Award Criteria Purposes
The Malcolm Baldrige National Quality Award Criteria are the basis for making Awards and for giving feedback to applicants. In addition, the Criteria have three other important roles in strengthening U.S. competitiveness:
Award Criteria Goals
The criteria are developed to help companies enhance their competitiveness through focus on dual, results oriented goals:
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 key business requirements within a results-oriented framework. These core values and concepts are:
Customer Driven Quality
Quality is judged by customers. Thus, quality must take into account all product and service features and characteristics that contribute value to customers and lead to customer satisfaction, preference, and retention.
Value and satisfaction may be influenced by many factors throughout the customer's overall purchase, ownership, and service experiences. These factors include the company's relationship with customers that helps build trust, confidence, and loyalty.
Customer-driven quality addresses not only the product and service characteristics that meet basic customer requirements. It also includes those features and characteristics that differentiate them from competing offerings. Such differentiation may be based upon new or modified offerings, combinations of product and service offerings, customization of offerings, rapid response, or special relationships.
Customer driven quality is thus a strategic concept. It is directed toward customer retention, market share gain, and growth. It demands constant sensitivity to changing and emerging customer and market requirements, and the factors that drive customer satisfaction and retention. It also demands awareness of developments in technology and of competitors offerings, and rapid and flexible response to customer and market requirements.
Customer-driven quality means much more than defect and error reduction, merely meeting specifications, or reducing complaints. Nevertheless, defect and error reduction and elimination of causes of dissatisfaction contribute to the customers' view of quality and are thus also important parts of customer-driven quality. In addition, the company's success in recovering from defects and mistakes (“making things right for the customer”) is crucial to building customer relationships and to customer retention.
Leadership
A company's senior leaders need to set directions and create a customer orientation, clear and visible values, and high expectations. The values, directions, and expectations need to address all stakeholders. The leaders need to ensure the creation of strategies, systems, and methods for achieving excellence and building knowledge and capabilities. The strategies and values should help guide all activities and decisions of the company. The senior leaders need to commit to the development of the entire workforce and should encourage participation, learning and creativity by all employees. Through their personal roles in planning, communications, review of company performance, and employee recognition, the senior leaders serve as role models, reinforcing the values and expectations and building leadership and initiative throughout the company.
Continuous Improvement and Learning
Achieving the highest levels of performance requires a well-executed approach to continuous improvement and learning. The term “continuous improvement” refers to both incremental and “breakthrough” improvement. The term “learning” refers to adaptation to change, leading to new goals and/or approaches. Improvement and learning need to be “embedded” in the way the company operates. Embedded means improvement and learning:
Sources of improvement and learning include: employee ideas; R&D; customer input; and benchmarking.
Improvement and learning include:
Thus, improvement and learning are directed not only toward better products and services but also toward being more responsive, adaptive, and efficient - giving the company additional marketplace and performance advantages.
Employee Participation and Development
A company's success depends increasingly on the knowledge, skills, and motivation of its work force. Employee success depends increasingly on having opportunities to learn and practice new skills. Companies need to invest in the development of the work force through education, training, and opportunities for continuing growth. Opportunities might include classroom and on-the-job training, job rotation, and pay for demonstrated knowledge and skills. On-the-job training offers a cost effective way to train and to better link training to work processes. Work force education and training programs may need to utilize advanced technologies, such as computer-based learning and satellite broadcasts. Increasingly, training, development, and work units need to be tailored to a diverse work force and to more flexible, high performance work practices.
Major challenges in the area of work force development include:
Addressing these challenges requires use of employee-related data on knowledge, skills, satisfaction, motivation, safety, and well-being. Such data need to be tied to indicators of company or unit performance, such as customer satisfaction, customer retention, and productivity. Through this approach, human resource management may be better integrated and aligned with business decisions.
Fast Response
Success in competitive markets demands ever-shorter cycles for new or improved product and service introduction. Also faster and more flexible response to customers is now a more critical requirement. Major improvement in response time often requires simplification of work units and processes. To accomplish this, the time performance of work processes should be among the key process measures. There are other important benefits derived from this time focus: time improvements often drive simultaneous improvements in organization, quality, and productivity. Hence it is beneficial to integrate response time, quality, and productivity objectives.
Design Quality and Prevention
Companies need to emphasize design quality - problem and waste prevention achieved through building quality into products and services and efficiency into production and delivery processes. Costs of preventing problems at the design stage are usually much lower than costs of correcting problems that occur “downstream”. Design quality includes the criterion of fault-tolerant (robust) or failure-resistant processes and products.
A major success factor in competition is the design-to-introduction (“product generation”) cycle time. To meet the demands of rapidly changing markets, companies need to carry out stage-to-stage integration (“concurrent engineering”) of activities from basic research to commercialization. Increasingly, design quality also depends upon the ability to use information from diverse sources and data bases, that combine customer preference, competitive offerings, price, marketplace changes, and external research findings. More emphasis should be placed on capturing learning from other design projects.
From the point of view of public responsibility, the design stage is critical. In manufacturing, design decisions determine process wastes and the content of municipal and industrial wastes. The growing environmental demands mean that design strategies need to anticipate environmental factors.
Consistent with the theme of design quality and prevention, improvement needs to emphasize interventions “upstream” - at early stages in processes. This approach yields the maximum cost and other benefits of improvements and corrections. Such upstream intervention also needs to take into account the company's suppliers.
