This book is a concise guide to understanding and using the Baldrige Criteria to bring world-class status to an organization.

It describes with academic rigor why it makes sense to undertake this journey and the organizational factors that guarantee success. I recommend it for senior leaders who want to know why implementing the Baldrige Award process is a sound financial investment. David Branch Chair, Board of Directors, Texas Award for Performance Excellence CEO, Branch-Smith Printing Recipient 2002 Malcolm Baldrige National Quality Award

If youre looking for a no-nonsense, roll-up-your-sleeves-and-get-it-done guide to applying the Baldrige Criteria, this is the book. It cuts through the hype and helps you hit the ground running. The authors know the Criteria and they are veterans of applying it every day in their work. Understanding both the principles and the practice is what makes this book special. Tom Mosgaller Past Chair, ASQ Board of Directors

This book, The Executive Guide to Understanding and Implementing the Baldrige Criteria, takes into account a breadth of research, confirming not only the conventional wisdom but also the most current thinking on the impact of performance excellence. Leonard and McGuire have focused on essential information of value to newcomers and experienced practitioners alike. This book will be a welcomed addition to any performance excellence library or training toolkit. Elizabeth Clark Menzer Executive Director Wisconsin Forward Award, Inc

This is one of the best books Ive seen on the Baldrige Award process. It makes a convincing case for Baldrige, and shows how to get positive results while avoiding pitfalls. It is exceptionally well documented. The case examples give numerous hints on the right way to proceed. Although it was written primarily for managers, I think it has real value as a supplementary text in college Quality Management courses. Roger Berger, PhD Professor Emeritus, Iowa State University Past Chair, Quality Management Division, ASQ This book stays away from typical quality jargon, which will help readers engage the Criteria effectively. Jerry Mairani, Chairman, ASQ

The Executive Guide to Understanding and Implementing the Baldrige Criteria

Improve Revenue and Create Organizational Excellence

Also available from ASQ Quality Press: The Executive Guide to Understanding and Implementing Quality Cost Programs: Reduce Operating Expenses and Increase Revenue Douglas C. Wood The Executive Guide to Understanding Employee Engagement: Expand Capacity, Increase Revenue, and Save Jobs Pat Townsend and Joan Gebhardt The Executive Guide to Understanding and Implementing Lean Six Sigma: The Financial Impact Robert M. Meisel, Steven J. Babb, Steven F. Marsh, and James P. Schlichting Insights to Performance Excellence 2007: An Inside Look at the 2007 Baldrige Award Criteria Mark L. Blazey Transformation to Performance Excellence: Baldrige Education Leaders Speak Out Sandra Cokeley, Margaret A. Byrnes, Geri Markley, and Suzanne Keely, editors Business Performance through Lean Six Sigma: Linking the Knowledge Worker, the Twelve Pillars, and Baldrige James T. Schutta Homeland Security Assessment Manual: A Comprehensive Organizational Assessment Based on Baldrige Criteria Donald C. Fisher The Certied Manager of Quality/Organizational Excellence Handbook: Third Edition Russell T. Westcott, editor The Quality Improvement Handbook, Second Edition ASQ Quality Management Division and John E. Bauer, Grace L. Duffy, Russell T. Westcott, editors The Executive Guide to Improvement and Change G. Dennis Beecroft, Grace L. Duffy, John W. Moran Principles of Quality Costs: Principles, Implementation, and Use, Third Edition Jack Campanella, editor

To request a complimentary catalog of ASQ Quality Press publications, call 800-248-1946 or visit our Web site at http://qualitypress.asq.org.

The Executive Guide to Understanding and Implementing the Baldrige Criteria

Improve Revenue and Create Organizational Excellence
The ASQ Quality Management Division Economics of Quality Book Series

Denis Leonard Mac McGuire

ASQ Quality Press Milwaukee, Wisconsin

American Society for Quality, Quality Press, Milwaukee 53203 2007 by ASQ All rights reserved. Published 2007 Printed in the United States of America 13 12 11 10 09 08 07 5 4 3 2 1 Library of Congress Cataloging-in-Publication Data The executive guide to understanding and implementing the Baldrige criteria: improve revenue and create organizational excellence / Denis G. Leonard, Mac McGuire. p. cm. Includes bibliographical references and index. ISBN 978-0-87389-717-4 1. Total quality managementEvaluation. 2. Organizational effectivenessEvaluation. 3. Industrial efciencyEvaluation. 4. Industrial productivityEvaluation. 5. Malcolm Baldrige National Quality AwardCase studies. I. McGuire, Mac, 1969- II. Title. III. Title: Guide to understanding and implementing the Baldrige criteria. HD62.15.L46 2007 658.4013--dc22 2007011954 No part of this book may be reproduced in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Publisher: William A. Tony Acquisitions Editor: Matt T. Meinholz Project Editor: Paul OMara Production Administrator: Randall Benson ASQ Mission: The American Society for Quality advances individual, organizational, and community excellence worldwide through learning, quality improvement, and knowledge exchange. Attention Bookstores, Wholesalers, Schools, and Corporations: ASQ Quality Press books, videotapes, audiotapes, and software are available at quantity discounts with bulk purchases for business, educational, or instructional use. For information, please contact ASQ Quality Press at 800-248-1946, or write to ASQ Quality Press, P.O. Box 3005, Milwaukee, WI 53201-3005. To place orders or to request a free copy of the ASQ Quality Press Publications Catalog, including ASQ membership information, call 800-248-1946. Visit our Web site at www.asq.org or http://qualitypress.asq.org. Printed in the United States of America Printed on acid-free paper

Denis Leonard would like to dedicate this book to his wife Mary for her caring and support.

