The Financial Impact of Mbnqa

THE FINANCIAL IMPACT OF MBNQA DENIS LEONARD
Introduction The success of The Malcolm Baldrige National Quality Award (MBNQA) Criteria for Performance Excellence has certainly created debate since it was established in 1987. 1 It was created to stimulate quality and improvement, recognize achievement, establish criteria to be used to evaluate improvement and make available information on award winning companies for others that wish to learn about quality. 2 After 17 years, 1063 applicants, 59 award recipients, training over 2300 examiners, mailing more than 50,000 copies of the criteria and providing over 700,000 downloaded copies per year, and being the inspiration for the creation of 44 state awards and nearly 50 quality award programs internationally (including the European Quality Award) the MBNQA could be considered successful in attaining it goals to date. 3, 4 Despite this experience the significant detailed insights through case studies from Baldrige winners, questions still exist about MBNQA specifically in regard to its the financial impact. Most of the issues that question MBNQA are based on perceptions and are rarely based on objective data and statistically valid analyses. 5 Studies on the Performance Impact of MBNQA Perhaps the best-known study on the financial results of the MBNQA has been the ‘Baldrige Index’. This study began in 1995 and compared placing $1000 in a fictitious stock fund made up of publicly traded MBNQA winners and comparing them to investing $1000 in the Standard and Poor’s 500. Between 1992 and 2002 the Baldrige Index out performed the S&P 500 by 6.5 to 1. This has been used as significant evidence of the positive financial impact of MBNQA. However, in the last 2 years the Baldrige Index has underperformed the S&P 500 by in some cases –0.71 to 1. 6 This has been seen by many as eliminating the proof of MBNQA’s impact on financial performance. However, the dip in performance is not significant and part of the reason for the dip in

References: 1. Garvin, D.A, How the Baldrige Award Really Works, Harvard Business Review, Nov-Dec, 1991, pp 80-93, (and the responding ‘Debate’), Garvin, DA, “Does the Baldrige Award Really Work?” Harvard Business Review, Jan-Feb, 1991, pp 126-147 2. The Malcolm Baldrige National Quality Improvement Act of 1987 – Public Law 100-107, HR 812, Section 2, Findings and Purpose 3. Oklahoma School District is 1000th Award Applicant, NIST News Release, June 15th 2005 3 4. Frequently Asked Questions about the Malcolm Baldrige National Quality Award, NIST Fact Sheet, Nov 23rd 2004 5. Hendricks, K.B & Singhal, V.R, Don’t Count TQM Out: Evidence Shows Implementation Pays Off in a Big Way, Quality Progress, April, 1999, pp 35-42 6. NIST website, Baldrige Stock Studies, Tenth NIST Stock Investment Study, April 2004 & Ninth NIST Stock Investment Study, May 2003 7. Tai, L. S & Przasnyski, Z. H, Baldrige Award Winners Beat the S&P 500: Study Shows Quality Results in Increased Shareholder Value, Quality Progress, 1999, April, pp 45-51 8. George, S, Bull or Bear? : The Q100 Index Proves That If You Have Quality You’ll Beat The Market, Quality Progress, 2002, April, pp 32-37 9. Wisner, J.D & Eakins, S.G, A Performance Assessment of the US Baldrige Quality Award Winners, International Journal of Quality and Reliability Management, 1994, Vol. 11, No2, pp8-5 10. Wrolstad, M & Krueger, T, Study Shows that Quality Pays Winners, The Quality Management Forum, 2001, Summer, Vol. 27, No 3, pp 11&14 11. Ramasesh, R.V, Baldrige Award Announcement and Shareholder Wealth, International Journal of Quality & Reliability Management, 1998, Vol. 3, No 2, pp 114-125 12. Jacob, R, Madu, C.N & Tang, C, An Empirical Assessment of the Financial Performance of Malcolm Baldrige Award Winners, International Journal of Quality & Reliability Management, 2004, Vol. 21, No 8, pp 897-914 13. Davis, R.A, Linking Firm Performance to the Malcolm Baldrige National Quality Award Implementation Effort using Multi-attribute Utility Theory, Managerial Finance, 2005, Vol. 31, No 3, pp 19-34 14. Taylor, C Baldrige Winners Learn that Quality Really Does Pay, Managing Service Quality, Vol. 7, No 2, 1997, pp 65-68 15. McDonald, I, Zairi, M & Idris, M.A, Sustaining and Transferring Excellence: A Framework of Best Practice of TQM Transformation based on Winners of Baldrige and European Quality Awards, Measuring Business Excellence, 2002, Vol. 7, No 3, pp 20-30 Denis Leonard has degrees in construction engineering and education in addition to a M.B.A. and Ph.D. in quality management. Denis is a Fellow of the UK Institute of Quality Assurance 4 (IQA) and a Senior Member of the American Society for Quality (ASQ) with whom he is a Certified Quality Manager, Auditor and Six Sigma Black Belt. An ASQ Feigenbaum Medalist he has won several international awards for research publications. He has been an Assessor on the Northern Ireland Quality Award, Judge and Examiner for the Wisconsin Forward Award, Baldrige National Quality Award Examiner and a Judge on the ASQ International Team Excellence Competition. He is a member of several boards including the U.S. (ANSI) Standards Group for Quality Management, Member of the UK Quality Standards Development Group Forum and ASQ’s Quality Management Forum and Quality Press Review Boards. He has presented at national and international conferences and published widely in such journals as; The International Journal of Quality and Reliability Management, The Quality Management Journal and The International Journal of Operations and Production Management. A former Professor of Quality at the University of Wisconsin, he has experience in management, engineering, training, auditing and consulting with expertise in strategic and operational quality management. He recently led his company to win the Baldrige aligned, 2006 National Housing Quality Award. Denis is Quality Manager for Veridian Homes in Madison WI. 5