Frameworks for Achieving Business Excellence · frameworks for achieving business excellence 1.1 introduction 1.2 the european foundation for quality management (efqm) business excellence

1chapter

Frameworks for Achieving Business Excellence

1 . 1 I N T R O D U C T I O N

1 . 2 T H E E U R O P E A N F O U N D AT I O N F O R Q U A L I T Y

M A N A G E M E N T ( E F Q M ) B U S I N E S S E X C E L L E N C E M O D E L

1 . 3 T H E ( H A R V A R D ) B A L A N C E D S C O R E C A R D

1 . 4 T H E M A L C O L M B A L D R I D G E N AT I O N A L Q U A L I T Y AWA R D

1 . 5 R E G I O N A L E X C E L L E N C E AWA R D S A N D O T H E R

F R A M E W O R K S

C H A P T E R 1 : F R A M E W O R K S F O R A C H I E V I N G B U S I N E S S E X C E L L E N C E

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1.1 IntroductionWhen the term ‘Total Quality Management’(TQM) first became popular amongst

organisations seeking a methodology by which to improve their performance,

there were very few people who had a clear understanding of what TQM actually

meant.To many TQM was synonymous with ISO 9000 (previously BS5750) to

others it was also concerned with issues such as improving communications,

understanding customer needs and the development of a ‘mission’ or ‘vision’

statement.

What is clear is that many organisations embarked on TQM programmes

without an understanding of where they were going or indeed how they were

going to get there.Because of this lack of understanding, the term TQM has now

largely been dropped in favour of ‘Business Excellence’ or ‘Organisational

Excellence’.A number of frameworks have emerged which help organisations to

focus on the criteria which must be addressed in order to achieve excellence

through a programme of continuous improvement.

To achieve continuous improvement,organisations must be able to answer

three fundamental questions:

• Where are we now?

• Where do we want to get to?

• How do we get there?

The question ‘where are we now’ is most effectively answered by a

rigorous self-assessment programme using an appropriate model or framework.

The self-assessment process examines an organisation’s performance against key

performance criteria and establishes a baseline of performance supported by

objective evidence. In order to understand ‘where do we want to get to’

organisations must have a clear vision of the future, but, more importantly, must

establish and communicate the strategy and specific actions which will deliver

this ‘vision’.

There are many examples of organisations who have spent large amounts

of time and money developing impressive mission statements which are printed

on glossy newsletters and posters and yet, when questioned, the people within

the organisation are not even sure what it means let alone how it is going to be

achieved! These organisations have missed the point entirely, as the focus must

be on ensuring everyone in the organisation understands and, indeed, have

played a part in developing the mission and the specific actions which will

ensure achievement.The people in the organisation must know how they can

contribute to achievement and, in order to measure achievement, these actions

must have appropriate performance measures or indicators.The self-assessment


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process looks closely at the way organisations develop and communicate their

vision, mission and goals.

The question ‘how do we get there’ is answered by the specific

performance improvement activities which are identified and prioritised during

the self-assessment process. These improvements are prioritised with the

objective of achieving the organisation’s strategic objectives and they must be

integrated with the organisation’s business planning function to ensure that

responsibilities and timescales are identified and that the necessary resources are

provided. Repeated self-assessments will measure improvements against the

initial performance baseline and monitor progress towards ‘Business Excellence’.

This chapter now looks at some of the frameworks which are currently in

use and later chapters examine the self-assessment process in more detail.

1.2 The European Foundation for Quality Management(EFQM) Business Excellence Model

The European Foundation for Quality Management was established in 1988 with

the objective of improving the competitiveness of European companies in the

world market.The EFQM was originally made up of fourteen chief executives

from leading European companies. During a series of workshops held during

1990,they examined the key characteristics displayed by ‘excellent’organisations

and also the criteria used by existing quality award mechanisms such as The

Deming Prize and The Malcolm Baldridge National Quality Award.

From these workshops the simple model was established:

Figure 1.2.1 The Simple Model

The premise of the simple model was that organisations would achieve

better results through involvement of all employees (people) in continuous

improvement of their processes.