Mac McGuire would like to dedicate this book to his loving mother Mary Ann for her never-ending and life-long caring, guidance, and support.

Table of Contents

Figures and Tables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 1 Understanding Baldrige . . . . . . . . . . . . . . . . . . . . . . Background of the Malcolm Baldrige National Quality Award (MBNQA) Criteria for Performance Excellence (CPE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Origins of the Baldrige Criteria . . . . . . . . . . . . . . . . . . . . . . . . . Purpose of the Baldrige Criteria. . . . . . . . . . . . . . . . . . . . . . . . . The Baldrige Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organizational Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seven Categories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effective Organizational Improvement Model. . . . . . . . . . . . . . Benefits, Considerations, and Disadvantages of Implementing the Baldrige Criteria: One Research Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Need for Strategy and Leadership . . . . . . . . . . . . . . . . . . . . . . . Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary Questions for Consideration . . . . . . . . . . . . . . . . . . .

xiii xv xvii xxi 1

1 2 4 6 7 7 9

10 13 13 14

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Table of Contents

Chapter 2 Financial Impact of the Baldrige Criteria . . . . . . . . The Baldrige Criteria: Key Issues in Context. . . . . . . . . . . . . . . Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary Questions for Consideration . . . . . . . . . . . . . . . . . . . Chapter 3 Other Impacts of the Baldrige Criteria . . . . . . . . . . Self-Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organizational Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . Employee Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Considerations Before Adoption/Implementation Efforts . . . . . Dealing with Change in Implementation . . . . . . . . . . . . . . . . . . Role of Senior Leaders in Implementation of Baldrige Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leader Competency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leadership Attitudes about the Baldrige Criteria. . . . . . . . . . . . Disadvantages of Adoption/Implementation . . . . . . . . . . . . . . . Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary Questions for Consideration . . . . . . . . . . . . . . . . . . . Chapter 4 Implementing the Baldrige Criteria . . . . . . . . . . . . . Implementation Considerations . . . . . . . . . . . . . . . . . . . . . . . . . Time and Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Leader Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . Defined Implementation Plan . . . . . . . . . . . . . . . . . . . . . . . . Importance of Training. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Phases in the Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impact of Change in Baldrige Criteria Implementation. . . . . . . Kotters View of Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Leaders and Change: Other Thoughts . . . . . . . . . . . . The Learning Organization . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits of Being an Examiner. . . . . . . . . . . . . . . . . . . . . . . . . . Examiner Selection and Training Process. . . . . . . . . . . . . . . Learning Approaches. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Links to Knowledge Management and Organizational Learning . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary Questions for Consideration . . . . . . . . . . . . . . . . . . .

17 17 24 24 29 29 30 30 31 31 32 32 33 34 34 36 41 41 42 42 43 44 44 46 47 52 54 55 56 57 57 59 60 61

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Chapter 5 Site Visits and Feedback Reports . . . . . . . . . . . . . . . Gaining Maximum Value from National Baldrige or State Quality Award Feedback Reports and Site Visits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Site Visit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sustaining Momentum after the Site Visit . . . . . . . . . . . . . . Addressing the Feedback Report . . . . . . . . . . . . . . . . . . . . . . . . Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary Questions for Consideration . . . . . . . . . . . . . . . . . . . Chapter 6 Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sunny Fresh Foods, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DynMcDermott Petroleum Operations Company . . . . . . . . . . . Park Place Lexus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Richland College . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jenks Public Schools. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bronson Methodist Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary Questions for Consideration . . . . . . . . . . . . . . . . . . . Chapter 7 Final Thoughts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67

67 68 70 71 72 72 73 73 73 74 75 75 76 77 78 81 83 83 83 84 85 85 86 88 88 89 90 90 91 93 93 94

Appendix A 2007 Malcolm Baldrige Award Criteria for Performance Excellence . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organizational Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P.1 Organizational Description. . . . . . . . . . . . . . . . . . . . . . . P.2 Organizational Challenges. . . . . . . . . . . . . . . . . . . . . . . Category 1 Leadership (120 pts.) . . . . . . . . . . . . . . . . . . . . . 1.1 Senior Leadership (70 pts.). . . . . . . . . . . . . . . . . . . . . . . 1.2 Governance and Social Responsibilities (50 pts.) . . . . . Category 2 Strategic Planning (85 pts.). . . . . . . . . . . . . . . . 2.1 Strategy Development (40 pts.) . . . . . . . . . . . . . . . . . . . 2.2 Strategy Deployment (45 pts.) . . . . . . . . . . . . . . . . . . . . Category 3 Customer and Market Focus (85 pts.) . . . . . . . 3.1 Customer and Market Knowledge (40 pts.) . . . . . . . . . . 3.2 Customer Relationships and Satisfaction (45 pts.) . . . . . Category 4 Measurement, Analysis, and Knowledge Management (90 pts.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Measurement, Analysis, and Review of Organizational Performance (45 pts.). . . . . . . . . . . . . . . 4.2 Management of Information, Information Technology, and Knowledge (45 pts.). . . . . . . . . . . . . . .

