So, what are the benefits of Business Excellence? In this blog we show the key findings from research into the impact of Business Excellence in the United States.

  • The Baldrige Performance Excellence Program conducts regular studies that showcase the positive impact of the Baldrige Framework in terms of operational and financial perfomance. For example:
    • 124 Baldrige Award winners (including 10 that have won it twice and two that have won it three times) are serving as national role models in the United States.
    • 80% – is the median growth in revenue for two-time Baldrige Award winners.
    • 56% – is the median job growth for two-time Baldrige Award winners (compared with 4.6% for a matched set of industries and time periods).
    • 255% – is the median growth in revenue for three-time Baldrige Award winners.
    • 188% – is the median job growth for three-time Baldrige Award winners.

    Source: National Institute of Standards and Technology, 2023a. Baldrige Program Impacts. NIST.

Figure 1 – Baldrige Excellence Framework

  • An economic evaluation of the Baldrige Performance Excellence Program reported that the Baldrige Program’s benefit-to-cost ratio was 820:1. To arrive at this ratio, the benefits received by the 273 Malcolm Baldrige National Quality Award applicants from 2007 to 2010 were compared with the cost of operating the Baldrige Program. The 820:1 ratio represents only the benefits for the surveyed applicants, but it represented all of the Baldrige Program’s social costs. The research indicated that the benefit-to-cost ratio would be much higher if program costs were compared with the benefits for the entire economy of the United States.

      Source: Link, A. and Scott, J., 2011. Economic Evaluation of the Baldrige Performance Excellence Program. NIST.
  • A fictional investment of US$1,000 was made in stocks of the S&P 500 companies that were using the Baldrige Criteria. A stock study was then released every year from 1994 to 2004 to compare the financial performance of these companies against the S&P 500 average. The companies following the Baldrige Criteria were found to perform significantly better than the average each year until 2003, with the highest outperformance being recorded at 6.5 to 1 in favour of the companies using the Baldrige Criteria. The poorer performance of the companies using the Baldrige Criteria in 2003 and 2004 against the compared group was attributed to the poor performance of technology companies in those years, for unrelated reasons. The Baldrige Program discontinued the study in 2004, as most Award recipients since then have been either business units of larger publicly traded companies, privately held companies, or non-profit organisations. Neither of the latter two types of organisations issues or trades stock on the public exchanges, and business units cannot be disaggregated from the corporation as a whole.

      Source: National Institute of Standards and Technology (NIST), 2023b. Baldrige Stock Studies 1994 to 2004. NIST
  • 600 award winners (including Malcolm Baldrige National Quality Award winners and winners of supplier awards based on the Baldrige model) were studied, with 75% coming from the manufacturing sector. The sample only included publicly traded firms so that objective and historical financial data could be analysed.

    Performance was examined over two five-year periods. The first period—the post-implementation period—started one year before and ended four years after the recipients had won their first quality award. Examining performance from this point provided an estimate of the financial impact of TQM implementation once it had become effective. The second period—the implementation period—started six years before and ended one year before the recipients had won their first quality award. It was during this time that the recipients were implementing TQM and incurring the associated implementation costs. To provide a benchmark for the performance of the award winners, a control firm was set up for each award winner: companies were selected from the same industry and were the closest in size, as measured by the book value of assets.

  • Results for the implementation period
    The results for the implementation period showed no significant differences in the performance observed during the implementation period compared to the control group. This was good news, since worsening performance might have been expected because of the direct and indirect costs from implementing TQM.

    Results for the post-implementation period
    The results show significant differences in performance between award winners and the control group. During this period, the growth in operating income of winners averaged 91%. This contrasted with a 43% average growth for the control group. Winners, on average, experienced a 69% jump in sales (compared to 32% for the control group), a 79% increase in total assets (compared to 37% for the control group), and a 23% increase in the number of employees (compared to 7% for the control group). For full results, see Figure 2.

Figure 2 – Comparison of Award-Winning Firms and Control Firms for Post-Implementation Period

    When comparing small award winners (with total assets less than US$600 million) and large award winners (total assets greater than US$600 million), the small winners outperformed their control group by an average of 63%, whereas large winners outperformed their control group by about 22%. Figure 3 shows that small winners experienced a 63% improvement in operating income (compared to 22% for large winners), a 39% increase in sales (compared to 20% for large winners), and a 17% improvement in return on sales (compared to 7% for large winners).

Figure 3 – Comparison of Small and Large Award-Winners for Post-Implementation Period.
Source: Hendricks, K. B., & Singhal, V. R., 1999. Don’t Count TQM Out Evidence Shows Implementation Pays Off in a Big Way. Quality Progress, April, ASQ.

This blog is part of a larger report titled ‘Best Practice Brief, Issue 2: International Research Evidence on the Benefits of Business Excellence.’ The report compiles findings from studies conducted over the last 35 years, shedding light on how Business Excellence delivers economic and societal benefits for organizations and countries worldwide. The full report is available from the member’s area of BPIR.com. Membership of BPIR.com is available at https://www.bpir.com/join-now/.


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Posted by:BPIR.com
Author:Dr Robin Mann, Centre for Organisational Excellence Research, New Zealand, December 26, 2023
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