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Int. j. econ. manag. soc. sci., Vol(4), No (2), February, 2015. pp.

233-236

TI Journals

International Journal of Economy, Management and Social Sciences


www.tijournals.com

ISSN:
2306-7276

Copyright 2015. All rights reserved for TI Journals.

Impact of Business Excellence Model on Firm's Business Results


(Findings from Literature Survey and Research Agenda)
Prabir Kumar Bandyopadhyay *
Professor, Goa Institute of Mangement, Sanquelim Campus, Goa, India, 403505

Suresh Nair
Professor, Ackerman Scholar and Dun & Bradstreet CITI Research Fellow, Operations and Information Management Department, University of Connecticut,
School of Business, 2100 Hillside Road, Storrs, CT 06269-1041
*Corresponding author: prabir@gim.ac.in

Keywords

Abstract

Business excellence
MBNQA
EFQM
Business Impact
Business Excellence Process
Business excellence practice

This literature review based study presents the divergent views on the impact of Business excellence models
on the performances of the Business excellence award winning firms and highlighted there exists a need to
better understand the differences in the key management practices and processes followed by the Award
winning firms to that of the high performing non-participating firms and also to better understand the
influence that these practices and processes have on improved business performance outcomes. It also
presents, based on literature survey, different management practices and approaches followed by the Award
winning Firms and highlighted that there exists no comparative study of management practices followed by
Award winners and high performing non-participating firms. To fill this gap it presents a research problem
and five supporting research questions which the authors intends to take it further.

1.

Introduction

Ever since Total Quality Management (TQM) has emerged as a proven approach to improve quality in firms, companies, academicians and
consulting organizations are in constant search of a model that will encompass all the features of TQM. This has also been greatly fuelled models
collectively known as Business Excellence Model around the world. Today there exist 100 excellence models and national quality awards in 82
countries [1]. The most employed and recognized models at an international level are the Deming Prize, introduced by JUSE (Union of Japanese
Scientists and Engineers) in 1951, which is the first globally known excellence model, Malcolm Baldrige National Quality Award (MBNQA) in
the USA established in 1987 and the European Quality Award (known as European Excellence Award since 2004), based on the European
Foundation for Quality Management (EFQM) model, established in 1991 [2]. In India, the Confederation of Indian Industry (CII), and the
Export-Import Bank of India (EXIM Bank) jointly instituted the CII-EXIM Bank Award for Business Excellence in 1994. This award is based
on EFQM model.
While plethora of literature is available on effect of TQM on business performance [3,4,5,6,7,8,9,10], literature on impact of Business excellence
model on firms business performance is comparatively scanty. At the same time key business processes followed by Business Excellence
Award winning firms and non-participating firms with good performance results is also not common. The anecdotal evidence gathered from
interaction with executives of participating organizations at the time of assessment suggests that there exists a high degree of interest in these
aspects. Particularly repeat applicants without much success in gaining expected score in subsequent assessment process are particularly sceptic
about its utility. Level of participation particularly from manufacturing sector is reducing. In view of the above points this literature survey based
study has been carried out to understand the impact of Business Excellence Award models on Firms performance and also to understand how
the management of key business practices followed in award winning firms differs from that of high performing non-participating firms.

2.

Methodology and scope

Our emphasis for the research was to identify the impact of Business Excellence Model and to understand business practices followed in award
winning firms through literature survey. We did not restrict only to academic journals. We were open to any reports on such issues available in
public domain. We used the following Key words: Business excellence, MBNQA, EFQM, Business Impact and Business Excellence Process
and Business excellence practice. We first searched articles in Google Scholar and accessed the identified articles from computerized data bases
like, EBSCO, PROQUEST and JSTOR.

3.