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Category 5 Workforce Focus (85 pts.) . . . . . . . . . . . . . . . . . 5.1 Workforce Engagement Systems (45 pts.) . . . . . . . . . . . 5.2 Workforce Environment (40 pts.) . . . . . . . . . . . . . . . . . . Category 6 Process Management (85 pts.) . . . . . . . . . . . . . 6.1 Work Systems Design (35 pts.). . . . . . . . . . . . . . . . . . . . 6.2 Work Process Management and Improvement (50 pts.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Category 7 Business Results. (450 points). . . . . . . . . . . . . . 7.1 Product and Service Outcomes (100 pts.). . . . . . . . . . . . 7.2 Customer-Focused Outcomes (70 pts.). . . . . . . . . . . . . . 7.3 Financial and Market Outcomes (70 pts.) . . . . . . . . . . . 7.4 Workforce-Focused Outcomes (70 pts.) . . . . . . . . . . . . . 7.5 Process Effectiveness Outcomes (70 pts.) . . . . . . . . . . . 7.6 Leadership Outcomes (70 pts.) . . . . . . . . . . . . . . . . . . . . Appendix B Baldrige Criteria for Performance Excellence Outline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix C MBNQA Criteria for Performance Excellence Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Visionary Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer Driven Excellence . . . . . . . . . . . . . . . . . . . . . . . . . . . Organizational and Personal Learning. . . . . . . . . . . . . . . . . . . . Valuing Employees and Partners . . . . . . . . . . . . . . . . . . . . . . . . Agility Rapid Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Focus on the Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Managing for Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management by Fact. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Focus on Results and Creating Value . . . . . . . . . . . . . . . . . . . . . Systems Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

95 95 98 99 99 100 101 101 101 102 102 103 103 105 107 107 108 109 110 110 111 111 112 113 113 114 115 119

Figures and Tables

Chapter 1
Figure 1.1 The Malcolm Baldrige National Quality Award Criteria for Performance Excellence (Baldrige Criteria) Model (Business Version) . . . . . . . . . . Table 1.1 Advantages and Disadvantages of Implementing the MBNQA Criteria for Performance Excellence . . . . . . 6 12

Chapter 4
Figure 4.1 Kotters Eight-stage Process of Creating Major Change Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Figure 4.2 Lewins Three-Step Change Model . . . . . . . . . . . . . . . . . . Table 4.1 Linkage of the Kotter Change Process and Categories of the MBNQA Criteria for Performance Excellence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table 4.2 Learning Orientations for Examiners . . . . . . . . . . . . . . . . Table 4.3 Transferable Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 52

50 58 59

Appendices
Figure B.1 Baldrige Business Criteria for Performance Excellence Outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

xiii

Introduction

f, as it is often said, we are what we eat, then it may follow that we are also what we read. If nothing else, books that broaden our knowledge are indeed food for the brain. That is the purpose of the Quality Management Divisions book series on the Economics of Qualityto stimulate thought about how different quality methods can be used to influence the financial position of an organization. A manager may want to know about a popular business topic; an engineer responsible for cost control may need a good business tool; a person new to the quality profession may want to understand more about the many different approaches that drive organizational success. We all seek answers to two simple questions. What is it? And how do I get started? This book series has those answers. The Economics of Quality series is written by subject matter experts from business, academia, consulting, and not-for-profit organizations. They represent the best minds on the subjects about which they write. The books in the series are not intended to be application guides. This is introductory material that points us in the right direction so we know what the capabilities are of a particular method. These books are intended to arm us with the right questions. If we decide to deploy a particular methodology, we know what to ask in order to move to the next step in the implementation process. The subject matter experts of the Quality Management Division are members of a variety of technical committees. They have specific and indepth knowledge about methods such as Baldrige, ISO, Lean/Six Sigma, Quality Costs, Employee Involvement, Quality Management Information Systems, Globalization/Supply Chain, Data Driven Decision Making, and Quality in Project Management. In addition to sharing their expertise through books like this one, the committees contribute to business journals and speak at Quality and other business conferences.

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Introduction

You can find out more about the Quality Management Division through the American Society for Quality website: www.asq.org. As a member, you will benefit from the professional contributions of our technical committee members and other subject matter experts. The Division publishes a peer reviewed journal, The Forum, that provides in-depth application guidance to improve all types of organizations. You will also have the opportunity to attend our annual conference dedicated to Quality and organizational improvement. Our goal is to help make all organizations, as well as society as a whole, a better place to work and live. William H. Denney, PhD Vice Chair, Technical Committees Quality Management Division American Society for Quality 2007

Preface

he Malcolm Baldrige National Quality Award Criteria for Performance Excellence, hereafter known in this book as simply the Baldrige Criteria, is fundamentally a system-based model. The systems-based approach highlights crucial issues such as: The importance of leadership The need to consider all elements of an organization The strategic importance of scanning and analyzing the business environment The value of creating focus on customers and employees The need to use measures, indicators and organizational knowledge to identify and monitor key performance indicators The methods for approach and deployment of improvement action plans The need for organizational alignment around a set of priorities This systems-based approach is what gives the Baldrige Criteria its coordinating and aligning nature. This is also the key to its wide appeal and adaptability. The Baldrige Criteria focuses on the basics, on the essentials for excellence. It has been implemented internationally and used, in many cases, as the basis for other national quality awards. While fads come and go, the fundamentals of quality remain. The Baldrige Criteria is not prescriptive; it does not specify what quality tool or technique should be used or in which circumstance. Rather, the Baldrige Criteria is the strategic coordinating

