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What is Business Excellence?
A key feature of the BPIR member's area is the use of business excellence models to categorise and present business improvement information. At present in addition to the BPIR's own categorisation system, members have a choice of selecting either the Baldrige Model, EFQM Excellence Model or Singapore Quality Award Framework through which to view the BPIR databases. Future development includes the addition of more models in order to increase the range of choice for members from different parts of the world.

The following is a brief discussion of what business excellence models are. Included are the key challenges and proven benefits that can stem from their use.

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What are Business Excellence Models?                                                                        

Business excellence models are frameworks that, when applied within an organisation, can help to focus thought and action in a more systematic and structured way that should lead to increased performance. All the formal models used within the BPIR are best practice models ie. thorough and consistent use of the model can lead to world class performance levels in the area(s) related to the model.

The models used within the BPIR are holistic in that they focus upon all areas and dimensions of an organisation, and in particular, factors that drive performance. These models are internationally recognised as both providing a framework to assist the adoption of business excellence principles, and an effective way of measuring how thoroughly this adoption has been incorporated.

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What is Business Excellence?

Business Excellence, as described by the European Foundation for Quality Management (EFQM), refers to; ”Outstanding practices in managing the organisation and achieving results, all based on a set of eight fundamental concepts”, these being, “results orientation; customer focus; leadership and constancy of purpose; management by processes and facts; people development and involvement; continuous learning, innovation and improvement; partnership development; and public responsibility”.  This definition serves as a typical example of those put forward today.

In general, business excellence models have been developed by national bodies as a basis for award programmes. For most of these bodies, the awards themselves are secondary in importance to the wide-spread take up of the concepts of business excellence, which ultimately lead to improved national economic performance. By far the majority of organisations that use these models do so for self-assessment, by which they can identify improvement opportunities, areas of strength, and use the model as a framework for future organisational development. Users of the EFQM Excellence Model ,for instance, do so for the following purposes:

 

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 When used as a basis for an organisation's improvement culture, the business excellence ‘criteria’ within the models broadly channel and encourage the use of best practices into areas where their effect will be most beneficial to performance. When used simply for self-assessment the 'criteria' can clearly identify strong and weak areas of management practice so that tools such as benchmarking can be used to identify best-practice to enable the gaps to be closed. These critical links between business excellence models, best practice, and benchmarking are fundamental to the success of the models as tools of continuous improvement.

The most popular and influential model in the western world is the one launched by the US government called the Malcolm Baldrige Award Model (also commonly known as the Baldrige model, the Baldrige criteria, or The Criteria for Performance Excellence). More than 60 national and state/regional awards base their frameworks upon the Baldrige criteria.

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Who uses Business Excellence / Models?

Organisations across the world are using these models as a basis for continuous performance improvement. In the US nearly two million copies of the Malcolm Baldrige Model have been distributed since the award’s launch in 1988, and this does not include copies that are available in books, state and local award programs, or those downloaded from the web.  It was recently estimated that there are at least 76 countries operating a national BE award and in Europe alone the European Foundation for Quality Management believes that at least 30,000 organisations are using the EFQM model. The EFQM’s figure was based on the number of EFQM members, the members of its national partners, and those organisations that they know are utilising the model in their business.

Of course there are no rules on how an organisation may use the models,

  • some use them continually to self-assess, as the driver of continuous improvement
  • some use only the results sections as a basis for designing and managing a performance measurement system
  • some use the resulting scores from an assessment against the model to benchmark against other like-minded organisations, allowing an easy method of identifying organisations that can potentially be learned from
  • some base the whole culture of the organisation around the concepts

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What are the common challenges associated with a Business Excellence approach?

There are two main challenges that are faced by those using business excellence models, both of these are addressed by the services of the BPIR. The following two paragraphs outline these issues.

The first challenge encountered involves the fact that the criteria in the models contain hundreds of questions requiring responses on how or what is done in particular areas of focus. These questions are designed to apply to a generic organisation (although there are three versions of the Baldrige Model which are specific to Business, Education, and Health industries), as such they can be difficult to interpret to specific circumstances without spending a reasonably large amount of time reading around the model – something that many organisations with a short term focus find hard to justify. This challenge has given rise to much work for consultants on the subject.

The second and main challenge encountered when using business excellence models is that none of the models provide solutions. Although understanding the criteria and responding with the organisation's practices or results should bring enlightenment relating to what the organisation should be considering, there is no specific advice given on how to improve performance. It is left up to the user to find ways to improve in the areas identified.

