Business development is the basic building block of a strong Maine economy in the 21st century. While no magic formula for business development can be found, business owners in Maine can seek out an underused tool to help their companies improve -- the Margaret Chase Smith Maine State Quality Award. Every applicant for the award receives extensive feedback on its business practices. This feedback is essentially a low-cost form of consulting. Yet only a few of the 37,000 businesses in Maine have taken advantage of the program.(1) Table 1 lists the more than two dozen organizations that won the award between 1991 and 1997, and Fig. 1 indicates that the number of organizations applying for the award each year has grown since mid-decade. In 1998, large and small organizations in the manufacturing, service, education, health care, and public sectors submitted 24 applications (see Table 2).
Maine is one of over forty states with a quality award program at the state or local level.(2) Maine's program, the Margaret Chase Smith Maine State Quality Award, is modeled after the Malcolm Baldrige National Quality Award. Congress established the Baldrige Award in 1987 (the year that the Reagan Administration Commerce Secretary died in a rodeo accident) for two reasons: to recognize U.S. companies for their achievements, and to raise awareness about the importance of quality and performance excellence as a competitive edge. The Council on Competitiveness, a not-for-profit group of executives and organized labor, concluded that the Baldrige Quality Award was "responsible for making quality a national priority and disseminating best practices across the United States."(3)
One might assume that companies participate in quality award programs
for the recognition. While winning a Margaret Chase Smith Quality Award
does convey many advantages -- it generates publicity, enhances brand equity,
and motivates and rewards employees -- a company undoubtedly benefits more
from organizational improvements tied to the application process than from
the award itself. Organizational improvements stem from three aspects of
the award program: 1) self-assessment, 2) external feedback from award
examiners, and 3) examiner training.
Self-assessment
To prepare an application for a Margaret Chase Smith Maine State Quality Award, an organization conducts a self-assessment using award norms listed in the application booklet.(4)
The Margaret Chase Smith Award criteria are directly tied to the Baldrige Award criteria, which fall into the seven major categories exhibited in Table 3. The criteria can be seen as a road map for building a quality organization that will continue to prosper. These standards form an integrated framework for assessing the management of all aspects of the organization. An applicant must examine how it uses leadership, planning, and information to create an effective, efficient system for managing products, services, human resources, and customer relationships. Furthermore, an applicant must look for evidence that its culture of continuous improvement has produced excellent results.
The award guidelines reflect the belief that long-term competitiveness follows from the pursuit of two goals: delivering ever-improving value to customers and improving overall company performance. The philosophy driving the model presumes that all organizations with world-class excellence do not follow the same management formulas, but that they do share core values guiding decisions. These core values, summarized in Table 4, are embedded in the award criteria.
All types of organizations -- businesses, governments, non-profits, schools -- can use the award rules to improve organizational performance. The criteria, which address general issues rather than particular management practices, are sufficiently abstract to apply to any organizational mission. For example, the organization is asked how it determines if customer needs are met, but it does not have to use a specific technique such as customer satisfaction surveys. A second way in which the awards program avoids a one-size-fits-all-solution is to use company-specific key business factors. Each applicant provides a business overview to identify features relevant and important to the success of that particular organization. The award examiners assess whether systems and processes throughout the organization are compatible with the self-reported key business factors.
Along with consultation from the private sector, the U.S. Commerce Department's National Institute of Standards and Technology (NIST) continuously refines the Baldrige Award criteria, which are widely regarded as the predominate standard for performance excellence. More than a million copies of the Baldrige criteria have been distributed in the last ten years, without counting photocopies, Internet copies, and distribution of Baldrige-based state award criteria.(5) In 1998, the Margaret Chase Smith Award program circulated approximately 600 copies of the criteria to Maine organizations.
The award guidelines can be used as an improvement tool even if the organization does not apply for an award. A self-assessment using these core values and concepts forces the organization to look at business practices, customer relationships, and employees in objective and measurable ways, often for the first time. While the results of the introspection may not be flattering, it helps the firm focus on improvement opportunities.
Self-assessments appear to be most effective when employees throughout
the organization participate. A joint exploration of company practices
by a broad range of employees highlights divergent opinions and inconsistencies
between organizational goals and practices. Employee involvement in self-assessment
also serves to educate employees about quality, and reinforces a quality
culture at the organization. After all, employee acceptance of quality
is crucial because continuous improvement requires employees to make adjustments
in attitude and daily work activities.
External Feedback from Award Examiners
A team of examiners evaluates each application for the Margaret Chase Smith Maine State Quality Award. Examiners use the application, and possibly a site visit, to write a confidential report detailing organizational strengths and opportunities for improvement. As shown in Fig. 2, managers can use this report as the foundation for their next business review because the report identifies areas where improvement initiatives could boost organizational efficiency and effectiveness.