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xviii Preface

method to drive quality and integrate the various tools and techniques required to achieve corporate goals. The model provides an effective way to conduct company-wide self-assessments that are cross functional in nature. The tools and techniques needed to improve inefficiencies uncovered by self-assessment or by feedback from an award application will be determined by how far along the quality journey an organization is and its current needs, experience, skill set, and culture. While this book focuses primarily on customers and business, our discussion could just as easily pertain to patients and health care or to students and education. This book is a guide to the Baldrige Criteria for executives or managers new to Quality, and to organizations interested in introductory information. National, regional, state, and local quality award organizations may benefit from this book by providing it as a resource to their examiners and to companies wanting to become involved in the Baldrige award process. Companies with internal quality award or self-assessment programs would also benefit from it, and it could be used as a guide for self-assessment and award application writing workshops and continuing education classes. Colleges and universities with business courses that focus on or discuss the Baldrige Criteria will also find it useful. Portions of this book are based on research conducted by a nationwide Delphi study group that was assembled for the purpose of evaluating the benefits, considerations, and disadvantages of implementing the Baldrige model. This research effort evaluated the steps involved in adoption and implementation of the Baldrige Criteria. Chapter 1 provides an introduction to understanding the Baldrige Criteria. We briefly discuss the origins of this instrument and its purposes, and then we address some of the major benefits, considerations, and disadvantages of the Criteria implementation. The book provides tips on how best to introduce Baldrige to senior, mid-level, and first-level leaders and how to best implement it. We also discuss its value as a strategic tool for business planning and internal communications and how it can be used to coordinate a wide range of operational improvement initiatives. In Chapter 2 we discuss in some detail the financial impact of implementing the Baldrige Criteria and we feature a number of researchers who provide interesting and compelling data in support of the Criteria. These financial considerations are important to senior leaders who will ultimately make the decision to adopt and implement. In Chapter 3 we highlight the non-financial impact of implementing the Criteria, the importance of an initial self-assessment, and the challenges of dealing with change brought about by the implementation. Implementing the Criteria will cause an organization to evaluate the priorities of both daily work and the long-term strategy. We introduce the concept of self-

Preface

xix

assessment, which allows senior leaders to answer targeted questions that will help them determine the efficacy of the Criteria for their organizations. In Chapter 4 we move to the actual implementation of the Baldrige Criteria and discuss major issues such as time and resources, senior leader commitment, how to define an implementation plan, and the importance of training. We also highlight the benefits that result when members of the organization become examiners, learn how to use the Baldrige Criteria framework efficiently, and actively participate in state and national Baldrige-based programs. In Chapter 5 we discuss the primary benefit of implementing the Baldrige Criteria, the site visit and the resulting feedback report. The site visit allows professional examiners to review your plans and propose improvements based on Criteria questions. The feedback report will give the senior leaders a roadmap to overcoming organizational deficiencies. Chapter 6 could have been a very lengthy chapter, but here we highlight only the 2005 national Baldrige Award-winning organizations and some of their financial and other improvements. We also provide points of contact that readers may use to secure additional information. Chapter 7 concludes the book with our final thoughts and a look at the research that was the foundation for this book. So as to make this book a complete guide to the Baldrige Criteria, we provide the criteria, outline, and values in Appendices for the readers convenience. And because of book of this type can only scratch the surface of a number of topics, we have also included an extensive list of studies that enable further reading in any research areas of interest.

Acknowledgements

e would like to thank those who helped make this book possible, especially Bill Denney, PhD, for his support and drive and for originally introducing the two authors to each other. We would also like to thank Chris Luter, Gary Zajicek, Art Trepanier, and Donald McLachlan for their review of the manuscript and their thoughts and ideas and Will Murphy, PhD, for his valuable comments.

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1
Understanding Baldrige

Management has to give direction to the institution it manages. It has to think through the institutions mission, has to set its objectives and has to organize resources for the results the institution has to contribute.
Peter F. Drucker, Management: Tasks, Responsibilities, Practices, 19731

BACKGROUND OF THE MALCOLM BALDRIGE NATIONAL QUALITY AWARD (MBNQA) CRITERIA FOR PERFORMANCE EXCELLENCE (CPE)
In the late 1980s, the Reagan administration began the task of identifying how American companies could become more effective in the new global economy.2 During this time, Japanese companies were surpassing American corporations in the areas of innovation, production, and quality, especially in the automobile industry. This trend continues today, with Toyota rapidly becoming the largest auto maker in the world. President Reagan tasked Secretary of Commerce Malcolm Baldrige (1981-1987) with developing a set of criteria that would lead American businesses into the twenty-first century. The administration searched for a name for the Award without success until the tragic death of Baldrige in a

Chapter One

rodeo accident in 1987. Public Law 100-107, signed into law on August 20, 1987, created the Malcolm Baldrige National Quality Award and received principal support from the Foundation for the Malcolm Baldrige National Quality Award. The Foundation receives funding from Congress through the Secretary of Commerce. The Baldrige program, officially begun in 1988, was originally designed to promote Total Quality Management (TQM) as the best approach for improving and restoring competitiveness to American corporations. It has since evolved and expanded to cover such area as leadership and human resources.3 TQM defines an organizational culture dedicated to training, continuous improvement, and customer satisfaction.4 TQM is entrenched in many organizations today as part of the legacy of Dr. W. Edwards Deming, who articulated four principles to guide organizational work.5 The four principles are: do it right the first time; listen to and learn from customers and employees; make continuous improvement an everyday matter; and build teamwork, trust, and mutual respect.5,6 While the perceived value of TQM as a business model has diminished in some areas, the Baldrige Criteria, originally designed for business, has evolved to address education (K-16), health care organizations, and service companies. The Baldrige Criteria continues to evolve and produce specialized standards for a larger cross-section of organizations. Since last year it has included a focus on nonprofit and government organizations. While the Baldrige Criteria initially appears to have some merit and provides significant benefit for organizations, executives are not in agreement about its value. One study, conducted by Louis Harris & Associates, found that some CEOs believe the Baldrige Criteria to be very valuable (67%) while others find it extremely valuable (79%) for stimulating improvements in quality and competitiveness in corporate America.7 This book is intended to serve as a guide for CEOs who may be unsure about the validity of adoption and implementation of the Baldrige Criteria. As of 2003, more than 50 countries have adopted the Baldrige Criteria as a basis for their own quality awards in an effort to improve their competitiveness in global markets.8 This imitation suggests that the Baldrige Criteria has applications for all types of organizations in many parts of the world.

