Introduction: What is the Malcolm Baldrige National Quality Award?
The Malcolm Baldrige National Quality Award is an award that is given to U.S. businesses with excellence in their quality improvement and quality management. This award has very high-quality standards that a company should maintain, and if a company wins the award, it means that it can boast of excellence in the quality of its processes, consumer satisfaction, and systems (Wilkinson, 2013).
The Malcolm Baldrige National Quality Award was created by Public Law 100-107
signed into law by U.S. Congress in 1987.
Only U.S. companies can be given Malcolm Baldrige quality awards, however, the award is well-known and recognized globally. It is interesting to know, that this award is given by the American president to the companies that win. In fact, the award has got its name after Malcolm Baldrige, Secretary of Commerce (1981-1987). Malcolm Baldrige was an ardent proponent of quality management of American companies and even contributed to the preparation of the Malcolm Baldrige National Quality Improvement Act (Wilkinson, 2013).
Different types of businesses can compete for a Malcolm Baldrige quality award: starting from manufacturers, small and large businesses, service companies, health care and education organizations, and charity organizations. Several Malcolm Bridge Awards can be given annually to any of the above-listed organizations. The main goal of the award is to pay attention of consumers to the issues of quality management and at the same time to motivate and encourage U.S. firms to improve their quality standards and try to achieve excellence in their quality management and improvement (Wilkinson, 2013).
It's worth paying attention to the Findings and Purposes section of the above-mentioned Public Law 100-107 that explains to a certain extent the necessity in the award, stating that:
Foreign businesses have challenged the U.S. leadership in the quality of product and process and sometimes successfully, and that recently the competitor's growth of productivity has improved more than American nation's one.
It has become obvious, that low-quality results in a 20 % loss of sales revenues at the national level and those goods of better quality are interrelated with lower costs, improved productivity, and increased profitability.
The well-being of the national economy strongly depends on quality improvement programs with their focus on companies' commitment to excellence in their manufacturing processes and services, which become more and more vital and necessary.
The main components of improvement in the product quality and cost are better management understanding, the involvement of employees and workers in quality and control of the statistical process.
Quality improvement can be applied directly to the different type of businesses, starting from small businesses and ending up with manufacturing industries, and to both public and private sectors.
Programs on quality improvement can lead to significant organizational changes so as to be successful and practice 'management-led and customer-oriented' approaches.
Such kind of national quality award programs in the U.S. would improve quality and enhance productivity by: (a) helping the U.S. firms to enhance their quality and productivity so as to be recognise while 'obtaining competitive edge through increased profits'; (b) recognizing companies that have achieved a certain improvement in their goods and services quality and giving the example to other companies; (c) provide specially developed guidance for other firms willing to achieve high quality, ensuring that they have access to the information about the winning companies that managed to implement the required organizational changes; (d) creating guidance and list of criteria for organization to refer to when evaluating the efforts they make to improve quality (“The Malcolm Baldrige National Quality Improvement Act of 1987”).
The list of criteria includes the following issues, leadership, strategic planning, customer and market focus; measurement, analysis, and knowledge management; workforce focus; process management and, the last but not the least, the results (Wilkinson, 2013).
The U.S. Department of Commerce's National Institute of Standards and Technology (NIST) manages the award and collaborates with quality experts. The NIST developed the above-mentioned list of criteria, 1000-point score system and a three-phase process of judgment (Gradig & Harris, 1994). Competing for the Baldrige Award begins with verification of the fact that the applicant is a U.S. business. Afterward, the applicant receives the notification about their eligibility status. This is followed by submitting of the application form and description form that provide more details about the company.
Companies applying for the Award should describe their quality improvement activities according to the seven categories of criteria as each category has its own maximum score (Gradig & Harris, 1994). The director of the Baldrige Award paid attention to the key factors that judges and examiners usually focus on, they include the following:1. A plan that demonstrates the continuous improvement of all categories.
2. A system that allows measuring the improvements.
3. A strategic plan comparing the firm's performance and the best world-known performance.
4. A clear understanding of customers' needs both regular and potential so as to offer the, a product they exactly want.
5. A long-term relationship with customers, including also service and maintenance.
6. A strategy aimed at preventing possible mistakes, not at their correction mistakes rather than merely correcting them (Gradig & Harris, 1994).
This is just to name a few. Of course, there is other factors and a dimension that the examiner will be interested in. Afterward, all the applications are reviewed by the Board of Examiners, members of which are representative of the industry, consulting firms, academic field and are recognized as quality experts. Only 10% of the applicants receive the status of finalists and are paid with site visits by examiners, who analyze company's facilities, interview employees and may also clarify any information from the company's application (Gradig & Harris, 1994).
