The Baldrige Award: a quest for excellence?
The purpose of this article is to describe and provide insights about the Baldrige Award. Specifically, the article covers the Award's guidelines, its procedures, its winners circle, and its pros and cons. This information is basic knowledge for members of the business community.
What is Quality?
Every time someone buys a product or service, he or she is reminded of how critical quality has become in today's world. Nobody wants a car that falls short of perfection. Nor does anyone like to settle for poor service from an airline, a store, or a bank. Quality is becoming the biggest competitive issue of the late 20th century. Although there are several definitions of quality, they all basically boil down to one issue--customer satisfaction (Shepard 1991, 4).
Corporate America now realizes that providing internal and external customers with quality products and services is the only way to survive in today's global market. Therefore, the focus is on TQM--managing the entire organization to excel in all the dimensions of its products and services that are important to current and potential customers.
In John Guaspari's fable about quality, I Know It When I See It (1985), the Boss goes through months of work, frustration, and bewilderment while trying to figure out why his product was rapidly losing market share. When surveyed, customers repeatedly told the Boss their definition of quality: "I know it when I see it." Finally the Boss realizes that all the specifications, tight tolerances, and inspection stickers mean nothing compared to the customer's expectations. The customer is only interested in the answer to one simple question: "Did the product do what I expected it to do?" If the answer is yes, then it is a quality product.
When relative quality is achieved, that differential becomes a competitive weapon. Companies embracing quality have been found to hold a competitive edge of up to 10 cents per dollar of sales (Hammonds and DeGeorge 1991, 35). Quality products increase productivity (due to less rework and wasted management time), increase market share (by attracting and retaining more customers), and increase profitability.
Managing for quality is not easy. It requires active, unwavering leadership from the CEO, organization change, employee involvement, and time. The Baldrige Award has been established to promote quality awareness and publicize successful quality strategies as well as to recognize quality achievements of specific U.S. companies. The application guidelines are being used as a basic management guide to implement TQM in organizations of all sizes.
The Malcolm Baldrige National Quality Award
The Baldrige Award was established to recognize U.S. companies that excel in quality achievements and quality management. According to the application guidelines, the Award is designed to promote:
* Awareness of quality as an increasingly important element in competitiveness,
* Understanding of the requirements for excellence in quality, and
* Sharing information on successful quality strategies and on the benefits derived from implementation of those strategies.
The Baldrige Award is managed by the U.S. Department of Commerce's National Institute of Standards and Technology (NIST). Collaborating closely with quality experts, the NIST produced a seven-category, 1,000 point scoring system and a three-level judging process. Meeting the criteria for the Award should result in world-class quality.
The application guidelines are used by many companies as standards to measure their quality improvement efforts and activities. Some of these companies, however, do not intend to apply for the Award. In fact, in 1990, there were approximately 200,000 requests for copies of the Baldrige Award guidelines, but only 97 companies actually applied. The value of the Award is not necessarily in winning as much as it is in providing a common set of standards for implementing TQM.
Competing for the Baldrige Award starts with the submission of an eligibility determination form to verify that the applicant is a wholly owned U.S. business. Soon thereafter, applicants are notified of their eligibility status. Next, a two-page application form is submitted along with a site-listing and description form outlining the size, structure, and function of the various components of the applying company and its different locations.
Figure 1 Scoring the 1991 Baldrige Award Examination Categories/Items Maximum Points Leadership 100 1.1 Senior Executive Leadership 40 1.2 Quality Values 15 1.3 Management for Quality 25 1.4 Public Responsibility 20 Information and Analysis 70 2.1 Scope and Management of Quality Data and Information 20 2.2 Competitive Comparisons and Benchmarks 30 2.3 Analysis of Quality Data and Information 20 Strategic Quality Planning 60 3.1 Strategic Quality Planning Process 35 3.2 Quality Goals and Plans 25 Human Resource Utilization 150 4.1 Human Resource Management 20 4.2 Employee Involvement 40 4.3 Quality Education and Training 40 4.4 Employee Recognition and Performance Measurement 25 4.5 Employee Well-Being and Morale 25 Quality Assurance of Products and Services 140 5.1 Design and Introduction of Quality Products and Services 35 5.2 Process Quality Control 20 5.3 Continuous Improvement of Processes 20 5.4 Quality Assessment 15 5.5 Documentation 10 5.6 Business Process and Support Service Quality 20 5.7 Supplier Quality 20 Quality Results 180 6.1 Product and Service Quality Results 90 6.2 Business Process, Operational, and Support Service Quality Results 50 6.3 Supplier Quality Results 40 Customer Satisfaction 300 7.1 Determining Customer Requirements and Expectations 30 7.2 Customer Relationship Management 50 7.3 Customer Service Standards 20 7.4 Commitment to Customers 15 7.5 Complaint Resolution for Quality Improvement 25 7.6 Determining Customer Satisfaction 20 7.7 Customer Satisfaction Results 70 7.8 Customer Satisfaction Comparison 70 TOTAL POINTS 1,000 Source: National Institute of Standards and Technology, 1991 Application Guidelines, p. 5.