ORIGINS OF THE BALDRIGE CRITERIA

The Baldrige Criteria is based on Public Law 100-107, which created a public-private partnership designed to improve quality and maximize productivity growth by setting standards of excellence that enable American companies to combat global competition.3 Public Law 100-1079 Finding and Purposes states:

Understanding Baldrige

1. The leadership of the United States in product and process quality has been challenged strongly (and sometimes successfully) by foreign competition, and our nations productivity growth was less than our competitors over the last two decades. 2. American business and industry are beginning to understand that poor quality costs companies as much as 20% of sales revenues annually, and that improved quality of goods and services goes hand in hand with improved productivity, lower costs, and increased profitability. 3. Strategic planning for quality and quality improvement programs, through a commitment to excellence in manufacturing and services, is becoming more and more essential to the well-being of our nations economy and our ability to compete effectively in the global marketplace. 4. Improved management understanding of the factory floor, worker involvement in quality, and greater emphasis on statistical process control can lead to dramatic improvements in the cost and quality of manufactured products. 5. The concept of quality improvement is directly applicable to small companies as well as large, to service industries as well as manufacturing, and to the public sector as well as private enterprise. 6. In order to be successful, quality improvement programs must be management led and customer oriented, and this may require a fundamental change in the way companies do business. 7. Several major industrial nations have successfully coupled rigorous private-sector quality audits with national awards, giving special recognition to those enterprises the audits identify as the very best. 8. A national quality award program of this kind in the United States would stimulate American companies to improve quality and productivity, allowing them to take pride in the recognition while at the same time permitting them a competitive edge and increased profits. It would recognize the achievements of those companies and make them an example to others. Business, industrial, governmental, and other organizations would profit from the tested and proven guidelines, learning how to manage for quality, change their cultures, and achieve eminence.10

Chapter One

The United States Department of Commerce is responsible for the Baldrige National Quality Program and the Award process. The National Institute of Standards and Technology (NIST), an agency of the Department of Technology Administration, manages the Baldrige program. The American Society for Quality (ASQ) assists in administering the Award Program under contract to NIST. ASQ is dedicated to ongoing development, advancement, and promotion of quality concepts, principles, and techniques. Eighteen years after initial publication, the Baldrige Criteria remains a powerful set of guidelines for the determination and execution of organizational priorities. Thousands of United States organizations utilize the Criteria to improve their competitive posture, either externally through award processes or internally through trained employees.11 At its core, the Baldrige Criteria is an educational initiative designed to encourage organizations to strive toward performance excellence. The purpose of the Baldrige Award process is to highlight and recognize those organizations that are successful in effective management techniques.12 The program is a comprehensive, rigorous method for examining performance improvement in organizations. The Baldrige Criteria, based on what are arguably the best questions to ask about performance, may be an outstanding model to use to anchor improvement in your organization. In summary, the intent of the Baldrige Criteria is to improve value to customers and overall financial performance for shareholders, owners, and other stakeholders. The intent is to create a distinct advantage for United States organizations in a time of increasing global competitiveness.

PURPOSES OF THE BALDRIGE CRITERIA

The Baldrige Criteria promotes three primary objectives:3 The first objective is to assist an organization to improve its performance practices, capabilities, and results. When addressing the specific questions, an organization may determine where it is falling short in its attempts to improve the bottom line. The second goal is to facilitate communication and the sharing of best practice information among all United States corporations. This sharing, often referred to as benchmarking, identifies and shares the best practices of many types of organizations, potentially enhancing and improving the productivity of all. Identifying those organizations at the top of their game and motivating them to share the knowledge and wisdom that helped them reach that plateau is a crucial part of the process. For

Understanding Baldrige

example, a small business that has developed software to track customer service may be able to help your organization in a similar endeavor. The third objective is to provide a working tool for understanding and managing performance, guiding planning, and creating opportunities for organizational learning.13 Strategic planning is important to Baldrige applicants, and each must address short- and longer-term goals. According to Brown,3 the Baldrige Criteria program offers a powerful set of guidelines for operating an effective organization, and he emphasizes the need to proactively adopt the guidelines if the organizations goal is performance improvement. The Baldrige Criteria questions deal with what the organization does to improve efficiencies, how it plans to excel against competition, and how the organization plans for the future. These questions identify how an organization addresses critical issues and where gaps of performance occur. The Baldrige Criteria includes an Organizational Profile and seven integrated Categories, as described in Appendix A. These are the questions Baldrige regards as significant to performance improvement. Appendix B includes an outline for the Baldrige Criteria. The core values of the criteria are reflected in Appendix C. The first step for organizations implementing the Baldrige Criteria is to complete an organizational profile. This may be used as either a simple selfassessment or as the beginning of a more complicated fifty-page document that leads into the award process. The organizational profile questions address the business environment and the organizations relationship with customers, suppliers, and other partners. Within this component, an organization is also asked to describe its competitive environment and the key strategic challenges it faces. Each organization must carefully consider the decision to adopt and implement the Baldrige Criteria because this action requires commitment, patience, and perseverance. This warning is not meant to scare CEOs away, but merely to highlight the commitment required. The organizational profile is the foundation for an assessment document that will assist an organization in evaluating its current performance. An organization that has difficulty completing the organizational profile may be not prepared to begin full implementation of the Criteria or the rigorous journey of an award process.

