When the ISO 9000 quality management system was launched in the United States in 1987, the U.S. Congress established the Malcolm Baldrige National Quality Award to improve business performance. The resulting MBNQA Criteria for Performance Excellence (also known as the Baldrige Criteria) provided a system for managing process per- formance. The first Baldrige award went to Motorola, where I had an opportunity to contribute to the quality systems while working with the late Bill Smith. The purpose of the Baldrige Criteria was to accelerate the rate of improvement and inno- vation. The award criteria provided a performance framework based on measures of leadership, customer information, oper- ations, human resources, and finances. Studies showed that organizations implementing systems based on the award guidelines outperformed their counterparts in value creation, stock performance, and market leadership.
With worldwide acceptance, the Baldrige Criteria raised awareness of customer satisfaction, leadership, and informa- tion management. The Baldrige Criteria were based on global best practices. For example, the leadership category was created based on behaviors and practices deployed by leaders such as Bob Galvin, then CEO of Motorola. Leadership included defi- nition of a vision, communication with employees, community
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service, public responsibility beyond the organization, and con- stancy of purpose. The Baldrige Criteria provide a role model for companies to achieve superior performance, while ISO 9000 provides a framework for an organization to achieve good results consistently.
The Baldrige Criteria highlight the following aspects of business performance:
● Visionary leadership
● Customer focus
● Employee development
● Process excellence
● Market leadership
● Superior financial results
These business aspects are addressed in the seven categories of Baldrige Criteria for excellence, as shown in Figure 1-4, as
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Category Area Point Value
Organization Leadership
Public Responsibility and Citizenship Strategy Development
Strategy Deployment
Customer and Market Knowledge Customer Relations and Satisfaction Measurement and Analysis of Organizational Performance Information Management Work Systems
Employee Education, Training, and Development
Employee Well-Being and Satisfaction Product and Service Processes Business Processes
Support Processes Customer-Focused Results Financial and Market Results Human Resource Results
Organizational Effectiveness Results
Business Results 450
Human Resource Focus 85
Process Management 85
Customer and Market Focus 85
Information and Analysis 90
Leadership 120
Strategic Planning 85
FIGURE 1-4. Baldrige Criteria for performance excellence.
(MBNQA Guidelines, 2003.)
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well as in several areas within each category. Each area con- sists of a set of questions that focus on certain aspects of a business. The objective is to emulate, as much as possible, each guideline in order to achieve superior results.
The three major performance measurement and improve- ment systems of ISO, the Baldrige Criteria, and Six Sigma all launched at about the same time. ISO launched ISO 9000 and Motorola launched the Six Sigma methodology in 1987, and Congress launched the Baldrige Criteria in 1988. Figure 1-5 highlights key differences among the three approaches.
Faced with fierce foreign competition in the semiconductor industry, the late Bill Smith invented the Six Sigma methodology in 1985–1986. He realized that the rate of improvement Motorola required to be profitable was so significant that something dramatically different had to be done. Motorola
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ISO 9000 MBNQA Six Sigma
A framework for creating “Quality Thinking.”
Facilitates process management through documentation and compliance.
Specifies all business functions except Accounting.
Promotes Management Responsibility through communication and management review.
Main aspect is compliance to documented practices and improving effectiveness.
About 500,000 companies have implemented it worldwide.
Savings are difficult to quantify.
Mass application of the standards.
It is a third-party certification.
Is on decline due to diversification in series of industry-specific standards.
A framework for creating “Performance Thinking.”
Facilitates benchmarking to improve performance levels to best-in-class levels.
Specifies key aspects of business.
Promotes exceptional leadership behaviors as a way of life in society.
Main aspect is to achieve total customer satisfaction through superior practices and performance.
About 4 to 8 companies win the national level; similar number at state level and in other countries.
Performance of publicly traded companies has shown advantage over the others by 3 to 4 times.
Limited to a few companies.
It is recognition for excellence.
Stabilized due to limited recognition.
Has expanded into health care and education.
A framework for linking improvement to profitability.
Facilitates dramatic improvement to achieve performance excellence.
Specifies a methodology for improvement irrespective of functionality.
Requires leadership to aim at highest performance with highest profitability.
Main aspect is achieving and maintaining a high improvement rate for business aspects that affect
profitability.
Has been adopted by several companies to achieve dramatic improvement and profitability.
Companies have reported huge amount of savings in production and service areas.
Selectively used by companies committing to be a superior company.
It is a methodology to optimize performance and maximize profitability.
Growing rapidly as an attractive means to realize superior financial results.
FIGURE 1-5. Comparison of ISO 9001:2000, MBNQA, and Six Sigma system requirements.
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leaders envisioned the state of manufacturing 20 years into the future. They predicted that cellular phones were going to follow a similar route as the commercialization of digital watches. Interestingly, that is exactly what happened. Today, the trend in the cost of a cellular phone is almost like that of a digital watch several years ago. Like the price of digital watches, the price of cell phones has dropped precipitously. Sometimes a cellular phone is even complimentary with the purchase of a cellular service. This is why new processes for improvement must be created continually and not just as a one-time deal.
Sustaining the Six Sigma process is critical to maintain perfor- mance once the initial success is achieved.
Before launching the Six Sigma initiative, Bill Smith had discovered that most customer complaints and failures of the product in the field were primarily caused by errors that the quality control system was unable to detect before the product was shipped. Typically, management focuses on resolving cus- tomer complaints through developing a superior customer ser- vice team. With Six Sigma, however, improving customer service for fixing field failures may be less important than developing systems that will catch and correct errors before the customer receives the product. The field failures really determine the cus- tomers’ perception of an organization’s products or services. To address the customers’ concerns, therefore, internal operational excellence, driven passionately by the leadership, is mandatory.
In addition to widespread programs such as ISO 9000, the Baldrige Criteria, and Six Sigma, several companies have developed their own ways of achieving excellence. These can be effective, but issues arise in the methods such organizations use to rate their performance. Every organization looks at financial performance critically every month or quarter.
However, many organizations, small or large, do not review their operational performance as rigorously as they do their financial performance. In essence, they are watching the pennies at the end of the line while ignoring the dollars in the line, which should be subject to even greater scrutiny. Companies with superior performance do so and reap the benefits. However, most businesses struggle to find a method of looking at these costs that is simple, practical, and compatible with profitability.
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