An example of feedback for a fictitious firm is shown in Table 5. The individual comments are closely tied to the core values and concepts. To some extent, the comments also reflect the judgment and experience of the examiner team. Notice how the feedback is deliberately nonprescriptive. The award examiners point out areas for improvements, but do not make recommendations about specific management practices. Internal managers with a fuller understanding of the organization make the latter type of decision best. Nonetheless, the feedback report greatly contributes to organizational change because it furnishes an objective assessment from an outside perspective. Although data is not available for the state program, a survey of 1996 Baldrige Award applicants indicated that over 80% of respondents found the feedback report to be relevant and important in helping organizational improvement efforts.(6) A survey of 1993 and 1994 applicants showed that over 90% of respondents used the feedback report in their planning processes.(7)
Who are these examiners evaluating applications and providing feedback? They are volunteers with diverse professional backgrounds receiving extensive training. This year, 74 individuals from industry, academia, government, and not-for-profit organizations served as examiners for the Margaret Chase Smith Awards.
Because volunteers run the award program, the cost to applicants is
extremely low. Application fees range from $50 to $250, plus $2 for each
full-time employee. In return, the company receives hundreds of hours of
time from examiners and a feedback report that can be used to drive organizational
change. In other words, a small business can receive feedback tailored
to the company from highly experienced professionals, and yet pay the equivalent
of well less than minimum wage! The feedback received from Margaret Chase
Smith Award examiners is arguably the best consulting bargain in Maine.
Examiner Training
Organizations can also use the awards program as an employee development
tool. When employees serve as award examiners, they receive dozens of hours
of free training. They refine their understanding of quality, as they learn
to use the award criteria. They work closely with other quality and management
professionals to analyze case studies during training and to evaluate real-life
organizations. The skills and knowledge acquired by examiners can be put
to work at an examiner's own workplace.
Maine vs. National Quality Awards
Although the Maine and national quality award programs use similar standards, their missions are not identical. Both programs recognize excellent organizations, and spread awareness of quality and of quality practices. However, the Maine program plays a greater role in supporting organizations earlier in their quality journeys. This is particularly important in Maine, where 80% of businesses have 10 or fewer employees. Many small businesses need help to begin a quality program or improve an existing one. To serve the full-range of Maine organizations from small firms just beginning to embrace quality to larger, sophisticated ones, the Maine award program adopted a three-level award structure in 1996. Awards are given for "Commitment," "Progress," and "Excellence."
The Level 1 award, Commitment, was designed for firms at the beginning of their continuous improvement effort. The award recognizes that they have made a serious commitment to the use of total quality principles and values throughout their operations. It is understood that they are at the early stages of implementing systematic approaches to quality throughout the organization.
The Level 2 award, Progress, is for organizations making significant progress in applying quality principles and building sound processes throughout their organization. This level of progress must be substantiated by measurable results. The award norms for Levels 1 and 2 are abbreviated versions of the Baldrige criteria.
The highest-tier award in the Maine program is Level 3, Excellence. This advanced level is for organizations that have demonstrated through their approach, practices, and achievements world-class competitive excellence. The award criteria are those developed for the Baldrige Award.
The three-level award structure enables Maine businesses to take incremental
steps toward the standards of excellence outlined by the Baldrige criteria.
These standards can appear to be daunting to firms who have recently embraced
quality. The abbreviated goals used in Levels 1 and 2 make these awards
more accessible. The Level 1 standards function as a starter kit for organizations
beginning to embrace quality, while the Level 2 tests work as an intermediate
kit. Indeed, state and local awards programs throughout the country serve
as feeders for the national award. Seven of the last eight Baldrige winners
received state or local awards first.(8)
Conclusion
The Margaret Chase Smith Maine State Quality Award program is a cost-effective vehicle for organizational improvement. A self-assessment using the award criteria produces insight into organizational strengths and opportunities for improvement. The feedback received from award examiners provides additional focus for the firm's improvement efforts. Moreover, employees who serve as examiners receive free quality training, and gain skills and knowledge that can be brought back to the workplace.
Phil Roether, a vice president at Raytheon Systems Company, said that participating in the Baldrige Award process "energized improvement efforts" of his firm.(9) Ko Nishimura, C.E.O. of Solectron Corporation, the first two-time Baldrige Award winner, stated that "progress [had] come in a very accelerated fashion" after adopting the award criteria.(10) Solectron won its first Baldrige Award in 1991. Since 1992, the company has doubled its market share, and its stock has grown 60 times since its initial public offering. Its revenue growth has averaged well above the company's goal of 25 percent annually, and the industry average annual growth rate of 10 percent.