Long-Range View of the Future
Pursuit of market leadership requires a strong future orientation and a willingness to make long-term commitments to key stakeholders - customers, employees, suppliers, stockholders, the public, and the community. Planning needs to anticipate many changes, such as customer's expectations, new business opportunities, technological developments, new customer segments, evolving regulatory requirements, community/societal expectations, and thrusts by competitors. Plans, strategies, and resource allocations need to reflect these commitments and changes. A major part of the long-term commitment is developing employees and suppliers and fulfilling public responsibilities.
Management by Fact
Modern businesses depend upon measurement and analysis of performance. Measurements must derive from the company's strategy and provide critical data and information about key processes, outputs, and results. Data and information needed for performance measurement and improvement are of many types, including: customer, product and service performance, operations, market, competitive comparisions, supplier, employee-related, and cost and financial. Analysis refers to extracting larger meaning from data and information to support evaluation and decision making at all levels within the company. Analysis entails using data to determine trends, projections, and cause and effect - that might not be evident without analysis. Data and analysis support a variety of company purposes, such as planning, reviewing company performance, improving operations, and comparing company performance with competitors' or with “best practices” benchmarks.
A major consideration in performance improvement involves the creation and use of performance measures or indicators. Performance measures or indicators are measurable characteristics of products, services, processes, and operations the company uses to track and improve performance. The measures or indicators should be selected to best represent the factors that lead to improved customer, operational, and financial performance. A comprehensive set of measures or indicators tied to customer and/or company performance requirements represents a clear basis for aligning all activities with the company's goals. Through the analysis of data from the tracking processes, the measures or indicators themselves may be evaluated and changed to better support such goals.
Partnership Development
Companies need to build internal and external partnerships to better accomplish their overall goals.
Internal partnerships might include labor-management cooperation, such as agreements with unions. Agreements might detail employee development, cross-training, or new work organizations, such as high performance work teams. Internal partnerships might also involve creating network relationships amoung company units to improve flexibility, responsiveness, and knowledge sharing.
External partnerships might be with customers, suppliers, and education organizations for a variety of purposes, including education and training. An increasingly important kind of external partnership is the strategic partnership or alliance. Such partnerships might offer a company entry into new markets or a basis for new products or services. A partnership might also permit the blending of a company's core competencies or leadership capabilities with complementary strengths and capabilities of partners, thereby enhancing overall capability, including speed and flexibility. Internal and external partnerships should develop longer-term objectives, thereby creating a basis for mutual investments. Partners should address the key requirements for success, means of regular communication, approaches to evaluating progress, and means for adapting to changing conditions. In some cases, joint education and training could offer a cost-effective means to help ensure success.
Company Responsibility and Citizenship
A company's leadership needs to stress its responsibilities to the public and practice good citizenship. This responsibility refers to basic expectations of the company - business ethics and protection of public health, safety, and the environment. Health, safety, and the environment include the company's operations as well as the life cycles of its products and services. Companies need to emphasize resource conservation and waste reduction at their source. Company planning should anticipate adverse impacts from facilities, production, distribution, transportation, use, and disposal of products. Plans should seek to prevent problems, to provide a forthright company response if problems occur, and to make available information and support needed to maintain public awareness, safety, and confidence. Companies should not only meet all local, state, and federal laws and regulatory requirements. They should treat these and related requirements as areas for continuous improvement “beyond mere compliance.” This requires use of appropriate measures in managing performance.
Practicing good citizenship refers to leadership and support - within limits of a company's resources - of publicly important purposes, including areas of public responsibility. Such purposes might include education improvement, improving health care in the community, environmental excellence, resource conservation, community services, improving industry and business practices, and sharing of nonproprietary information. Company leadership as a corporate citizen also entails influencing other organizations, private and public, to partner for these purposes. For example, individual companies could lead efforts to help define the obligations of their industry to its communities.
Results Focus
A company's performance measures need to focus on key results. Results should be guided by and balanced by the interests of all stakeholders - customers, employees, stockholders, suppliers and partners, the public, and the community. To meet the sometimes conflicting and changing aims that balance implies, company strategy needs to explicitly include all stakeholder requirements. This will help to ensure that actions and plans meet differing stakeholder needs and avoid adverse impact on any stakeholders. The use of a balanced composite of performance measures offers an effective means to communicate short- and longer-term priorities, to monitor actual performance, and to marshal support for improving results.
Award Criteria Framework
The core values and concepts are embodied in seven Categories, as follows:
The framework connecting and integrating the Categories is given in the figure below.
The framework has three basic elements, from top to bottom:
Strategy and Action Plans
Strategy and Action Plans are the set of company-level requirements, derived from short- and long-term strategic planning, that must be done well for the company's strategy to succeed. Strategy and Action Plans guide overall resource decisions and drive the alignment of measures for all work units to ensure customer satisfaction and market success.
System
The system is comprised of the six Baldrige Categories in the center of the figure that define the organization, its operations, and its results.
All company actions point toward Business Results - a composite of customer, financial, and non-financial performance results, including human resource development and public responsibility.
Information and Analysis
Information and Analysis (Category 4) are critical to the effective management of the company and to a fact-based system for improving company performance and competitiveness.
Award Criteria Organization
The seven Criteria Categories shown in the figure are subdivided into items and Areas to Address:
Items
There are 20 Items, each focusing on a major requirement.
Areas to Address
Items consist of one or more Areas to Address (Areas). Information is submitted by applicants in response to the specific requirements of these areas.