This article presents an overview of the Malcolm Baldrige National Quality Award program. The award program was launched by Congress when it passed the Malcolm Baldrige National Quality Improvement Act of 1987. The act and the award it created were named for Ronald Reagan’s first Secretary of Commerce, who was killed in July 1987. The purpose of this award is to recognize outstanding, well-managed companies to set a standard of competitive excellence for American enterprises in the global economy. Applicants complete an application that makes them take stock of their critical practices—in management, employee relations, customer focus, and other key areas of business operations. The application, which reflects principles known as the Baldrige Criteria, invites a company to look at itself methodically to recognize what it is doing well and to find areas where improvement is possible. Although winning the award is prestigious, the more fundamental value lies in structuring a company’s culture and practices to deserve it.
A company that is named supplier of the year by three different customers in two years can’t be taking its performance for granted. The company has to work at it. For instance, suppose it increased its deliveries 18 percent in five years and at the same time reduced customer complaints to 0.3 percent in 2005 and then to 0.2 percent in 2008. Suppose its deliveries are error-free more than 99 percent of the time.
Cargill Corn Milling North America did just that. Part of privately held Cargill Inc., Cargill Corn Milling supplies corn- and sugar-based foods, animal feed, and fermentation products. Its accomplishments didn’t stop with its delivery performance. Careful monitoring and maintenance of equipment and careful energy usage, for instance, have permitted the company to maintain steady per-bushel costs even as energy prices increased 50 to 80 percent, chemical costs rose 30 percent, and maintenance costs increased 10 percent. What's more, its earnings after tax nearly tripled between 2003 and 2007.
Cargill Corn Milling was the recipient of the Malcolm Baldrige National Quality Award in 2008 from the U.S. Department of Commerce. It is the purpose of the award to recognize outstanding, well-managed companies like Cargill in order to set a standard of competitive excellence for American enterprises in the global economy. Applicants complete an application that makes them take stock of their critical practices—in management, employee relations, customer focus, and other key areas of business operations. The application, which reflects principles known as the Baldrige Criteria, invites a company to look at itself methodically to recognize what it is doing well and to find areas where improvement is possible.
As a member of the Board of Examiners for the Malcolm Baldrige National Quality Award, I have come to see the Baldrige Criteria as more than the means to apply for national recognition of accomplishment. Although winning the award is prestigious, the more fundamental value lies in structuring a company's culture and practices to deserve it. By going through the process of internal analysis that the Baldrige Criteria prompt—some companies hire a third-party consultant as a guide—the exercise can be a form of gap analysis for management. After all, the company that stops looking for ways to improve itself has begun to fail.
The award program was launched by Congress when it passed the Malcolm Baldrige National Quality Improvement Act of 1987. In the early ’80s, business leaders and government officials had begun to recognize that American productivity and quality could use improvement if U.S. companies were to compete in an ever-expanding global marketplace. The act and the award it created were named for Ronald Reagan's first Secretary of Commerce, who was killed in July 1987 in a fall from a horse.
Criteria for Winning
The award program is administered by the National Institute of Standards and Technology for the U.S. Department of Commerce. Its goals are to stimulate American companies to improve quality and productivity while increasing profits, to recognize the achievements of those companies that are role models in these areas, and to set forth criteria that may be used to manage winning enterprises.
The Malcolm Baldrige National Quality Award was designed around a framework for an integrated approach to achieve superior performance and organizational improvement. Quality principles are applied in specific categories to assess performance against a non-prescriptive standard of activities. They are reviewed by a panel of examiners and judges, and updated periodically.
The Baldrige Criteria were established to help companies enjoy better employee relations, higher productivity, greater customer loyalty, increased market share, and improved profitability. The application process begins by asking companies to evaluate themselves in six key areas: leadership; strategic planning; customer focus; measurement, analysis, and knowledge management; workforce focus; and process management. For scoring purposes in competing for the award, each category has a maximum number of points possible. Leadership has a maximum of 120 points. Most of the other categories have 85 points possible.
What Does It Cost
The fees for applying for the Malcolm Baldrige National Quality Award are quite reasonable and depend on the size of the company. The application fee is roughly between $4,000 and $7,000. A company that scores in the lower ranges will receive a report of strengths and opportunities for improvement (OFIs in examiner lingo). A company that scores in the upper ranges of performance will qualify for a site visit by the examiner team that lasts about a week. The fee for a site visit is an additional $10,000 to $35,000. The company will receive an additional feedback report based on the site visit findings.
A company in the early stages will want to have some consulting from an outside source. An internal team would be established with functional experts in each of the criteria categories, probably six to 10 managers, who will be responsible for coordinating the information for the application document. This team should also have a document writer.