From the simple model the European Model for Total Quality was

developed in 1990 and this later became known as the EFQM Business

Excellence Model (see Figure 1.2.2).The Model was developed as the framework

for the European Quality Award and the award process was first launched in

1991.In 1993 the British Quality Foundation was established and,using the same

award framework, launched the UK Quality award in 1994.

RESULTSPROCESSESPEOPLE


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Following its development as the basis of the European and UK Quality

Awards, the EFQM Business Excellence Model has become a recognised

framework for carrying out self-assessments within a variety of organisations in

both the private and public sector – with the emphasis very much on achieving

continuous improvement rather than being used as the basis for applying for a

quality award.

Figure 1.2.2 The EFQM Business Excellence Model

The Business Excellence Model is based on the premise that Customer

Satisfaction, People (employee) Satisfaction and a favourable Impact on Society

are achieved through Leadership driving Policy and Strategy, People

Management, Resources and Processes, leading ultimately to excellence in

Business Results.

Each of the nine elements shown can be used to assess an organisation’s

progress towards Business Excellence. These elements are divided into five

‘Enabler’elements which are concerned with how an organisation approaches a

particular activity and four ‘Result’elements which are concerned with what the

organisation has achieved and is achieving.These nine elements are further sub-

divided into ‘Criterion Parts’ and ‘Areas to Address’ as shown in Figure 1.2.3,

below.

Organisations wishing to apply for the European or UK Quality Award must

prepare a detailed, written submission which addresses each element of the

Business Excellence Model and which describes clearly the approaches chosen

and the results which have been achieved. Relevant examples and commentary

are also included in order to demonstrate understanding and provide a guide to

the evidence which exists to support performance in each area.Trained assessors

will then review and ‘score’the award submission on the basis of two factors: the

Leadership

10%

Processes

14%

Businessresults

15%

Peoplemanagement

9%

Resources9%

Policy &strategy

8%

Peoplesatisfaction

9%

Impact onsociety

6%

Customersatisfaction

20%

Enablers 50% Results 50%


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excellence of the approach (or results) and the extent to which the approach (or

results is deployed, or achieved throughout the organisation.

From the percentage scores allocated to each element an overall

percentage score is then derived and converted into points according to the

weightings shown in the Model (see Figure 1.2.2, above).It is on the basis of this

overall score that organisations are selected for site visits to validate the evidence

presented in the submission and awards are then made according to these

verified scores.

Figure 1.2.3 The Structure of the Elements

The Enabler Elements

As has already been said, the enabler elements are concerned with how the

organisation approaches particular activities, and self-assessment programmes

will look specifically at the appropriateness of the activities, systems and

techniques in place. Self-assessment also examines the degree to which these

activities are systematic and prevention based, the use of review cycles and the

implementation of improvements resulting from reviews and the degree to

which these activities and systems are integrated into normal operations. The

following pages examine each element in more detail.

Element 1 – Leadership

The leadership element examines the involvement and commitment of all

managers in leading the organisation in customer focused, continuous

improvement activities. Also, it includes how managers demonstrate this

involvement and commitment through their support of staff training and

Element 1 Leadership

1d

1c

1b

1a

Criterion Parts

AREAS TOADDRESS


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development and their involvement in building relationships with customers and

suppliers. The leadership element is broken down into four criterion parts as

follows:

1(a) Visible Involvement of Leaders

How managers or leaders act as role models, leading by example in the carrying

out of improvement activities and by becoming directly involved in the giving

and receiving of training.

Also, how leaders of organisations communicate the values and

expectations of the organisation clearly with employees, give them the

opportunity to provide feedback and then act on this feedback to improve

organisational performance.

1(b) How Leaders Provide Resources and Assistance

How leaders of organisations ensure that training and improvement activities are

properly resourced and that people are encouraged to participate in these

activities by providing appropriate support.

1(c) How Leaders are Involved with Customers and Suppliers

How leaders are concerned with developing strong links with suppliers and

customers and in developing and participating in joint improvement activities.

Also, how they promote and support the achievements of the organisation

externally and are actively involved with professional bodies and participate in

conferences and seminars to promote Business Excellence.

1(d) How Leaders Recognise Achievement

The way leaders of organisations recognise the achievements of individuals and

teams from both within the organisation and externally, for example from

customers and suppliers.