Literature survey

3.1 A critique on impact of MBNQA and EFQM models on Firms business performance
Centre of Quality Excellence (CQE) of University of Leicester presented the findings of the jointly sponsored research by the European
Foundation for Quality Management (EFQM) and the British Quality Foundation (BQF). The study found that compared to the comparison
companies award winning companies experience higher increases in share value, sales, capital expenditure over assets and capital expenditure
over sales, higher growth in assets and further reduction in costs over sales within a short period of time after having received a first award [11].
Advocates for continuing the funding for the Baldrige program pointed to an independent economic study of the Baldrige program, which
estimated nearly $25 billion in benefits to the economy, a 25-to-1 return on the governments investment. The study mentioned the Baldrige
award recipients that used the program method for six continuous years showed a median growth of 57%, revenue growth of 93% and job
growth of 63%. During the same period, the industries from which the recipients came had 3.2% job growth [12].
Bergquist, et al. reported that, based on their study with the MBNQA/State Quality Award winning, award participating and non-applicants of
US companies, it cannot be conclusively determined whether quality award winning companies perform better than others in respect of both
operational and financial performance [13].

Prabir Kumar Bandyopadhyay *, Suresh Nair

234

International Journal of Economy, Management and Social Sciences Vol(4), No (2), February, 2015.