Do other firms find that participation in a quality-award program leads to more efficient business systems, a better bottom line, and long-term prosperity? The early evidence suggests that it does. According to the Conference Board, which is a business membership organization, "a majority of large U.S. firms have used the criteria of the Malcolm Baldrige National Quality Award for self-improvement, and the evidence suggests a long-term link between use of the Baldrige criteria and improved business performance."(11) Such a link accords with the stock performance of Baldrige Award winners and applicants. NIST, the Baldrige Award sponsor, has tracked hypothetical investments in publicly traded Baldrige Award winners from 1988 to 1996. The results show that Baldrige winners outperform the S&P 500 approximately 2.5 to 1, while Baldrige applicants receiving a site visit outperformed the S&P 500 by some 80%.(12)
A separate study examined 600 companies that won awards for effective
implementation of total quality management. This is a much larger group
of companies than in the NIST study of Baldrige winners. The award winners,
compared to a control group of companies similar in size and industry,
averaged a 44% higher stock price return, a 48% higher growth in operating
income, a 37% higher growth in sales, as well as higher operating margins,
employee growth, and asset growth. Interestingly, these differences were
observed during the five-year period after an award was won, but not during
the five years prior to the winning of the award. The authors attribute
this to the need to maintain a long-term commitment to quality.(13)
According to NIST, other studies by universities, think tanks, and the
General Accounting Office "have found that investing in management pays
off in increased productivity, satisfied employees and customers, and improved
profitability both for customers and investors."(14)
In short, participating in a quality award program helps produce quality,
and quality pays!
| Table 1 | ||
| MARGARET CHASE SMITH MAINE STATE QUALITY AWARD WINNERS | ||
| 1997 | Level 1 | Brown Goldsmiths & Co. (Freeport)
Eagle Industries (Hollis Center) EMS (Westbrook) Infinity Federal Credit Union (Westbrook) D&L Management of McDonald's (Bangor) Neill & Gunter (Scarborough) Shoreline Community Mental Health Services (Brunswick) Lewiston Public Works Department Town of Houlton |
| Level 2 | C.M. Almy & Son (Pittsfield )
Geiger Brothers (Lewiston ) Hussey Seating Company (North Berwick) Pioneer Plastics (Auburn ) Pratt & Whitney (North Berwick) Central Maine Power (Augusta ) Maine State Housing Authority (Augusta ) |
|
| 1996 | Level 1 | AVX Tantalum Corporation (Biddeford)
Geiger Brothers (Lewiston) Hussey Seating Company (North Berwick) Maine State Housing Authority (Augusta) Infinity Federal Credit Union (Westbrook) Pratt & Whitney (North Berwick) Pioneer Plastics Corporation (Auburn) Waterville Area Boys and Girls Club (Waterville) Wright Express Corporation (South Portland) |
| Level 2 | Naval Air Station (Brunswick)
NYNEX - Maine |
|
| 1995 | Special Recognition for Leadership | Veterans Administration Medical and Regional Office Center (Togus) |
| 1993 | Level 3 equivalent | L.L. Bean Manufacturing (Portland) |
| 1991 | Level 3 equivalent | National Semiconductor (South Portland ) |
| Table 2 | |
| APPLICATIONS FOR THE 1998 MAINE QUALITY AWARD | |
| Organization Size | Industry |
| Education | Health Care | Manufacturing | Public Sector | Service Industry | Total by Size | |
| Small/Medium
( 250 employees) |
1 | 1 | 1 | 3 | 7 | 13 |
| Large
(> 250 employees) |
1 | 3 | 3 | 3 | 1 | 11 |
| Total by Category | 2 | 4 | 4 | 6 | 8 | 24 |
| Table 3 | |
| AWARD CRITERIA CATEGORIES | |
| Leadership | Examines how senior executives lead the company, and how the company fulfills its community responsibilities. |
| Strategic Planning | Examines the company's strategic planning process, and how key action plans are developed. |
| Customer and Market Focus | Examines how the company determines customer requirements and satisfaction levels, and how customer relationships are enhanced. |
| Information and Analysis | Examines the management of data and information to support company processes, and the company's performance management system. |
| Human Resource Development and Management | Examines how the company develops its workforce, and creates an environment to use the full potential of employees to achieve its objectives. |
| Process Management | Examines how key production, delivery, and support processes are designed, managed, and improved. Also examines the management of supplier and partner relationships. |
| Business Results | Examines the company's performance relating to customer satisfaction, financial and marketplace results, human resources, operations, and supplier/partner performance. Also examines performance improvement and performance relative to competitors. |
Customer-Driven Quality
First and foremost, this concept includes more than just satisfaction with results. It includes the organization's relationship with customers, which helps build trust, confidence, and loyalty. All product and service characteristics that contribute value and lead to customer satisfaction and preference must be a key focus of the organization's management system -- a strategic concept directed toward market share gain and customer retention.
