximately 30,000 presentations reaching thousands of organizations.
QUALITY AWARENESS AIDED BY BROAD DISTRIBUTION OF GUIDELINES
From 1988 to 1994, the award program has received 546 applications from U.S. companies. Twenty-two companies, including 11 large manufacturers, five service companies, and six small businesses -- in a wide variety of industries -- have won the award.
But, the award program is much more than a contest. While recognizing companies that have successful quality systems is a very visible part of the program, its intent is much broader. Equally important is the award's role in raising awareness by encouraging all U.S. businesses and organizations to implement quality improvement programs whether they intend, or are even eligible, to apply for the award.
The award criteria have been a major tool in increasing awareness and in helping U.S. companies and other organizations make quality a way of doing business. They are designed to help organizations deliver ever-improving value to customers and improve overall performance and capabilities. A report from the U.S. General Accounting Office calls the criteria, "the most widely accepted formal definition of what constitutes a total quality management company."
Almost 1 million copies of the award criteria have been distributed since 1988. In addition, they have been copied widely in many forms, from companies reproducing a single copy for all employees to inclusion as appendices in books. While there is no way to determine the actual number of independent reprints, it likely matches or exceeds the million copies distributed by the award program.
Thousands of organizations use the criteria as a quality improvement road map. For example, SEMATECH, a consortium of American semiconductor manufacturers, several years ago launched a supplier partnership program based on the Baldrige Award criteria. More recently, the American Electronics Association created a new quality steering committee and a three-year implementation guide based on the Baldrige criteria.
Increasingly, quality management is spreading beyond the workplace into governments and healthcare and educational institutions. Now, 42 state and local quality award programs are in operation in 30 states. Most are modeled after the Baldrige Award. Almost 500 U.S. companies and organizations applied for these awards in 1993, and about 430 applied in 1994. Many companies plan to participate in these award programs before applying for the national award.
With experts from healthcare and education, NIST has adapted the Baldrige criteria and framework for these sectors and has launched a pilot application program. Pending a successful 1995 trial, continuing support from these two sectors, and funding, a full-scale award program for education and healthcare could be undertaken.
Just as the award criteria urge organizations to constantly improve, the criteria are reviewed annually with that same goal in mind. A wide range of stakeholders -- the private-sector award examiners, the quality community, companies that have applied for the award, business school leaders, and members of leading trade associations -- are asked for advice on how the criteria could be improved. As a result, NIST revised the 1995 criteria to focus more sharply on quality, competitiveness, and a results orientation as integral parts of today's management practices. The criteria also were streamlined to help address companies' concerns about complexity and cost.
By almost any measure, the Baldrige National Quality Program has had a profound effect on shaping how people and organizations operate and work. A study reported in Quality Progress (May 1993) stated, "... the Baldrige Award has altered the nation's conscience regarding the benefits and processes necessary to achieve quality. The award's success demonstrates that such efforts can indeed foster excellence, improve productivity, and help the United States regain its world-class quality ranking among nations."
The study was conducted by three professors of management at Georgia Southern University to determine what U.S. business thinks about the Baldrige Award. Overall results indicated that both industrial and service firms -- large and small -- agreed that the award currently provides the best framework for a total quality management system.
The results also showed that the firms surveyed believe the award fosters quality awareness, promotes the understanding of the requirements for quality excellence, promotes sharing of information on successful quality strategies, and recognizes U.S. companies that excel in quality achievement and quality management.
In depth: PERCEPTIONS ABOUT THE PROCESS
Source: Quality Progress, May 1993
A more recent survey of 180 U.S. firms was conducted last fall by the award's Board of Overseers, an independent advisory group reporting on the award to the Secretary of Commerce. While the results are still preliminary, the board reports that all of the 52 respondents say the Baldrige Award has been very good for the United States. Other preliminary results indicate that 71 percent of those surveyed use the award criteria as a quality management assessment tool.
Also, 86 percent said that sharing of practices by Baldrige Award winners has helped to motivate improvements in their own businesses.