Element 2 – People Management

This element is concerned with how the organisation manages its most

important asset, its people. The criteria focus on how people are developed

through effective appraisal and training activities and also how the organisation


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involves its people in helping to meet its strategic objectives. The element is

made up of six criterion parts as follows:

2(a) How People Management Resources are Planned and Improved

This criterion looks for evidence of human resource plans and strategies being in

line with overall Policy and Strategy and whether the organisation has a clear

process for human resource planning using employee surveys, for example, as a

basis for planning decisions.

2(b) How Skills and Capabilities are Sustained and Developed

This criterion is concerned with how the organisation establishes its own

requirements in terms of skills and competencies and how it then measures the

skills and capabilities of its people. Having identified a gap between current

competencies and requirements,the criterion then looks at how the organisation

manages the bridging of that gap through training, development and

recruitment.

2(c) Agreement of Targets and Reviewing Performance

This criterion looks at how organisations devolve overall objectives to individual

and team level.These individual and team objectives must be consistent with

overall objectives and there must be an effective mechanism for agreeing and

reviewing objectives. This mechanism is often some form of appraisal system

which reviews the individual’s performance and provides help to improve

performance.

2(d) How People are Involved, Empowered and Recognised

This criterion is concerned with how leaders ensure that the organisation’s

people are involved in continuous improvement activities by providing

appropriate resources and assistance.Also,the criterion looks at the way in which

individuals and teams are empowered and how effective the organisation’s

approach is in achieving this.

In addition, the criterion examines how the organisation promotes the

involvement of people and teams and how effective any recognition systems are

in sustaining involvement and empowerment.


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2(e) How People and the Organisation have an Effective Dialogue

Here the organisation must provide details on the communication process,

showing how communication needs are evaluated, how top down, bottom up

communication is actually achieved and how the effectiveness of the

communication process is reviewed and improved.

2(f) How People are Cared for

This new criterion is concerned with how the organisation promotes awareness

in health, safety and environmental issues.How the organisation sets the level of

benefits and employee facilities such as sick pay, pensions, assisted transport etc

and how the organisation promotes social and cultural activities.

Element 3 – Policy and Strategy

This element examines how organisations set about formulating Policy and

Strategy and how they convert these into a common vision and/or mission

statement. This section is also concerned with how Policy and Strategy are

communicated and implemented throughout the organisation, to what extent

Policy and Strategy reflect a customer focused approach and how Policy and

Strategy are reviewed and improvements made.The Policy and Strategy element

is broken down into four criterion parts as follows:

3(a) The Information on which Policy and Strategy are Based

How the organisation uses appropriate information to formulate its Policy and

Strategy for example using information from customers, suppliers, and

employees and if appropriate from benchmarking activities and from economic,

environmental, social and legal data sources.

3(b) How Policy and Strategy are Developed

This criterion is concerned with the process by which the organisation

formulates its Policy and Strategy and how, for example, the needs of all

stakeholders are taken into account and how the short and long-term needs of

the organisation are balanced.


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3(c) How Policy and Strategy are Communicated and Implemented

This criterion examines how the organisation uses Policy and Strategy as a basis

for setting objectives and how effectively it communicates this to everyone in the

organisation. Also how the organisation tests awareness and understanding of

Policy and Strategy amongst its people.

3(d) How Policy and Strategy are Reviewed and Improved

This criterion examines the way in which the organisation reviews Policy and

Strategy to ensure its continuing relevance and how updates and improvements

or adjustments are made when appropriate.

Element 4 – Resources

This section examines how the organisation manages its resources to maximise

efficiency and minimise waste. For example, how financial resources are

managed in line with Policy and Strategy and how information systems are

managed to maximise benefits to the organisation’s people and customers.This

section is concerned with the management of all resources including buildings,

equipment, materials and technology.The element is made up of five criterion

parts as follows:

4(a) How Financial Resources are Managed

Financial resources are short-term funds needed for the day to day running of the

organisation and capital from various sources required for longer-term financing.

This criterion part examines how well the financial strategy is aligned with

overall Policy and Strategy and how the financial strategy is reviewed and

improvements made.

The criterion also examines the way in which the organisation manages

key financial parameters such as costs, profitability and cash flow and how the

organisation evaluates investment and risk.