Companies that apply for the Baldrige Award must submit material describing their quality practices and performance in each of the seven categories shown in Figure 1. For scoring purposes, each category is weighted according to its overall importance in the evaluation. For example, customer satisfaction accounts for 300 of the 1,000 points or 30% of the evaluation, whereas strategic quality planning is 6%.
The criteria place an emphasis on systems for quality improvement, not just quality achievements. The director of the Baldrige Award has listed eight critical factors that are considered by examiners and judges (Main 1990, 108):
1. A plan to keep continuously improving all categories.
2. A system for accurately measuring these improvements.
3. A strategic plan based on benchmarks that compare the company's performance with the world's best performance.
4. A close partnership with suppliers and customers to cycle improvements back into the operation.
5. A clear understanding of current and potential customers so that their wants can be translated into products (services).
6. A long-lasting relationship with customers, going beyond the delivery of the product to include service and ease of maintenance.
7. A focus on preventing mistakes rather than merely correcting them.
8. A commitment to improving quality that goes from the top of the organization to the bottom.
Applications are reviewed by members of the Board of Examiners. These individuals are selected from industry, academia, and consulting firms, and are recognized quality experts. Members of the evaluation team undergo intensive training to ensure that the criteria and the review process are thoroughly understood.
Only about 10% of the applicants become finalists and receive site visits by a team of examiners. The examiners tour the facilities, conduct interviews, and review data and records to verify and clarify the information contained in the written application.
After the site visits, a final review is conducted by a Panel of Judges to recommend Award winners to the NIST. The Secretary of Commerce makes the final Award decisions. The recipients may publicize and advertise receipt of the Award. They also are required to share with other companies information about their successful quality strategies.
Perhaps the most important part of the Baldrige Award program is that each winner and loser receives a report from the examiners. In order to fulfill the overall goal of raising quality consciousness among U.S. companies, this feedback tells the company where its quality management programs are lacking and how they can be improved. In fact, this report is probably the best bargain in consulting services that a company could buy. In return for the application fee ($3,000 for large companies or $1,000 for small companies), five or six highly trained quality experts review the company and prepare a detailed analysis of its strengths and weaknesses. To purchase this service from an outside consulting firm would cost much more (Brown 1991, 7). Many companies apply for the Award even if they are far from being "Baldrige-eligible" in order to receive feedback to help them focus their quality improvement efforts.
The Winner's Circle
The Baldrige Award Program is designed so that there can be six winners per year--two large manufacturing companies or their subsidiaries, two large service companies, and two small businesses (manufacturing or service). In the first four years of competition, 309 applications were received and only 12 out of a possible 24 awards were made:
Year Applications Awards 1988 66 3 1989 40 2 1990 97 4 1991 106 3 309 12
The Baldrige Award winners are listed in Figure 2. Commentary on some of these winners is given in the next section of the article.
Baldrige Pros and Cons
The Baldrige Award has established a national standard of quality, with hundreds of corporations using the application criteria as a basic management guide. For example, a number of large companies, including IBM and Motorola, use the criteria as an internal measure of quality. The benefits of this approach are threefold: (1) companies refocus and take a close look at themselves, (2) companies gain a better understanding of their strengths and weaknesses, and (3) executives are required to consider in detail what their companies are doing with regard to quality (Main 1990, 116).
Despite its popularity, the Baldrige Award has come under criticism. Critics contend that companies place a focus on winning, instead of on achieving quality. Supporters of the Award, on the other hand, maintain that it does not matter how intent companies are on winning as long as they put a meaningful quality program in place. In any event, however, executives should be careful to not mistake the Award for a company cure-all; it does not address some key elements of business success--innovation, financial performance, and long-term planning (Main 1991, 62).
Some people feel that the Baldrige Award is flawed because it falls to predict a company's financial success. This criticism was made because several Baldrige winners experienced financial problems after winning the award. However, the Baldrige Award denotes quality products or services, not business excellence. The Award is not meant to be a measure of financial success.
Another criticism is that the "Baldrige can be bought." These claims arise from reports of large expenditures being made by companies who seek the Award. For example, one Fortune 500 company acknowledged that over several weeks, it deployed more than 80 people and spent more than $250,000 in its unsuccessful efforts to write, edit and publish a winning application in 1988 (Chase and Aquilano 1992, 241). Baldrige defenders contend that the real cost is not in preparing the application but in installing the quality programs themselves. In fact, in 1988 Kenneth E. Leach, then co-owner of Globe Metallurgical, Inc., wrote his award winning application in one weekend (Carey 1991, 59)!