While quality management cannot guarantee success, it can lead to outstanding returns, both for individual companies and the country. These returns are showing up in increased productivity, satisfied employees and customers, and improved profitability. According to Ko Nishimura, president and chief executive officer of Solectron Corp., "We continue to use the Malcolm Baldrige National Quality Award criteria even after winning the award in 1991. The criteria have helped us build a quality company and return substantial value to our shareholders."
Adds Nishimura, "From 1989 to 1994, sales have increased from $130 million to $1.46 billion, net profit has increased from $4 million to $56 million, Solectron's stock price has had an average growth of 82 percent per year, and the number of customer awards for quality and service has increased from 14 to 63."
Recent studies by NIST and others have found that a stock investment in the group of companies winning the award, including Solectron, could result in an impressive payoff. For example, a hypothetical $1,000 was invested in the five whole company Baldrige Award winners -- Eastman Chemical Co., Federal Express Corp., Motorola Inc., Solectron Corp., and Zytec Corp. -- from the first business day in April of the year the company won the award (or from the date the company went public) to Oct. 3, 1994. The investment yielded a 188-percent return compared to a 28-percent return for the Standard & Poor's 500, outperforming the S&P 500 by almost 6.5 to 1.
If the parent companies -- Westinghouse Electric Corp., Xerox Corp., General Motors, IBM, AT&T, and Texas Instruments -- of subsidiaries that had won, are added to the five whole company winners, the result is a 92-percent return on investment, compared to a 33-percent return on investment for the S&P 500. All together, these companies outperformed the S&P 500 by almost 3 to 1.
BALDRIGE AWARD WINNERS' STOCK STUDY
TOP TEN PERFORMANCE MEASURES, GAO STUDY
NIST also invested a hypothetical $1,000 in the publicly traded Baldrige Award applicants receiving site visits during 1990 through 1993. The "investment" period began on the first business day in April of the year the company was site-visited (or from the date the company went public). The eight whole company applicants out-performed the S&P 500 by 4.5 to 1. The 32 total companies outperformed the S&P 500 by 2 to 1. (Names of applicants are kept confidential.)
Benefits of making quality management a way of doing business extend far beyond improved financial performance. In a 1991 study of 20 U.S. companies that had applied for the Baldrige Award, the U.S. General Accounting Office found that "in nearly all cases, companies that used total quality management practices achieved better employee relations, higher productivity, greater customer satisfaction, increased market share and improved profitability."
For example, the GAO found:
Baldrige Award winners can provide many examples of using quality management to improve:
A recent report by The Conference Board, a global business membership organization, says, "A majority of large U.S. firms have used the criteria of the Malcolm Baldrige National Quality Award for self-improvement, and the evidence suggests a long-term link between use of the Baldrige criteria and improved business performance."
The report is a compilation of 20 studies by many researchers analyzing hundreds of organizations, including large, mid-sized, and small industrial and service firms.
Also, two members of the faculty of the University of Chicago Graduate School of Business recently examined 30 companies -- 22 manufacturers and eight service businesses -- that had applied for the award or were known to be committed to a quality management philosophy. Key findings reported in the December 1993 issue of Quality showed that after implementing a quality management program:
A commitment to quality is no longer an option for American business. It has become a necessity for doing business in today's customer-oriented competitive world market. Many believe the Baldrige National Quality Program has had a tremendous influence in making quality part of America's corporate culture because it captures better than anything else what organizations need to improve the way they do business.
The overall impact of the program was described in an article in the Harvard Business Review: "... the Malcolm Baldrige National Quality Award has become the most important catalyst for transforming American business. More than any other initiative, public or private, it has reshaped managers' thinking and behavior. The Baldrige Award not only codifies the principles of quality management in clear and accessible language. It also goes further: it provides companies with a comprehensive framework for assessing their progress toward the new paradigm of management and such commonly acknowledged goals as customer satisfaction and increased employee involvement." (David A. Garvin, "How the Baldrige Award Really Works," Nov./Dec. 1991, Harvard Business Review.)
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