4(b) How Information Resources are Managed

Information resources are the business, technical and other data, along with the

means by which this data is made available and accessible. The criterion

examines how the organisation manages this information,how it ensures that the

people who need it have access to relevant information and how the

organisation sets about ensuring the integrity, validity and security of its


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information.The criterion also examines to what extent information has been

structured to support overall policy and strategy.

4(c) How Suppliers and Materials are Managed

Suppliers are defined as any individual or organisation providing goods,services,

knowledge or information to the organisation,and materials are physical items in

all their forms including raw materials, work in progress and finished goods.

This criterion examines how the organisation manages relationships with

suppliers in order to improve the supply chain and how it makes optimum use

of material inventories. Also, it examines how the organisation goes about

reducing and re-cycling waste, conserving non-renewable resources and

reducing its consumption of raw materials and utilities.

4(d) How Buildings, Equipment and Other Assets are Managed

This criterion looks at how the organisation manages the utilisation and

maintenance of all assets to improve the performance and lifespan of those

assets.Also,it looks at how the organisation optimises use of its assets in line with

overall Policy and Strategy and how the organisation considers the impact of its

assets on employees and other stakeholders.

4(e) The Management of Technology

This criterion examines how the organisation develops and exploits

technologies which are the basis of the products or services it provides. It also

looks at how research into new and emerging technologies is carried out and

how the organisation provides training and development for its employees to

ensure the benefits of technologies employed are maximised. The criterion is

concerned with how the organisation exploits technology to secure competitive

advantage.

Element 5 – Processes

Many organisations are moving from a traditional structure based around

functional areas to one focused on customers and products or services. This

element examines the extent to which these issues have been addressed and

(whether or not processes have been identified) how business activities are

reviewed and improvements are identified and implemented. The element is

made up of five criterion parts as follows:


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5(a) How Processes Critical to the Success of the Organisation are Identified

This criterion examines how the organisation has identified its key processes

including how any cross-functional issues have been overcome.In examining this

criterion, an assessor would expect to find a list of key processes available for

examination – particularly those which have a significant impact on the result

elements (6 – 9).

5(b) How Processes are Managed

This criterion looks at how ownership of processes has been established and

how process owners go about managing their processes.This will include how

the organisation has developed and uses operating standards and appropriate

performance measures and how the organisation have applied any quality system

standards such as ISO 9000 or environmental management systems.

Organisations who have obtained ISO 9000 certification would normally

expect to score fairly highly in this area,however, it must be remembered that in

many cases ISO 9000 systems do not cover all of an organisation’s key processes

– for instance, the Marketing and Finance functions may not be included.

5(c) How Processes are Reviewed and Improved

This criterion examines how the organisation sets about identifying and

implementing improvements to processes, for example by using information

from employees, customers and other stakeholders, to establish priorities and

targets for improvement. It also looks at how the organisation sets targets which

support its overall strategic objectives.

5(d) How Processes are Improved by Innovation and Creativity

This criterion looks at how the organisation uses the creative talents of its people

to innovate and create improvements to processes, how it makes changes to its

organisational structure to encourage innovation and change and how it

encourages continuous learning by all its people.

The criterion also examines how the organisation uses feedback from

stakeholders and new technology and techniques to stimulate creativity and

innovative improvements to processes.


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5(e) How Processes are Changed and Benefits Evaluated

This criterion looks for evidence of appropriate methods of implementing

changes to processes, for example by piloting new or changed processes. It also

examines how changes to processes are communicated throughout the

organisation and how people receive appropriate training to ensure that new or

improved processes are operated effectively.

The criterion is also concerned with how the organisation goes about

reviewing the changes which are made to ensure anticipated benefits are being

achieved.

The Results Elements

Results elements are concerned with what the organisation has achieved and is

achieving. Self-assessment will look specifically at how results show positive

performance against all internal targets,against competitors and ‘best in class’and

how results are combined with evidence of how future targets will be achieved.

Element 6 – Customer Satisfaction

This element is concerned with the organisation’s actual results with respect to

direct measurements of customer satisfaction. Measurements will include the

quality and reliability of products and services, identified by customer surveys or

other methods of gathering data.This section will also examine the identification

and measurement of indirect customer satisfaction measures such as the

percentage of repeat business and complaint levels.