Figure 2 Winners of the Baldrige Award Principal Year Company Category(*) Business 1988 Motorola, Inc. LMC Semiconductors, communication equipment 1988 Commercial Nuclear LMC Fuel rods for Fuel Division of West- nuclear power inghouse Electric Corp. plants 1988 Globe Metallurgical, Inc. SB Processes metal alloys 1989 Milliken & Company LMC Fabrics, carpets 1989 Xerox Business Products LMC Copiers, printers, and Systems Group workstations, software 1990 Cadillac Division of LMC Luxury auto- General Motors mobiles 1990 IBM Rochester LMC Intermediate-sized AS/400 Unit computers 1990 Federal Express Corp. LSC Package delivery 1990 Wallace Company, Inc. SB Distributes pipes, valves, fittings 1991 Solectron Corp. LMC Computer prod- ucts, systems 1991 Zytec Corp. LMC Computer power supplies 1991 Marlow Industries SB Thermo-electric coolers *LMC = Large manufacturing company LSC = Large service company SB = Small business
Critics point out that the Award does not reflect outstanding, or even exceptionally good, product quality. Quality experts were taken aback when Cadillac won. That Award did not mean that Cadillac made the best cars. The judges recognized that Cadillac developed a quality process that transformed every part of its business, from product design to customer service. The process was judged, not the product itself. The publisher of The Quality Executive stated, "The notion that something called the Malcolm Baldrige National Quality Award is not given in recognition of what a company produces or does well is simply illogical and counter-intuitive" (Bowles 1992, 127). Hockman (1992, 137) agrees that the Award is not for product excellence, but for those companies with excellent quality practices; they probably will improve product quality and probably will do it faster than their competition. The Baldrige Award is not a guarantee that a company's products or services are superior; instead quality comes as an end result of a long-term commitment to quality management systems. Quality is a journey, not a destination.
The Baldrige Award also has been criticized on grounds that it does not fit service companies very well. Many service companies believe that the criteria for the Award are too stringent and primarily oriented toward manufacturing organizations. As a result, less than 20% of the applications for the Baldrige Award in its first three years were from service organizations, even though the service sector accounts for more than half of the U.S. economy. David Nadler, a leading quality expert, thinks that the service companies' lack of success can be justified because service companies are far behind manufacturing companies in terms of quality (Main 1990, 116). Two main reasons explain this lag. First, U.S. service companies have much less exposure to foreign competition than do manufacturing companies. Second, the intangible nature of services makes it more difficult for service companies to quantify their measures of quality. For example, service companies have little quantifiable information on how many customers were lost because of dissatisfaction with the quality of their services, whereas manufacturers can easily count the number of defective products returned by their customers.
Despite the criticisms, the Baldrige Award can be considered ideal in many ways. The Award is neither so narrow that it is uninspiring, nor so broad as to be unmanageable. Since 1988, the NIST has distributed over 450,000 copies of the application guidelines throughout the world. There may be flaws in the Award's criteria, but as a framework for assessing management processes and launching improvement programs, it is obviously important to many managers. (Garvin 1991, 86).
As companies are being steadily pressured by intense global competition, a sustainable competitive advantage through differential quality is being emphasized more than ever. The Malcolm Baldrige National Quality Award promotes quality awareness, recognizes quality achievements of U.S. companies, and publicizes successful quality strategies. Despite much criticism, the Baldrige Award has prompted U.S. companies to improve quality. "Quality," observed a senior vice president at Federal Express, "is to economic success as the nuclear reaction process is to energy production: The output is wildly disproportionate to the input once it builds to a chain reaction" (Chase and Aquilano 1992, 228).
1. Bowles, J., in "Does the Baldrige Award Really Work?," Harvard Business Review (January-February, 1992): 127.
2. Brown, M., Baldrige Award Winning Quality: How to Interpret the Malcolm Baldrige Award Criteria (Quality Resources and Quality Press, 1991).
3. Carey, J., "The Prize and the Passion," Business Week (October 25, 1991): 58-59.
4. Chase, R. and Aquilano, N., Production & Operations Management (Irwin, 1992).
5. Garvin, D., "How the Baldrige Award Really Works," Harvard Business Review (November-December, 1991): 80-93.
6. Guaspari, J., I know It When I See It (AMACOM, 1985).
7. Hammonds, K. and DeGeorge, G., "Where Did They Go Wrong?," Business Week (October 25, 1991): 34-35, 38.
8. Hockman, K., in "Does the Baldrige Award Really Work?," Harvard Business Review (January-February, 1992): 137.
9. Main, J., "How to Win The Baldrige Award," Fortune (April 23, 1990): 101, 104, 108, 112, 116.
10. Main, J., "Is the Baldrige Overblown?," Fortune (July 1, 1991): 62-65.
11. Shepard, S., "Defining the Q-Word," Editor's Note, Business Week (October 25, 1991): 4
Rita M. Gradig is an Application Analyst/Programmer at Phillips Petroleum Co. and is a graduate student at the University of Tulsa; John K. Harris is professor of accounting at the University of Tulsa, Tulsa, Oklahoma.