Kennedy Smith [14] reported that according to Harry Hertz former director of MBNQA, it is difficult to design an across-the-board metric/index
that shows that Baldrige award recipients outperform other organizations particularly because every organization has different ways of
measuring their success. Yet another challenge that former Baldrige Award recipients encounter is keeping their workforce committed to
Baldrige., Smith mentioned, Although some companies that have received Baldrige Awards in the past still believe that its a powerful tool
toward performance excellence, they dont continue to utilize the criteria as their primary method for quality improvement. More so, many
former Baldrige Award winners dont wish to apply again.
Though 1149 applications submitted since 1988 till 2009 comprising all the six categories of industries, the number of applications received in
the manufacturing category has slowly reduced over the years. In 1988, 45 applications were received, 10 site visits were conducted, and two
awards were given. When compared to the figures from 2007, only two applications were received, no site visits were conducted, and no awards
were given. This either indicates a general lack of interest in the award program or a lack of qualified applicants Cazzell and Ulmer [15] have
studied five MBNQA Award winners and reported that Sunny Fresh Foods (SFF), which won the award in 1999 and 2005, has achieved a 19%
increase in sales per employee between 2001 and 2005 and 24% increase in sales and revenue between 2005 and 2007. Their market share has
also increased while their competitors experienced a decrease. Another example is that of Bama Company, Inc. after several attempts received
the award in 2004 from among only 60 candidates in all five categories. During 1999 to 2004 the company has increased sales by 72% and
revenues by almost 100%. Finally, Medrad, Inc., a medical device manufacturing company, after their fifth attempt at applying for the award,
finally became the winner of the MBNQA award on 2003. Since winning the award in 2003, Medrad has experienced an increase in sales of
almost 100% from $254 million to $478 million in the last four years and their company has added approximately 50% more staff from nearly
1,200 to 1,700 during the same time period.
Motorolas Commercial, Government and Industrial Solutions Sector (CGISS) won the award in 2002. From 1999-2002 employee productivity
increased by over 30%, and overall customer satisfaction levels were nearly 90%. Financially, CGISS was not only stable during very lean years
of the U.S. economy; it had a 7 percent return on assets versus a negative average for the telecommunications industry. Additionally during the
same period, CGISS experienced an improved cash flow as a percent of revenue of 20% compared to an industry average of only 5%. The
winner of the 2001 MBNQA was Clarke American Checks Inc., which provides check printing services, financial forms, and other banking
related documents. Since 1996, Clarke American's market share has increased by 50%; however, they only maintain approximately 5% of the
overall market share against three major competitors. Despite fierce competition and major industry consolidations, Clarke Americans revenues
were over $460 million in 2001 (NIST Clarke, 2002) which equates to each employee generating over $139,000 of revenue each. Additionally,
annual growth in company revenues has increased from a rate of 4.2% in 1996 to 16% in 2000, compared to the industry's average annual
growth rate of less than one percent over the five-year period. [15].
Though most of the award winning organizations continued to make strides, some found their success to be short lived. The Wallace Company, a
1990 Baldrige winner, filed for bankruptcy in 1992 only a few years after winning the award . Eastman Chemical Company won the MBNQA
award in 1993 in the large manufacturing category. Business results and financial improvements were quickly seen after receiving the
recognition associated with winning the award but it was short lived. The financial gains of the mid 90s were followed by 5 to 8 years of
disappointing performance. It has become evident that the company gradually abandoned the strategies that made them the first organization to
receive the Malcolm Baldrige Award in the large manufacturing category. [16].
The success of Baldrige winners has been promoted as evidence that quality management leads to excellent business results. Dean and Tomovic
have questioned this paradigm whether the same is true [17]. They have argued that successful implementation of the Baldrige model is
confounded with excellent business results, because excellent business results are themselves part of the model. Since business results are one of
the seven criteria used to evaluate an organizations performance against the model, the contribution of the approach-deployment elements to
excellent results cannot be determined. They further added that analyses that equate success of a model that includes results with successful
implementation of a quality management process cannot correctly lead us to conclude quality management brought about those results. As with
the other examples, the conclusions of these studies are suspect because results are included in the determination of a successful company. In
other words, claiming that the Baldrige award winners perform well in results due to practicing of award criteria and practices will be wrong as
these companies are judged based on their results too. Similarly, Baldrige applicants who score well on the results section may continue to do
well on results, independent of their approach and deployment. There may be something besides the elements of the Baldrige model that
explains their success, and some of the elements included may have no impact on success (ibid). A recent study [18] found a positive
relationship between Business Excellence (EFQM Model) and Performance, and between Strategic Agility and Performance. The study also
revealed that there was also evidence that Strategic Agility was related to Business Excellence. The findings suggested organizations that
successfully implement Business Excellence develop the ability to respond to change, a capability that was becoming more critical as the pace of
change increases. This capability leads to benefits for many of the organizations stakeholders.
Home in his thesis, The Effect on Corporate Performance of Firms that won the Malcolm Baldrige National Quality Award examined the
business results of companies that won the Malcolm Baldrige National Quality Award (MBNQA) considering three key indicators, return on
assets (ROA), earnings per share (EPS) and the current ratio. Company performance data were analyzed in two ways; first tests were made by
comparing company performance before and after winning an MBNQA. The second way of testing was by comparing the MBNQA-winning
company's performance with its key competitors within their market segment. His analysis, based on statistical techniques, suggests there was no
significant difference in performance after winning the MBNQA than before, using the three performance indicators used in this study. There
was also no evidence to suggest that the MBNQA-winning firms outperformed their key competitors within their market segment, for the three
performance indicators used. The Baldrige Index, a hypothetical stock fund made up of U.S. companies that received the Baldrige Award, has
historically outperformed the S&P 500 by approximately 4 to 1. But this claim was challenged by many authors for the reasons stated before.
NIST has since discontinued the practice of computing Baldrige Index in 2004. Among the reasons for the discontinuation of the annual
comparisons was that an increasing number of applicants who were not publicly traded companies [19] [20].
Evans and Jack used large empirical data set to explore the linkages between the Baldrige award criteria with firms business performance. The
result of various statistical tests provide evidence of the validity of the Baldrige model and its examination/self-assessment process that seeks to
validate strong business results as an outcome of high-performance management practices. [21].
Bernal and Castel conducted a research involving 34 Spanish firms. They grouped these firms in four groups depending on the level of their
implementation of EFQM model. From the analysis they found that firms with higher level of quality in most of the criteria of the model
(EFQM) obtain better results, measured by key performance results and firms with the lowest scores in most of the variables obtain worst results.
Their analysis also suggests that partial adjustments do not improve the results [22].
It may be concluded from the study that there exists a diversity of views on contribution of the Business Excellence (BE) Models, particularly
the MBNQA and EFQM Models, on the impact on the bottom line of the Award Winning organizations. Emerging from this concern is a need to
better understand the differences in the Management Practices and processes followed by the Award winning firms to that of the high
performing non-participating firms and also to better understand the influence that these practices and processes have on business performance
outcomes.

235

Impact of Business Excellence Model on Firms Business Results (Findings from Literature Survey and Research Agenda)
International Journal of Economy, Management and Social Sciences Vol(4), No (2), February, 2015.