6(a) Customers’ Perceptions of the Organisation

This criterion is concerned with the excellence and trends in results of direct

measurements of customer satisfaction, for example from customer surveys or

focus groups. The criterion will also examine the extent to which results are

available for all of the organisation’s products and services, measures may

include: response times, complaint handling, value for money, reliability etc.


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6(b) Additional Measures of Customer Satisfaction

The second part of customer satisfaction is concerned with the excellence and

trends in indirect measurements of customer satisfaction and the extent to which

results of these other, indirect measurements are available. Types of measures

could include: market share, complaints and levels of repeat business etc.

Element 7 – People Satisfaction

This element is concerned with the results and trends in results of direct and

indirect measurements of employee satisfaction.Direct measures are often made

by employee attitude or satisfaction surveys and it is the perception of the

employees which is under examination, not the excellence of the measurement

process.This section will also look for indirect employee satisfaction indicators

being measured,such as staff turnover levels and the number of grievances.It also

looks at whether the results of employee surveys are made known to people and

how the results are acted on.

7(a) People’s Perceptions of the Organisation

This criterion is concerned with the excellence and trends in results of direct

people satisfaction measures on issues such as: opportunities for training and

development, recognition, communication, job security, pay and benefits etc.

7(b) Additional Measures of People Satisfaction

This second criterion is concerned with the excellence and trends in results of

indirect measures such as: grievances, levels of sickness and staff turnover,

feedback from suggestion schemes,training evaluation results and response rates

to people surveys.

Element 8 – Impact on Society

This Element is concerned with how the organisation has approached the issue

of care for the environment and protection of global resources. It will also

include impact on the local community and, if measures are being maintained,

the relevance and trend of those measures.


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8(a) Society’s Perception of the Organisation

Within the award process, this criterion looks at society’s perception of the

organisation from surveys, reports, media etc. and may include perceptions on

issues such as impact on the local/national economy, activities to reduce health

risks, noise and pollution and support for the local community. In reality, many

organisations, particularly smaller ones, do not undertake such surveys or

research, and in these cases the criterion is concerned with the results of

activities undertaken within the organisation which have an impact on the

community in which it operates.

8(b) Additional Measures of the Organisation’s Performance

Whereas the first criterion is concerned with the public’s perception this second

criterion is concerned with the internal measures made by the organisation in

respect of those issues which impact on society. For example, the organisation’s

own measurements and results in respect of issues like: impact on local

employment, reduction of waste, pollution levels, usage of re-cycled materials

etc.

Element 9 – Business Results

This section examines the organisation’s performance with respect to its planned

business results. Measures will include key financial targets such as profit

margins, costs, sales and return on capital non-financial measures could include

performance measures such as the time taken to resolve complaints, delivery

times etc. The questions are also concerned with trends in performance,

projections of future performance and comparisons with competitor

organisations.

9(a) Financial Measures

This criterion is concerned with the excellence and trends in financial results

and in the extent to which results are available.Types of results could include:

budget management and control, income,expenditure,cash flow and returns on

investment.

9(b) Additional Measures of Performance

This second criterion is concerned with the excellence of and trends in other

results which show how well the organisation is performing. These other


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measures are usually the performance measures associated with the key

processes identified in element 5. Types of measures could include: order

processing times, time to resolve complaints, supplier performance and market

share.

1.3 The (Harvard) Balanced ScorecardThe Balanced Scorecard was first proposed in the January-February 1992 issue of

the Harvard Business Review and provides a comprehensive framework for

translating an organisation’s strategic objectives into a coherent set of

performance measures. The Balanced Scorecard provides four different

perspectives within which a limited number of critical performance measures

can be identified.

Figure 1.3.1 The Balanced Scorecard (source, Harvard Business Review)

Many organisations already have a large number of performance measures

which tend to be local measures derived from the ‘bottom up’ and which are

aligned to ad hoc or traditional hierarchical processes.The Scorecard’s measures,

however, are based on the organisation’s strategic goals, and by focusing

managers and staff on a limited number of critical measures the Scorecard helps

concentrate on the achievement of this strategic vision.