Chapter One

THE BALDRIGE MODEL

This unique Baldrige Criteria improvement model, Figure 1.1, includes an organizational profile comprising approximately 200 questions, in seven integrated categories, that the organization must address in narrative form. This application, at the national level and at most state-award levels, must not exceed fifty pages. Some local and state programs have ten-, twenty-, or thirty-page applications that permit organizations to wade into Baldrige rather than dive in at the fifty-page level. The shorter applications include reduced or downsized questions and do not fully address all categories. A full Business Criteria example appears in Appendix A. The organizational profile generates a Readers Digest version of how the organization operates on a daily basis and addresses competitors and future planning. Categories 1, 2, and 3 (Leadership, Strategic Planning, and Customer Market and Focus) are known as the Leadership Triad. Categories 5, 6, and 7 (Workforce Focus, Process Management, and Results) are known as the Results Triad. Category 4 (Measurement, Analysis, and Knowledge Management) underpins all of the other categories. It should be noted here that the Education Criteria and the Health Care Criteria have some variation in their categories.

zational Profile: Environment, Organi s, and Challenges Relationship

2 Strategic Planning 1 Leadership 3 Customer and Market Focus

5 Workforce Focus 7 Results 6 Process Mangement

4 Measurement, Analysis, and Knowledge Management

Figure 1.1 The 2007 Malcolm Baldrige National Quality Award Criteria for Performance Excellence Model (Baldrige Criteria, Business version).

Understanding Baldrige

Organizational Profile
The organizational profile outlines an organizations most critical elements and helps determine, based on world-class criteria, how close it is to being great. The profile has two major topics: an organizational description and the organizational challenges. The organizational description addresses two main issues, the organizational environment and organizational relationships. The organizational challenges section includes looks at the competitive environment, strategic challenges, and the performance improvement system. The organizational profile addresses the current status. An organization that cannot satisfactorily address the questions found in the profile may need to spend more time in reflection and discussion in order to align the issues of exactly why the organization exists and what it is trying to accomplish.

Seven Categories
After completing the profile, an organization responds to questions in seven categories regarding what it does to accomplish business requirements and how.3,12,14 All but Category 7 have two sub topics. A full set of Baldrige Business questions is provided in Appendix A. An executive overview of the questions follows. Category 1, Leadership Category Item 1.1, Senior Leadership: Asks questions about organizational leadership and how senior leaders establish a vision, set values, and improve communication and organization performance. Category Item 1.2, Governance and Social Responsibility: Addresses questions about the structure of organizational governance and legal and ethical behavior and about how senior leaders support their key communities. Category 2, Strategic Planning Category Item 2.1, Strategy Development: Addresses the organizational strategic development process and how the organization defines key strategic objectives. Category Item 2.2, Strategy Deployment: Deals with questions about deployment of the strategic plan and about how the

Chapter One

organization develops and deploys action plans and establishes and monitors short- and longer-term performance projections. Category 3, Customer and Market Focus Category Item 3.1, Customer and Market Knowledge: Asks about how the organization identifies customers, customer groups, and market segments and how it acquires market knowledge. Category Item 3.2, Customer Relationships and Satisfaction: Addresses customer relationships and satisfaction by inquiring about building customer relationships and the specific ways in which the organization determines customer satisfaction. Category 4, Measurement, Analysis, and Knowledge Management Category Item 4.1, Measurement, Analysis, and Improvement of Organizational Performance: Examines how the organization selects, gathers, analyzes, manages, and improves data, information, and knowledge assets in order to directly improve organizational performance. This category item also looks at how performance is measured and how performance analysis is reviewed and improved. Category Item 4.2, Management of Information, Information Technology, and Knowledge: Inquires about how management of information resources occurs, and about how data, information, and knowledge management are addressed. Category 5, Workforce Focus Category Item 5.1, Workforce Engagement: Discusses workforce engagement and how the organization accomplishes and ensures it, how workforce enrichment is realized, how workforce and leader development are achieved, and how the organization assesses workforce engagement. Category Item 5.2, Workforce Environment: Addresses the workforce environment, workforce capability and capacity, and workforce climate assessments.

Understanding Baldrige

Category 6, Process Management Category Item 6.1, Work Systems Design: Questions work system designs, core competencies, work process design, and emergency readiness. Category Item 6.2, Work Process Management and Improvement: Addresses work process management and improvement. Category 7, Results Category Item 7.1 Product and Service Outcomes Category Item 7.2 Customer-Focused Outcomes Category Item 7.3 Financial and Market Outcomes Category Item 7.4 Workforce-Focused Outcomes Category Item 7.5 Process-Effectiveness Outcomes Category Item 7.6 Leadership Outcomes Winning the award carries significant prestige, not only in the United States but also around the world.12,14 At the national level, the award process includes an annual deadline for submission of a fifty-page application. After an organization completes the application, a group of examiners carefully evaluates and scores it. If the application scores high enough, the examiners conduct a site visit to the organizations location. The examiners then reevaluate the application and a panel of judges reviews it and may or may not refer an award application to the Baldrige Criteria Board of Directors. The highest ranked applications, based on these positive recommendations, earn the Baldrige Award designation as best in the seven sectors evaluated: manufacturing, service, small business, large business, education, not-for-profit, and health care.

EFFECTIVE ORGANIZATIONAL IMPROVEMENT MODEL

According to research accomplished by DeBaylo,15 the Baldrige Criteria is an effective model because it hones in on assessment and improvements that drive business results. It encourages concepts and values, suggests assessments that are linked to business strategies, requires involvement of senior management, advocates accelerated learning, and continually

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evolves by improving the criteria. The Baldrige Criteria is revised annually based upon the latest research of performance improvements.