In order to find the already existing knowledge base in this aspect further literature survey was carried out focusing on the management practices
followed by Award winning firms and high performing non-participating firms.
3.2 Management practices and approaches
Based on a Finnish empirical case study on how quality management ideology permeates through the organization over time Taina Savolainen
provides practical insights into a managerial ideological change process suggesting strategies for achieving business excellence. This paper
suggests three specific strategies-THE COACH LEADERSHIP STRATEGY COACH-CHAMPION; THE LEADER-EXPERT STRATEGY
BY THE BOOK; THE OSCILLATING STRATEGY TRIAL & ERROR, for the implantation of total quality management (TQM). The
implication is that sustainable and inimitable competitive advantages may be realized through a deeply embedded quality management ideology
[23].
George Wilson, et al.in their paper, Measuring Improvement At Coca-Cola Bottlers (Ulster) focused on the development of an appropriate
structure for self-assessment and illustrated how CCBU had achieved significant improvement in business results as a consequence of adopting
an integrated approach to measuring performance; the authors emphasized this as the key strategic intervention for achieving Business
Excellence at CCBU. CCBU have developed a methodology which provides discipline in respect of monitoring business improvement activity
and which reinforces the companys leadership processes and culture of continuous improvement [24].
Pankaj Madan in his article; An award journey for business excellence: the case study of a public sector unit presented the nine-year total
quality management (TQM) implementation journey of one of the biggest power generation equipment manufacturing public sector units (PSU)
in India, Bharat Heavy Electrical Limited (BHEL), to win the European Foundation for Quality Management (EFQM) model-based CII-EXIM
Award for Business Excellence. The article details the business processes and management practices used by the company, which had .6500
employees, with a turnover in 20062007 of USD 446.48 million and the only PSU of India to win this award. The study of a successful TQM
implementation or award-winning journey means an estimation and understanding of the efforts made by the organization in travelling along
the quality road each year and learning further about the managerial decisions made in the years until it won the award. The organization under
discussion initiated its TQM implementation program in 1997 and received the excellence award in 2006. To summarize, this article prsented an
in-depth analysis of how the process of implementation was done by rolling out the TQM model and how its assessment offered the organization
an opportunity to learn about its own strengths and critical areas for improvement [25].
In late 1980s Philips launched their own Philips Quality Program driven by the concept: process improvement has to result in customer
satisfaction. All operational units were assessed based on this Philips Quality concept and the knowledge from these assessments became a
strong input in the development of the EFQM Business Excellence Model and Assessment Approach. Therefore the implementation of the
EFQM Model was the logic next step for Philips, which was introduced by the Board of Management in 1999 during a Quality Conference for
the Philips Top 400. All Business and Operational units including Corporate Philips and the Board of Management- had to apply the
EFQM/Business Excellence Model and Assessments. In addition Quality Improvement Teams and Black Belts, both based on the Six-Sigma
methodology, became part of this Philips Business Excellence (PBE) program. Especially through the involvement of so many employees
within the PBE Program, impressive improvement results could be realized. For each of the core processes Process Survey Tools (PSTs) have
been developed. These process maturity grids had a strong impact on improving all processes towards World-Class Level and on standardizing
the core processes across all Philips Divisions [26].
Meers, Allan , Samson and Danny argue that the success and sustainability of a business excellence initiative influenced by two factors:1) the
contextual alignment of the initiative with the organizations competitive business strategy and (2) the level of congruence between their
initiative and the organizations operating environment and culture. They illustrated these dependencies through three case studies that initiated
BE initiatives and failed to sustain their effort to adopt the process. They opined that organizations seeking to implement BE should undertake
contextual analysis of their business strategy, operating environment and culture before choosing the path to implement BE initiative. The case
studies highlight the need for further research into the nature and variety of organizational characteristics that either support or undermine BE as
an improvement strategy [27].
Linda C. Angell, et al. in their paper , The quest for business excellence: evidence from New Zealands award winners presented the findings
of their study on the progression of business excellence (BE) in 13 repeat applicants for the New Zealand Business Excellence award, which is
adapted from MBNQA, over the period 1993-2007.Most organizations set up a small team of people in a BE project office to facilitate the dayto-day implementation of the criteria, ensure that senior managers complete their improvement tasks and projects, organize training in quality
tools, and explain the BX framework to colleagues. A constant battle for this team was often staffs perception that the Award program was just
an add-on to their jobs, eventually to go the way of other fads. BE teams did play a large role in helping staff to understand that the BE and its
criteria had to be part of everyones everyday work though one unit disbanded their BE team after several years because senior management
realized that staff attributed total responsibility for implementing BE to this team, believing that no-one else in the organization needed to get
involved. The organizations indicated that once the CEO committed to the BE criteria then the implementation process typically proceeds in a
strongly top-down manner. The approaches to establishing criteria usage had several common features, such as structuring efforts around the
Award categories and establishing category champions within the senior management team. In smaller organizations, CEOs relied on staff who
demonstrated enthusiasm for the criteria. All of the studied organizations recognized the importance of getting complete staff buy-in for the idea
of BE. Generating this type of all-encompassing commitment involved an on-going effort to communicate why the organization wanted or
needed to adopt BE, and how people could incorporate it into their daily work. Some of these organizations have worked hard to inject BE into
their culture while others seem to have lost interest Most applicants indicated a constant struggle to continually up their game to achieve
outstanding, innovative approaches and achieve sustained excellence in their performance results [28].
Siemens has focused sustainability issues in its journey toward Business excellence. Its Balanced score card based Award to top management is
based upon the level of realization of EVA for Siemens. Siemens experience suggests that sustainable development can be integrated into a
business excellence model and it also emphasizes that to achieve sustainable success, organizations must develop a sense of corporate
responsibility and cat on it of course without losing sight of effective and efficient human resource management and asset management [29 ].
In spite of its record profit, and good progress in adopting total Quality on a site basis Texas Instrument (TI) realized to build a new stronger
more competitive European business company needed a harmonized approach with a common framework and language. It needed to accelerate
its rate of improvement. On June 18, 1993, in a meeting all TI Europe business and support-function managers made a collective commitment to
business excellence and the willingness of management to dedicate time and resource to it and committed to evaluate and raises performance
across all organizations, using the EFQM model for self-assessment and award application. They integrated various quality initiatives with a
common EFQM framework. A comprehensive communication package with the objective to create awareness, understanding, acceptance and
active participation of the organization at all level was developed. It was translated in six languages and it also developed a 76-page score book
based on EFQM program and the criteria to help self-assessment .All business and support organizations completed the self-assessment. Each
unit prioritized its areas for improvement in excellence gaps based on points lost and business relevance. Improvement action plans were
defined and implemented through policy deployment. This exercise help TI realize that major changes are needed to meet corporate profit goals
and to focus on Europe-wide business units with less emphasis on country-by country infrastructure. A major restructuring was done. Along