Unlike traditional performance measures,the Balanced Scorecard provides

a balance between external measures, such as income and profitability, and

Vision

Strategy

Financial Customer Internal Growth

Performance Measures


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internal measures, such as new product development and innovation.The four

measurement areas (as shown in Figure 1.3.1) normally contain 4 or 5 key

performance measures in each area and it is these which serve as the focal point

for an organisation’s efforts, defining priorities to managers, employees,

customers and all stakeholders. In companies which have developed Balanced

Scorecard Measures these have replaced the annual budget as the primary

business planning tool.

Figure 1.3.2 The Four Scorecard Perspectives (source, Harvard Business

Review)

Preparing a Balanced Scorecard

Creating a Balanced scorecard is different for every organisation and often

depends on how far the organisation has developed its own vision and strategic

planning process.Most organisations will,however, follow most of the following

8 stage programme.The implementation process is normally led by a facilitator

who is either an external consultant or a senior executive from within the

organisation.

Stage 1 – Scoping

The organisation must first decide upon the geographical and organisational

scope for the Balanced Scorecard and whether or not the Scorecard should be

FinancialPerspective

CustomerPerspective

Internal Business

Perspective

Innovation and Learning

Perspective


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piloted and then implemented in just one, or a number of business units, or the

entire organisation. In general terms, the Balanced Scorecard is suitable for units

which have their own customers, service/production facilities and their own

financial performance measures.

Stage 2 – Stakeholder Interviews

The facilitator will plan and carry out a series of interviews with the

organisation’s senior management team along with a number of key

stakeholders, such as principal shareholders and customers.These people will

first of all receive background information on the Balanced Scorecard process as

well as any internal documents which describe the organisation’s vision,mission

and strategy. The interviews themselves are carried out to establish individual

views and input into the organisation’s strategic objectives and to identify

preliminary proposals for scorecard measures.

Stage 3 – Senior Management Workshop 1

The facilitator brings the senior management team together to begin to develop

the scorecard.This is achieved by discussing and arriving at a consensus about

the organisation’s mission and strategy statements and then considering the

question: ‘if I succeed with my vision and strategy how will my performance

differ for shareholders; for customers, for internal processes and for my ability to

innovate and improve?’

Data gathered during stakeholder interviews carried out in stage 2 can be

considered during the debate in order to provide an external perspective.The

objective at this stage is to define the key success factors and arrive at a

preliminary scorecard which contains measures of success for the organisation’s

strategic objectives. At this stage narrowing the choice of measures is not critical,

even though there will often be more than 4 or 5 measures for each perspective.

Stage 4 – Senior Management Interviews

The facilitator reviews and consolidates feedback obtained during stage 3 and

documents this for review by the senior management team.Senior managers are

then interviewed once again to obtain their individual views on the preliminary

scorecard and examine any implementation issues.


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Stage 5 – Senior Management Workshop 2

Stage 5 may involve one or more workshops to achieve the following objectives:

• Involve a broader cross-section of middle managers and other

employees to consider the organisation’s vision, strategy and

preliminary balanced scorecard.

• Comment on the proposed scorecard measures.

• Identify links between the proposed measures and current operations

and initiatives.

• Develop an implementation programme which includes targets for

each of the proposed measures.

• Agree final measures along with targets and action plans to achieve

the targets.

• Agree an implementation programme which includes communicating

the scorecard to all employees and development of an information

system to support the scorecard.

Stage 6 – Implementation

Ideally, a new team should be established with responsibility for implementing

the scorecard – including communicating the scorecard throughout the

organisation and linking scorecard measures to databases and information

systems.

Stage 7 – Periodic Review

Balanced scorecard measures should be reviewed monthly by managers, teams

and individuals involved in the achievement of each measure. The measures

themselves should be reviewed annually as part of the normal business planning

process.


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Figure 1.3.3 Linking Measurements to Strategy (source Harvard

Business Review)

Creating Process Performance Measures

Traditional,financial performance measures report on what happened last period

without indicating how managers can improve performance in the future.As we

have already seen,by linking performance measures to an organisation’s strategic

objectives, balanced scorecard measures provide a cornerstone for the

organisation’s current and future success.