BENEFITS, CONSIDERATIONS, AND DISADVANTAGES OF IMPLEMENTING THE BALDRIGE CRITERIA: ONE RESEARCH PERSPECTIVE
One research effort spanning seventeen states collected data regarding the benefits, considerations, and disadvantages of adopting and implementing the Baldrige Criteria.16 Participants in this research were all examiners who had worked as volunteers in local, state, or national Baldrige-based programs for a minimum of three years. Some examiners worked at organizations that had applied for an award at various levels, and all examiners were highly experienced in applying the Baldrige Criteria. The researcher convened a nationwide Delphi study group for the expressed purpose of evaluating the benefits, considerations, and disadvantages. Primary Baldrige Criteria benefits: It is an organizational tool promoting systematic alignment and direction through an integrated performance management system. It provides a world-class framework and a proven model for organizational success including financial analysis. It enables and fosters improved employee and customer satisfaction. Overall, the research revealed the importance of what the Baldrige Criteria framework brings to an organization. The framework facilitates alignment, provides a systematic and linear approach to addressing business issues, and leads to financial success. Additionally, levels of workforce and customer dissatisfaction appear to be lower when an organization adopts and implements the Baldrige Criteria. Significant considerations: Significant time and resources are required. Senior leader must be committed to stay the course and agree to long-term requirements. A leader must identify a strategy for the implementation.

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A central and recurring theme developed around the issue of time and resources required to implement the Baldrige Criteria in its entirety. Many participants admitted that these are an issue, but all supported taking whatever steps necessary to accomplish the implementation because it would eventually save time and effort. It appears that this systematic approach improves organizational effectiveness over the long term. Senior leaders and subordinates must buy in to the criteria early in the transition to enable the organizational culture to adapt to the systematic approach. According to the responses, full implementation of the criteria may take five to seven years. It has been our experience that a lack of patience and commitment hinder implementation. Another major consideration is the need for senior leaders to develop a proactive, detailed strategy for implementation and refuse to rush the organization headlong into this process. Major disadvantages: Significant time and resources are required to begin the process of adopting and implementing the Criteria. The Criteria are complex. Senior leaders may have misgivings about a long-term commitment to systems thinking. The participants identified time and resources as is a definite consideration for prospective senior leaders. Another disadvantage may be the complexity of the Criteria. Most participants addressed the need for organizations to enroll leaders, the point of contact, and the writing team into local, state, or national examiner training programs. The need for leadership was another recurring theme throughout this research. The failure of some senior leaders to fully comprehend the long-term requirements to may cause failure in this process. The Baldrige Criteria is not a program of the month! The advantages and disadvantages of adoption and implementation outlined in Table 1.1 are taken from a number of research efforts and reduced to this simplified form. Senior leaders can use this as a quick reference guide. As this comparison emphasizes, the implementation of the Criteria is a journey and not a destination. Aggressively pursuing and achieving the Baldrige Award will require senior leaders and quality coordinators to maintain a deep commitment to the implementation of the Criteria. A strategy for implementation is needed and leaders will play an obvious critical role.

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Table 1.1

Advantages and disadvantages of implementing the Baldrige Criteria. Disadvantages Requires review and evaluation across organizational structure/system that will take precious leader time and resources. Requires intensive senior leader involvement, long-term view, and commitment. Requires leadership to be competent in the Baldrige model and understand organizational work and priorities. Requires intensive commitment to review and evaluate measurements and goals on a regular basis. May not guarantee nancial success, some mixed nancial results regarding a lack of commitment of senior leaders. Requires a senior leader commitment to develop employees and have change agents receive intensive and dedicated training. Requires a long-term view and denies short cuts to implementation. Requires precious time, energy, and resources for full implementation. Emphasizes that winning does not guarantee long-term success, as sustainment and further improvements are always necessary Requires continual commitment to excellence and continual improvement.
2005 McGuire, 2005

Advantages System-wide approach requires a prioritization of work; leaders must be committed; employees are empowered and trained. Advocates that leaders become heavily involved in long-term strategic planning with milestones and action plans. Advocates that leaders analyze work systems and review organizational priorities regularly. Advocates measurement of critical goals, comparison with competitors, and the proactive monitoring of the overall vision. Indicates financial success is probable with commitment to total implementation and linking resources to goals. Suggests employees at all levels must become involved through intentional training events and active participation. Accomplishes long-term gains but may not be fully effective in the short term. Requires time, energy, and resources and promises dividends. May lead to improved business processes and secondarily to performance excellence. Emphasizes that implementation is a journey, not a destination; this is a long-term exercise.

Understanding Baldrige

13

NEED FOR STRATEGY AND LEADERSHIP

Leadership begins with a vision that stimulates hope and a mission that transforms hope into reality.17 Leaders must create the vision, determine the mission, and define the cultural values on which the strategy is established. The Baldrige Criteria has questions that will identify the vision, mission, and values. It is critical that the vision support not simply what is good for the company but also what is good for its employees, local communities, stakeholders, suppliers, partners, collaborators, customers, and society as a whole. Focused on these segments, ethical leaders must have a longterm focus, be people oriented, and inspire pride among their employees. In contrast, ethically neutral CEOs have a short-term outlook, are selfcentered, and often inspire fear and confusion.18 A short-term focus reflects what Deming called one of the deadly diseases, namely an emphasis on short-term profits resulting from most executives think[ing] they are in business to make money rather than products and service.5 Leaders must describe the values needed to make the mission a reality and set a standard of behavior while embedding this behavior into corporate culture. This mission should not be about a code of conduct, rules, systems, and procedures. It should have a higher calling and be about a sense of purpose and a set of values that guide everyday actions.19 This is reflected in Jim Collins substantial research in which he points out, Enduring great companies dont exist merely to deliver returns to shareholders. In a truly great company, profits and cash flow become like blood and water to a healthy body: They are absolutely essential for life, but they are not the very point of life.20

CONCLUSIONS
Selection of the Baldrige Criteria program must be predicated on the understanding that senior leaders are responsible to stay the course and set the example. Training, patience, and perseverance are essential. Deciding whether to adopt and implement the Criteria is never an easy or quick process. The advantages and disadvantages should be weighed carefully, as the ultimate decision to proceed will carry a large degree of responsibility and accountability. Quality management has a strong ethical focus while significantly contributing to the achievement of organizational goals. There are heightened expectations of business behaviorin terms of how a business runs its core activities and how it contributes to tackling wider societal problems, says David Grayson.21 With the Baldrige Criteria as a backdrop, leadership at all levels becomes transparent. This transparency

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forces and reinforces ethical considerations as employees begin to ask questions and everyones accountability increases. The senior leaders who start the Baldrige journey are not only committing to improve the performance of the organization, but also committing to raise their own ethical standards and behavior.