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How can the BPIR help?

In response to the challenge above, in the BPIR's members' area we provide a service that uses the powerful focus of the models to complement the valuable experience and practices of organisations around the world. What we do, through our trained team of  Baldrige and EFQM assessors, is link best practice case studies and data to the lowermost parts of the business excellence models, and in some cases to individual parts of a question/area to address. This enables our members to conduct searches based upon the models and find relevant best practices or tools or measures to use - thus providing practical help and understanding of the business excellence model criteria and how to improve in that specific area. 

The BPIR databases provide our members with information so that they can make more informed decisions relating to what best practice to implement, which organisations to contact for benchmarking partners, what areas to improve (based on the performance measurement data we provide), and what tools or techniques have been used successfully in similar areas by other organisations. Therefore the BPIR helps organisations to confirm where they have opportunities (through providing performance measures and benchmarking data), and how to take the next step after having identified opportunities (through providing examples of appropriate performance improvement activities).

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What is the track record of Business Excellence use?

Research indicates that organisations with a business excellence approach obtain significant benefits. Beyond improvement in financial indicators, other benefits include enhanced innovation and idea generation, customer satisfaction, organisational growth (employees), employee satisfaction and involvement, efficiency and effectiveness and product reliability. Notwithstanding these benefits, of which there is considerable evidence and also debate, one key benefit of award-based models is that, even if nothing else, they provide a ‘balanced scorecard’ of criteria and measures against which organisations can objectively evaluate their management systems and performance, and compare that performance with world standard benchmark levels, or with the performance of other organisations.

Sources of evidence of the financial impact of business excellence include the US ‘Baldrige index’. This was used over the past ten years to track the share value performance of award winners against a control group of Standard & Poor’s 500 companies. A notional US$1000 was invested in Baldrige award winners and its subsequent growth compared against the equivalent amount invested in the S&P companies. After eight years of outperforming the S&P 500 companies by as much as 6.5 to 1 on stock price performance, Baldrige award winners underperformed against the comparison group in 2003 and 2004. This is attributed to the relatively poor performance of technology companies in recent years, and the index has now been discontinued for reasons that are detailed in NIST. A similar index was developed in Australia, whereby AU$5000 was notionally invested in BE award winners stock in 1990 and compared against the same amount invested in S&P companies. This index reported improved share performance of a factor of 3.5 to 1 among award winners over thirteen years up to 2003. No more recent data on this index are currently available at the time of writing.

Hendricks & Singhal studied the long-term effects of implementing effective BE programs. Using the winning of Criteria for Performance Excellence (Baldrige) awards as the criterion to select organisations their research shows a strong link between BE and financial performance. The study found that US BE award winners experienced increased income, sales and total assets during their respective post-implementation periods as compared with their controls. In a similar study sponsored by the European Foundation for Quality Management and British Quality Foundation of 120 award winners it was found that the winners outperformed comparison companies similar in size and operating in the same industries over a 11 year period.

In terms of general benefits, a study by Hausner of the University of Wollongong, Australia, examined the performance of 15 manufacturing firms that had participated in the Australian Quality Awards (not only award winners) and demonstrated improvements against a range of KPIs. Hausner requested 15 firms to list the 10 most important performance indicators, and provide quantitative data in respect of those KPIs over an 8 year period.  Hausner found a strong positive correlation between KPI improvement and total business excellence score, and hence concluded that striving for improvements against the Australian Business Excellence Framework (ABEF) is of interest to all stakeholders as organisational success is tied to the effectiveness of its management practices as reflected through the ABEF.

Mann and Saunders identified a strong correlation between “Enablers” and “Business Results” when studying Baldrige self-assessment results. Their data indicated that organisations with excellent approaches to leadership, strategic planning, customer and market focus, information and analysis, human resource focus and process management are more likely to achieve excellent Business Results (composed of customer satisfaction results, financial and market results, human resource results, and organisational effectiveness results).

Finally, organisations that used the Australian Business Excellence Framework were asked to assess whether or not their performance had changed as a result of following a business excellence approach. The Figure below indicates that all organisations except one reported benefits and the one that did not report any benefits had only recently began to use the ABEF. There was also a trend that those organisations which had used the ABEF for a longer period of time were more likely to indicate that their performance improvements had been greater.

 

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        Benefits from using the ABEF (categorised by length of use)

Read our Management Brief Report to learn more about Business Excellence

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