After this, a Panel of Judges makes a final review and suggest Award winners to the NIST. The final decision is made by the Secretary of Commerce makes and eventual recipients advertise receipt of the Baldrige Award. They are required to inform other firms about their quality strategies that make them successful (Gradig & Harris, 1994).
As for the award criteria, they are based on strong philosophy and values. If a company wants to win, it should practice customer oriented approach related to the quality program that should be coordinated and led by the representatives of senior company' management, ensuring active employee engagement and involvement and clear understanding of the company's internal processes by all involved. Obviously, every company has its right to choose the most appropriate techniques to achieve the main goal. For example, none of the criteria sets requirements stipulating the techniques to be utilized by the companies (Garvin, 1991).
Companies' Motivation and Success
So, the question arises "What motivates companies to meet the above-listed criteria and get the award?" The answer is quite simple. There are numerous standards of quality that companies can maintain, like ISO 9001 for instance. However, if a company adjusts to this quality standard it won't bring any award to it and, finally, won't give much light to it, as many other organizations can obtain this standard every year. Therefore, the award itself may be the reason of the company's motivation, as it allows a company stand out among other competitors. The reason for motivation may be the process of the fight for the award, as the fight itself may be even better that the award, because striving for their excellence, companies make certain changes to improve quality, which may lead to higher revenues ad customer satisfaction (Allvin, Ulmer, J& Ollison, 2009).
Besides the fact that Malcolm Baldrige Quality Award is a road map for sustainable quality management, companies motivation can be rooted in the feedback, that the leading experts in the industry give to the companies. As this feedback can be a good recommendation and that can be used as a chief component for developing business strategy and plan so as to identify areas to further focus on (Gradig & Harris, 1994). This feedback tells the company about their gaps and provides recommendations on how it can be improved. Perhaps, this the best bargain for a company applying for this award, as the application costs $4,500 for large businesses or $1,500 for small ones, which is much less than to hire an external consultant to evaluate their management processes and provide the detailed report (Gradig & Harris, 1994).
Taking into consideration the fact that not only the winning companies can benefit from the Malcolm Baldrige Award, one may ask: “Are the company successful since they received the award?”. Judging by the list of criteria and all positive organizational changes aimed at the quality improvement, that a company makes to achieve the award, the answer should be “Sure”. However, in reality, the answer is not so obvious and clear. In this regard, the-the Malcolm Baldrige Award has faced some critics as some winners 'have stumbled after receiving the desired award. The reasons of this variable from the problems with the design at Motorola to low demand at Cadillac, but the result in each situation was the same, as the above-mentioned companies could hardly boast of high financial performance. Critics have considered these problems as a reflection of the fact that the Malcolm Baldrige Award pays little attention to the enhancement of national competitiveness or improvement of corporate performance. To their view, high scores on the Baldrige do not say anything about tomorrow's possible financial performance and results. They claim, tells us nothing about tomorrow’s financial results (Garvin, 1991).
Obviously, this criticism cannot be considered as the right opinion, as the Baldrige Award and financial performance with its short-term results can't be mixed. One of the judges even commented on this saying that financial performance can not be added to the list of criteria as it will automatically 'overshadow' other categories (Garvin, 1991). Moreover, the award was never meant to reward the financial success of a company. Definitely, winning this award cannot be a for company's financial success. It is even not necessary, as there're other ways and tools to increase profitability and they are not limited to the excellence in quality management. For instance, 'one long-standing patent, or a one-of-a-kind production process' can lead to and guarantee success in financial performance, even in case a company is not able to adjust to any of the award's criteria (Garvin, 1991).
It is surprising, that some Wall Street analysts even have developed these critical arguments further shorting the stock of the award winners in anticipation of their low financial results. Thus, receiving the award is usually accompanied by disappointment, but managers of these companies are used to the long-term perspective rather than quarterly earnings. The reality is that the award winners can be affected by economic downturns, changes in fashion trends and technology developments, like any other company. The advantage of the winning companies is that they can recover quicker and in a more sophisticated way because they have excellence management processes inside the company. Therefore, the Malcolm Baldrige Award is an indicator of the profitability of a company in the future and long-term survival. Actually, according to the General Accounting Office winners and even semifinalists do perform better not only on quality but also on market share, customer satisfaction, employee relations, etc. (Garvin, 1991).
Turning to the Cadillac criticism, for example, it should be said that many refer to the fact that the company's cars 'had yet to distinguish themselves and that according to the Powers report (Garvin, 1991), in the category 'customer satisfaction' Cadillac ranked eighth in 1990, the year when they received the award, and in 1989 they ranked fourth, which allows critics to claim that the Baldrige company doesn't ensure a company's success after winning (Garvin, 1991).
However, this criticism is not true, as the award was never meant to reward only product quality. To prove this, it should be said that only 250 points out of the total 1000-point score are for product and service quality, as well as process and customer satisfaction. But the major part of the award pays attention to management processes and systems, where Cadillac can demonstrate their excellence (Garvin, 1991).