SUMMARY QUESTIONS FOR CONSIDERATION

As a leader, are you fully committed to the Baldrige journey? Leaders must decide early in this process if the organization desires to achieve targeted success as described by previous Baldrige Award-winning organizations. We recommend that leaders make a list of key reasons they want to focus on Baldrige, so they can fully articulate that information to the management team. All team members must understand why the journey is important and the steps required along the way. Leaders must determine who will be the champions that assist in the promotion of this effort. Long-term sustainability for Baldrige implementation requires that everyone understand the length and depth of the commitment to fully implement. Leaders must ensure that the fundamental concepts of quality management are understood by the team and that Baldrige is a major ingredient, not a stand-alone issue or just another program. Baldrige requires the organization of daily work and priorities. Leaders must recognize the potential for leadership in different ways and contexts. First-level employees may have substantial impact on the success of Baldrige implementation. Leaders must consider who can assist with implementation. Senior leaders, first-level leaders, colleagues, peers, and all employees must be involved. Leaders must be able to describe the Baldrige process and discuss its potential benefits, considerations, and disadvantages while understanding implementation even on a department or team level.

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What resources will be needed to begin and sustain the Baldrige journey? As you chart out the journey, consider the resources required. Evaluate organizational talent and barriers to implementation. Remember the very important fact that ending the journey half way will have a huge negative impact on the organization and on the team you lead. Ensure that your expectations are realistic and clearly defined. This will allow the resources to be more accurately determined and allocated over time. What is your organizational strategy and how can Baldrige help to achieve it? Your organizational strategy is not based solely on implementing the Baldrige self-assessment or writing an award application. Rather, Baldrige can help you and your organization to achieve your goals in a systematic and holistic manner. Integrating Baldrige into your strategic process and allowing it to evaluate and determine where your strengths and weaknesses lie are critical elements in implementation.

ENDNOTES
1. 2. Drucker, P. F. (1973). Management. NY: Harper Business. Baldrige National Quality Program. (2005). History of the Malcolm Baldrige National Quality Award (Electronic version). National Institute of Standards and Technology (NIST). Retrieved April 21, 2005, from http://baldrige.nist. gov/History.htm. Brown, M. G. (2004). Baldrige Award winning quality: How to interpret the Malcolm Baldrige Award Criteria (14th ed.). Milwaukee, WI: American Society for Quality (ASQ) ix-xviii. Kreitner, R. & Kinicki, A. (2004). Organizational behavior (6th ed.). Boston, MA: McGraw Hill Irwin, 1-695. Deming, W. E. (1986). Out of the crisis. Cambridge, MA: MIT. Walton, M. (1986). The Deming Management Method. NY: Perigee Books. NIST Press Release Study Number 818407. (1998, July). The nations CEOs look to the future. Retrieved July 30, 2005, from http://www.baldrige.nist. gov/ceo_rpt.htm. Vokurka, R. J. (2001, Summer). The Baldrige at 14. Journal for Quality & Participation, 24(2), 13-20.

3.

4. 5. 6. 7.

8.

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9.

10.

11.

12.

13. 14.

15. 16.

17. 18.

19. 20. 21.

Malcolm Baldrige National Quality Improvement Act of 1987. Public Law 100-107, HR 812, Section 2, Findings and Purpose. Retrieved January 4, 2007 from http://www.baldrige.nist.gov/Improvement_Act.htm. Baldrige National Quality Program, 2005, Public Law 100-107 Finding and Purposes. National Institute of Standards and Technology (NIST). Retrieved April 21, 2005, from http://www.baldrige.nist.gov/Improvement_Act.htm. Calhoun, J. M. (2002, Summer). Using the Baldrige Criteria to manage and assess the performance of your organization. Journal for Quality & Participation, 25(2), 45-54. Hutton, D. W. (2000). From Baldrige to the bottom line: A road map for organizational change and improvement. Milwaukee, WS: American Society for Quality, 2-83. Senge, P. M. (1990). The fth discipline: The art & practice of the learning organization. NY: Doubleday, 5-11. Blazey, M. L. (2003). Insights to performance excellence 2003: An inside look at the 2003 Baldrige Award Criteria. Milwaukee, WI: American Society for Quality. DeBaylo, Paul W. (1999, January/February). Ten reasons why the Baldrige model works. Journal for Quality & Participation, 22(1), 24-29. McGuire, C. U. III (2006). A Baldrige study of the benets, considerations, and disadvantages of implementing the Baldrige Criteria for Performance Excellence. Ann Arbor, MI: ProQuest Dissertations. Edgeman, R. L., Dahlgaard, S. M. P., Dahlgaard, J. J. & Scherer, F. (1999, October). On Leaders and Leadership, Quality Progress, 32(10), 49-54. George, W.W. (1999). Mission driven, values centered, executive excellence. Magazine of Leadership Development, Managerial Effectiveness and Organizational Productivity, 16(8), 6. Bernstein, A. (2001, February 26). Low skilled jobs, do they have to move? BusinessWeek, North American Edition, 94-95. Collins, J. (2001). Good to Great. NY: Random House. Grayson, D. (2003). The CSR Brand. Quality World, 29(1), 10-12.