To create effective process performance measures the first step is to define

what kind of factors, such as time, cost, quality and product performance are

critical to satisfying customers. The next step is to map the ‘cross-functional’

processes which are used to deliver results and, as part of this process, identify

the critical tasks and capabilities required to complete the process successfully.

Finally, appropriate measures can be designed to track these tasks and

capabilities.

Statement of Vision1 Definition of organisation

2 Mission statement3 Vision statement

________________________________________________________

________________________________________________________

________________________________________________________

________________________________________________________

__________________________________________

__________________________________________

__________________________________________

__________________________________________

With my ability toinnovate & grow

Innovation &learning

With my internalprocesses

Internalperspective

To my customers

Customerperspective

To myshareholders

Financialperspective

THE BALANCED SCORECARD

What is myVision of

the Future ?

If my visionsucceeds,how will I

differ?

What are thecritical success

factors?

What are thecritical

measurements?


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1.4 The Malcolm Baldridge National Quality AwardThe Malcolm Baldridge award criteria are the basis for making awards and for

giving feedback to applicants. In addition, the award criteria claim to:

• Help improve performance, practices and capabilities.

• Facilitate communication and sharing of best practices among and

within organisations of all types.

• Serve as a working tool for managing performance, planning, training

and assessment.

The Baldridge Award was established in the USA during the early nineteen

eighties in response to faltering productivity in US industry.One outcome of the

debate on improving productivity and performance was an agreement that

organisational excellence should be rewarded and the Malcolm Baldridge

National Quality Award was therefore launched in 1988.The criteria for the award

were established by learning from other award models such as the Deming Prize,

established in Japan in the early fifties, and by lengthy discussion with business

leaders.

Core Values and Concepts

The award criteria are built upon a set of core values and concepts.These values

and concepts are the foundation for integrating customer and company

performance requirements within a results oriented framework. These core

values and concepts are:

• Customer driven quality.

• Leadership.

• Continuous improvement and learning.

• Employee participation and development.

• Fast response.

• Design quality and prevention.

• Long-range view of the future.

• Management by fact.

• Partnership development.

• Corporate responsibility and citizenship.

• Results orientation.


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Award Criteria and Framework

The core values and concepts listed above are embodied in seven categories as

follows:

1.0 Leadership.

2.0 Information and analysis.

3.0 Strategic planning.

4.0 Human resource development and management.

5.0 Process management.

6.0 Business results.

7.0 Customer focus and satisfaction.

The framework connecting and integrating the categories is shown in the

figure below:

Figure 1.4.1 The Malcolm Baldridge National Quality Award

The framework has three basic elements:

Driver

Senior Executive leadership sets directions, creates values, goals, expectations

and systems and pursues customer and business performance excellence.

Leadership

1.0

ProcessManagement

5.0

Human ResourceDevelopment and

Management 4.0

StrategicPlanning

3.0

Information andAnalysis

2.0

Customer Focusand Satisfaction

7.0

BusinessResults 6.0

System

Driver

Goal

Customer &MarketplacePerformance

*CustomerSatisfaction*CustomerRetention*CustomerSatisfactionRelative to

Competitors*Market Share

*Competitiveness

BusinessPerformance

*Product & ServiceQuality

*Asset Productivity& Growth*Supplier

Performance*Public

Responsibility*Financial

Performance


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System

The system comprises the set of well defined and well designed processes for

meeting the company’s customer and overall performance requirements.

Goal

The basic aims of leadership and the purposes of the system are two-fold:

Customer and marketplace performance

Customer and marketplace performance means delivery of ever improving value

to customers, high levels of customer satisfaction and a strong competitive

position.

Business performance

Business performance is reflected in a wide variety of financial and non-financial

results, including human resource development and corporate responsibility.