Leadership
Senior leaders ensure the development of the organization's quality values, vision, mission, goals, and guide the sustained pursuit of quality performance objectives. Here is where senior leaders serve as role models in reinforcing values and encouraging leadership in all levels of the organization's management system.
Continuous Improvement
Achieving the highest levels of performance requires a well-executed approach to continuous improvement -- an underlying theme throughout every element of the criteria. The approach needs to be "embedded" in the way the organization functions and includes not only better quality, but also the need to be more responsive and efficient. Organizations should pursue regular cycles of planning, execution, and evaluation of every process and system.
Employee Participation and Development
An organization's success in improving performance depends increasingly on the skills and motivation of its work force. Organizations need to invest in the development of the work force through ongoing education, training, and opportunities for continuing growth. Factors bearing upon safety, health, well-being, and morale need to be a part of an organization's continuous improvement objectives.
Fast Response
Success in the global marketplace requires rapid response to customer requirements. A major improvement in response time often requires simplification of work organizations and work processes. To accomplish such improvement, the time performance of work processes should be among the key process measures. Response time improvements often drive simultaneous improvements in organization, quality, and productivity -- hence it is beneficial to consider response times, quality, and productivity objectives together.
Design Quality and Prevention
When designing and developing new products, programs, and services, organizations need to incorporate quality from the beginning of the design process as a way of preventing problems and waste. The concept includes creation of fault-tolerant (robust) processes and products. Consistent with prevention is "upstream intervention" for corrective action and continuous improvement.
Long-Range Outlook
Total quality organizations plan well into the future and make long-term commitments to customers, employees, suppliers, stockholders/stakeholders, and the community. Anticipating changes and preparing the work force to meet those changes are at the core of this long-range outlook.
Management by Fact
Facts and data are critical for sound planning, quality assessment, and managing quality improvement. It is important in today's fast-moving markets and diverse organizations that key decisions are made based on reliable information. This concept involves the use of analysis of trends, projections, and cause-and-effect relationships to support sound evaluation and decision-making.
Partnership Development
Internal partnering of individuals and teams helps each fulfill their goals and enhance overall performance of the organization. External partnering with customers, suppliers, and other organizations fosters continued growth and success.
Corporate Responsibility and Citizenship
Corporate responsibility refers to the basic expectations of the organization -- its business ethics and protection of public health, public safety, and the environment. Health, safety, and environmental considerations need to take into account the organization's operations as well as the life cycles of the products, programs, and services it provides.
Results Orientation
An organization's performance system needs to focus on
results. Results ought to be guided by and balanced by the interests of
all stakeholders -- customers, employees, stockholders, suppliers, partners,
the public, and the community. Organization strategy needs to explicitly
address the requirements of all stakeholders to ensure that actions and
plans meet differing needs and avoid adverse impact on the stakeholders.
| Table 5 |
| SAMPLE FEEDBACK IN THE AREA OF CUSTOMER SATISFACTION DETERMINATION |
STRENGTHS:
|
AREAS FOR IMPROVEMENT:
|
FIGURE 2: Improvement Cycle Using Quality Award Process
|
® ¬ |
Refine company's understanding of award criteria ¯ Conduct self-assessment
¯ Receive feedback from examiners
|
2. http://www.quality.nist.gov/97s<bl.htm. Hereafter, all cited Web pages belong to the U.S. Dept. of Commerce's National Institute of Standards and Technology, unless otherwise stated.
3. "Building on Baldrige: American Quality for the 21st Century," a July 1995 report issued by the Council on Competitiveness, Washington, D.C., http://www.quality.nist.gov/faq9704.htm.
4. Application booklets are available free from the Margaret Chase Smith Quality Association via the Web at http://www.maine-quality.org, phone at (207)621-1988, or e-mail at mqc@maine-quality.org.
5. http://www.quality.nist.gov/faq9704.htm.
6. http://www.quality.nist.gov/docs/98whyapp/page1.htm.
7. http://www.quality.nist/gov/qualswb.htm
8. Information presented at the "State and Local Award Workshop," Washington, D.C. (July 1998), sponsored by NIST.
9. Phil Roether, vice president for product production process, Raytheon Systems Company, a 1992 Baldrige Award recipient in manufacturing, http://www.quality.nist.gov/docs/98whyapp/page1.htm.
10. http://www.quality.nist.gov/faq9704.htm.
11. http://www.quality.nist.gov/faq9704.htm.
12. http://www.quality.nist.gov/docs/98whyapp/page5.htm.
13. Vinod Singhal and Kevin Hendricks, "Quality Awards and the Market Value of the Firm: An Empirical Investigation," Management Science 42:3 (March 1996): 415-36.
14. http://www.quality.nist.gov/faq9704.htm.