Prabir Kumar Bandyopadhyay *, Suresh Nair

236

International Journal of Economy, Management and Social Sciences Vol(4), No (2), February, 2015.

with business process reengineering TI also redesigned its management restructure and created a new European strategic leadership team based
on the EFQM categories were created. The new approach ensures clearly focused, quality-driven approach to business excellence across the
different organizations and countries in Europe. The deployment of EFQM model benefitted TI in many ways-both tangible and intangible terms [30].
It appears from the above findings that the participating firms take different approaches to implement Business Excellence Models but it is not
clear as to how they organize the key processes and how differently they manage the processes.

4.

Conclusion

In view of the study findings it may be concluded that there exists a gap in the literature dealing with management practices followed by the
award / prize winning firms. To fill this gap it is worth taking up a research study where the main question, which the research will attempt to
answer, which may be called as Research Problem, is:
How different and effective are the management practices and processes followed by the Business Excellence Award winning organizations in
comparison to the management practices and processes followed by high performing non-participating organizations?
Research Issues
Five key research issues are identified for investigations.
Key Research Issue 1: How the key business processes are identified in both types (Award winning and non-participating) of firms and how the
process of identifying the key business process differ from each other in these two groups of firms.
Key Research Issue 2: How the Award winning and non-participating firms measure their performance and how a balanced approach is adopted
by these two groups of firms in assessing stakeholder satisfaction and business results?
Key Research issue 3: What review systems and processes are being followed by the award winning and non-participating organizations to
ensure continuous improvement of stakeholder satisfaction and business results?
The fourth and fifth key research issues are focused on the specific management practices and processes.
Key Research issue 4: How are processes developed, deployed, reviewed and improved in these two groups of firms? What are the roles and
involvement of stake holders?
Key Research Issue 5: How are the various results measures used in both types of firms to determine the Key performance drivers needed to
deliver the desired outcomes?

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