The seven criteria categories shown in the figure above are sub-divided

into ‘Items’ and ‘Areas to Address’

Items

There are 24 Items, each focusing on a major requirement.These are:

1.0 Leadership

1.1 Senior Executive Leadership

1.2 Leadership System and Organisation

1.3 Public Responsibility and Corporate Citizenship

2.0 Information and Analysis

2.1 Management of Information and Data

2.2 Competitive Comparisons and Benchmarking

2.3 Analysis and Use of Company Level Data

3.0 Strategic Planning

3.1 Strategy Development

3.2 Strategy Deployment

4.0 Human Resource Development and Management

4.1 Human Resource Planning and Evaluation

4.2 High Performance Work Systems


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4.3 Employee Education,Training and Development

4.4 Employee Well-being and Satisfaction

5.0 Process Management

5.1 Design and Introduction of Products and Services

5.2 Product and Service Production and Delivery

5.3 Support Services

5.4 Management of Supplier Performance

6.0 Business Results

6.1 Product and Service Quality Results

6.2 Company Operational and Financial Results

6.3 Human Resource Results

6.4 Supplier Performance Results

7.0 Customer Focus and Satisfaction

7.1 Customer and Market Knowledge

7.2 Customer Relationship Management

7.3 Customer Satisfaction Determination

7.4 Customer Satisfaction Results

Areas to Address

Each Item consists of one or more Areas to Address. For award applications

information is submitted by applicants in response to the specific requirements

of these areas.

Items and Areas to Address are structured as in the following example:

1.0 Leadership

The Leadership category examines senior executives’ personal leadership and

involvement in creating and sustaining a customer focus, clear values and

expectations, and a leadership system that promotes performance excellence.

Also examined is how the values and expectations are integrated into the

company’s management system,including how the company addresses its public

responsibilities and corporate citizenship.


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1.1 Senior Executive Leadership

Describe senior executives’ leadership and personal involvement in setting

directions and in developing and maintaining an effective,performance-oriented

leadership system.

(A-D)

*See below for a description of this symbol.

Notes:

1 ‘Senior Executives’ means the applicant’s highest ranking official and

executives reporting directly to that official.

2 Values and expectations should take into account needs and

expectations of key stakeholders – customers, employees,

stockholders, suppliers and partners, the community and the public.

3 Review of overall company performance is addressed in 1.2b.

Responses to 1.1a (3) should focus on senior executives’ roles in such

reviews and their use of the reviews to set expectations and develop

leadership.

4 Evaluation of the company’s leadership system (1.1b) might include

assessment of executives by peers, direct reports, and/or a board of

directors. It might also include use of surveys of company employees.

Making The Application

Writing an application for the Baldridge award involves responding in 70 or

fewer pages to the requirements given in the 24 criteria items shown above.The

first stage in the application is the preparation of a ‘business overview’. The

business overview outlines the key factors that influence how the business

Areas to Address

a How senior executives provide effective leadership and direction in buidlingand improving company competitiveness, performance and capabilities.Describe how senior executives (1) create and maintain an effectiveleadership system based upon clear values and high expectations; (2)create future opportunity for the company and its stakeholders, setdirections and integrate performance excellence goals; and (3) reviewoverall company performance, capabilities and organisation.

b How senior executives evaluate and improve the company’s leadershipsystem, including their own leadership skills.


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operates and where it is headed,the business overview is prepared in addition to

the main submission.

The business overview is:

An appropriate start, point for writing and self-assessing the award

application, helping to ensure focus on key business issues and achieve

consistency in responses.

Used by the examiners and judges in all stages of the application review,

including the site visit.

The business overview is structured under the following headings:

• Basic description of the company.

• Customer requirements.

• Supplier relationships.

• Competitive factors.

• Other factors important to the applicant.

Having written the business overview, applicants then prepare their

written submissions against each of the 24 criteria items.

These written submissions are then ‘scored’according to the classification

of each Item.These are designated either *(A-D) = Approach/Deployment or (R)

= Results (as shown in the example above).

The Scoring Mechanism for Approach/Deployment

Score Approach/Deployment

0% • No systematic approach evident; anecdotal information.

10% to 30% • Beginning of a systematic approach to the primary purposes

of the item.

• Early stages of a transition from reacting to problems to a

general improvement in orientation.

• Major gaps exist in deployment that would inhibit progress in

achieving the primary purposes of the Item.

40% – 60% • A sound systematic approach responsive to the primary

purposes of the Item.

• A fact based improvement process in place in key areas; more

emphasis is placed on improvement than on reaction to

problems.

Documents

Frameworks for Achieving Business Excellence · frameworks for achieving business excellence 1.1 introduction 1.2 the european foundation for quality management (efqm) business excellence