Definitely, an absolute majority of the winning company can tell about their continued success after receiving the award, demonstrating the so-called payback on the investment they made when they applied for the award.
Thus, St. David’s HealthCare, a 2014 award recipient, has excellent net revenue growth with a 70% increase during the period 2007-2013. It has become possible because of both expanded operations and operational discipline. Moreover, in 2013, there was a 17% increase in the return on assets. This strength allows to avoid any debt and to reinvest funds in its facilities every year (“Baldrige FAQs: Baldrige Award Recipients”).
As for Nestlé Purina PetCare Co., a 2010 award winner, it is the first in market share in North America. Moreover, it has twice the market share of its rival. Speaking of the market share, there was an increase from 31.2% in 2001 to 34.2% in 2010 (“Baldrige FAQs: Baldrige Award Recipients”).
It's worth turning to the opinion of Motorola's Vice President and Director of Brussels office, who encourage other company to apply for the award providing the information on the impact the award brought to the company. He says that, first of all, the criteria provide the very best business management framework 'we have ever found or worked with in our ongoing quest for Business Excellence at Motorola CGISS'. Motorola applied the criteria for their company four years before they received the award and identified bothe external and internal value. As for the external value of applying for the award, they became recognized as a leader in the industry by a third party, Of course, it contributes to their brand recognition and allowed them to go ahead with their rivals. As for internal value, first of all, received a profound review and assessment from the external experts. Secondly, they gained recognition among their peers. Thirdly, they 'built pride and momentum' within the company. Thanks to the application for the Baldridge award, they transformed the company to its best state and understood how to offer both short- and long-term value for the company's stakeholders (“Baldrige National Quality Program: Why to apply?”).
The both companies continue to demonstrate excellent performance. In general, the process of applying for the award has a good impact on companies, after receiving the award they noticed an increase in sales of a new product and increased revenue, in general, cost reduction, greater customer satisfaction, and, as the consequence, improved product reliability, and many other benefits. It should be pointed out that it is not necessary to become a winner to enjoy all above-listed benefits, as applicants striving for the award improve their quality management anyway (“Baldrige FAQs: Baldrige Award Recipients”).
Conclusion
Summing everything up, it should be said that the Malcolm Baldrige National Quality Award has introduced and establishes a national quality standard, encouraging hundreds of firms to adjust their management process to the criteria and at the same time using them as their guide in the company management. For example, a number of businesses, like IBM or Motorola, have adopted the list of criteria and made its internal quality measure. Obviously, the award brings benefits, as companies evaluate themselves, which allows them to understand their strengths and weaknesses and, what is more, important to get the picture in terms of what a company does to improve their quality.
Nevertheless, the Malcolm Baldrige Award has faced pretty much criticism, saying that it doesn't guarantee the success of the company or, even worse, that a company wants only to win and not pay the required attention to the quality. However, ardent proponents of the award, say no matter to what extent they are focused on winning as long as they develop a comprehensive quality development plan for further implementation. Moreover, one should take into consideration the fact that the awards are not a solution to all problems, as it doesn't address other key components of business like innovations, long-term planning and financial performance (Gradig & Harris, 1994).
References
Allvin, S., Ulmer, J. M., & Ollison, T. (2009). The Malcolm Baldrige Award: What Technology Managers Can Learn From Health Care Winners. The International Journal of Applied Management and Technology, 6, 3rd ser., 274-302. Retrieved February 14, 2016, from http://scholarworks.waldenu.edu/cgi/viewcontent.cgi?article=1058&context=ijamt
Baldrige FAQs: Baldrige Award Recipients. (n.d.). Retrieved February 13, 2016, from http://www.nist.gov/baldrige/about/faqs_recipients.cfm
Baldrige National Quality Program. (2003). Baldrige National Quality Program: Why apply? [Brochure]. Author. Retrieved February 14, 2016, from http://louisianaquality.org/doc/Why_Apply.pdf
Garvin, D. A. (1991, November/December). How the Baldrige Award Really Works. Retrieved February 13, 2016, from https://hbr.org/1991/11/how-the-baldrige-award-really-works
Gradig, R. M., & Harris, J. K. (1994, March 22). The Baldrige Award: A quest for excellence? Retrieved February 13, 2016, from http://www.freepatentsonline.com/article/Review-Business/16074276.html
The Malcolm Baldrige National Quality Improvement Act of 1987. (2013, October 31). Retrieved February 13, 2016, from http://www.nist.gov/baldrige/about/improvement_act.cfm
Wilkinson, J. (2013, January 24). Malcolm Baldrige National Quality Award. Retrieved February 13, 2016, from http://strategiccfo.com/wikicfo/malcolm-baldrige-national-quality-award/