They will need training. That cost depends on the number of hours needed to bring the team up to speed on the materials needed and the integrative nature and intricacies of the criteria. That might be 40 to 80 hours of training. Depending on each company's special needs and the cost of the consultant, this investment can be quite variable.
For companies that wish to use the criteria for internal review rather than applying for the award, after the application document is written, the company might want an outside auditor to perform the review, scoring, and gap analysis. Again, in the early stages, the same trainer could be hired to do the review, if the trainer is qualified. However, if the company intends to base compensation on the results, or actually file an application with the Baldrige committee, then the same person who trained the internal team might not be the best person to evaluate the final document for submittal, at least in my opinion. Either way, there is another 60 to 120 hours for an independent review of the application, for a gap analysis, and for scoring, depending on how many auditors are used to conduct the evaluation. All in all, this isn’t cheap, but a robust quality system pays for itself many times over in the long run. There is definitely an up-front cost, but it takes money to make money, or so I’ve heard. S.G.
Each category is broken down into a series of questions that require detailed analysis. Under customer focus, for instance, companies are asked to consider their customer engagement with an overall question: “How do you engage customers to serve their needs and build relationships?” That question is supplemented by sub-questions including, “How do you identify and innovate product offerings to meet the requirements and exceed the expectations of your customer groups and market segments?” and “How do you identify and innovate product offerings to attract new customers and provide opportunities for expanding relationships with existing customers?” The sub-questions are very detailed and delve into the essence of a company's processes. A company that is thinking of applying for the Baldrige Award would be well advised to have specific answers as responses to the sub-questions in the application.
But the evaluation doesn’t end there. The first six categories account for as many as 550 points of a possible total of 1,000. The remaining 450, almost half, come under the category of results.
Within the results section of the application, there are echoes of those questions asked in the process section. Results questions include, “What are your current levels and trends in key measures or indicators of customer satisfaction and dissatisfaction? How do these results compare with the customer satisfaction levels of your competitors and other organizations providing similar products?”
In short, the process doesn’t only ask companies what steps they have taken, but also has them evaluate how successful those decisions have been.
Product = Service
Although the language of the questionnaire consistently refers to “product,” the product can appropriately be a service. Indeed, service businesses account for the majority of applicants for the award.
In 2009, the Malcolm Baldrige National Quality Award program received 70 applications. In our nation, only 70 companies in six business categories applied for this prestigious quality award. Forty two of those applications came from health care organizations.
Few companies apply for the award and far fewer win. The number of recipients varies from year to year. In 2003, seven companies received the award. In 2008, three companies did.
Every company that applies for the Baldrige award does not expect to win it. They apply because the Baldrige organization assigns their application to a team of examiners, usually five to seven team members, who have been elected to the Board of Examiners based on their business specialties, education, and work experience in the quality field. There are about 500 Malcolm Baldrige National Quality Award Examiners on the board each year.
Once the team receives an application, it begins a rigorous evaluation of the company in a series of reviews and collaborations. By the time the process of reviewing the application ends, there is a consensus view of the scoring, and a complete set of comments that acknowledge strengths exhibited by the company as well as opportunities for improvement. Each company may then leverage on what it does well and work on improving areas to achieve the most benefit for itself.
The score and comments convey how well the company is performing in the Criteria categories. Essentially, it is a gap analysis. This feedback offers the management of the company direction for ways to improve during the next year. The process has great usefulness to a company since it is an evaluation of its business from the perspective of the Baldrige standard of excellence.
As one of the 2006 Baldrige Award recipients, put it: “The Baldrige assessment is the best consulting available. Teams of highly experienced experts analyze every aspect of your organization's strengths and weaknesses as presented by your own internal review. This internal and external review forces continuous assessment, learning, deployment, and integration of key business processes.”
Why do so few companies apply for the award? I’d like to think that many companies reap the benefits of the Baldrige process without ever applying for the award, that they use the Criteria for a self-evaluation and have a third-party perform the audit once a year. Perhaps they write the award application as if to apply, but then simply have it reviewed by someone who has been trained in the Baldrige process.
Other companies may choose to participate in quality programs hosted by their state. Several states have quality programs that are patterned around the national program.
The goal of the Malcolm Baldrige National Quality Award program is to achieve a robust quality process and therefore high customer satisfaction, which in turn results in high profitability. Why not consider using the Baldrige Criteria to improve your company?
To Learn More
A profile on Cargill Corn Milling, a 2008 recipient of the Malcolm Baldrige National Quality Award, and the profiles of all the award's winners going back to 1988 can be found on the NIST Web site, www.nist.gov/baldrige.
The site also offers free copies of Baldrige Criteria booklets and other information relating to the Quality Award program.