• Same store sales have grown for 24 years
• Market share has grown for 24 years
• Service speeds four times faster than competitors
• Order accuracy at least ten times better than the closest competitor
• Employee turnover half the industry average

Pal’s Sudden Service has accomplished all of this with what may be the ugliest store design in fast-food history—and it may be coming to a major thoroughfare near you. Pal’s was recently named one of Restaurant Business magazine’s “Future 50,” which are restaurant chains that have proven their concepts, are fast growing, and are getting ready to go big.

Pal’s key concept is a management system based on the Baldrige model. The restaurant chain won the Baldrige Award in 2001. It established the Business Excellence Institute to share its best practices with other organizations, and those lessons aren’t just for food service companies. More than 50 nonprofit organizations and government agencies have taken the training BEI offers, which once again demonstrates the universality of Baldrige principles. You can learn more about Pal’s BEI by clicking here.

Pal’s did its first Baldrige assessment in 1995. As I’ve seen with other organizations, the first assessment often produces profound insights, and the same was true for Pal’s. “From the founding of this company until 1995 we didn’t know what business we were in,” said Thom Crosby, the CEO at Pal’s. “We took it for granted that we were in a service industry. When we did our first assessment, we realized that we were a manufacturing concern. We bring in raw materials to create our own distinct products. The scales dropped away from our eyes. It changed how we viewed our business and the data we wanted to collect. Performance that was good had impeded us from being a great company.”

To learn more about Pal’s, click here. To learn more about conducting your own Baldrige assessment, click on these articles:

• The Organization You Want
• Baldrige Core Values
• The Baldrige Criteria
• How to Integrate Baldrige
• New Baldrige Resource

They also share these final two characteristics:

6. They treat people well. That means everyone the company touches: employees, customers, suppliers, community members—everyone. The striking difference between companies that treat people as commodities and companies that treat them well was captured in the transformation of Wainwright Industries. In the early 1990s, the leaders of this small Missouri-based manufacturer of machined parts listened to a speaker describe how his company thrived because of a sincere trust and belief in people. One of Wainwright’s leaders wondered what that meant. The CEO didn’t have a good answer, and that bothered him. What would Wainwright look like if it sincerely trusted and believed in its people?

The answer changed the company. A sincere trust and belief in people became one of its core values, and that value guided its actions. Quality improved. Safety improved. Customer satisfaction improved. Gross profit jumped 62 percent in just three years. And employees rewarded the company’s trust by generating more than one implemented improvement suggestion per employee per week. Most American companies struggle to get one suggestion per employee per year.

7. They continually improve. They must. It’s who they are. They build improvement into their processes, a step to take in an ongoing cycle that compels them to find ways to do things better.

Such cultures are not created overnight. The contrast between good companies and great ones can be seen in the ways people work. In great companies, employees care about the quality of their work. They feel integral to their company’s success. They seek opportunities to learn and improve and feel responsible for making things better.

Employees in average companies also care about the quality of their work—they’re just not sure anyone else does. They see little connection between what they do and their company’s success. They have been conditioned to interpret opportunities to improve as problems with their performance and react defensively. Yet as Wainwright and others have proved, the employees in both cultures are the same. What is different is the system.

To read more about integrating Baldrige, click on these articles:

• How to Integrate Baldrige
• Leading the Integration of Baldrige
• The Organization You Want
• 5 Added Values of the Baldrige Process

Here, then, are the next three characteristics of these role-model organizations:

3. They know where they’re going. Yeah, I know, you’ve got a vision and a mission. Do you measure progress on them? Great companies know that what they’re doing today takes them further along the path to what they wish to become, and they don’t know it intuitively, they know it measurably. Today’s actions meet objectives that support strategies that realize the vision.

This interlinked structure is the product of careful research, thoughtful analyses, and ambitious goals. Dozens of people—sometimes hundreds of people—participate in the process of discovering what their company is, where it must go, how it can get there, and what will obstruct its progress. They repeat this process annually. When they’re done, they know individually and collectively where they are going. Even better, they know what they must do—individually and collectively, today and tomorrow—to get there.

4. They align activities. At most companies, if you strapped every employee into a harness and told them to pull, you wouldn’t get very far. Some would sit down and wait for the moment to pass. Others would set off in their own directions. Still others would give a half-hearted tug hoping that the illusion of support would be good enough. A few would throw their shoulders into the task only to be frustrated when nothing moved.

Companies that can align all of their people and activities with a shared vision, strategies, and objectives and move as one toward them enjoy an almost insurmountable competitive advantage. They get the right things done better and faster. They anticipate. They focus. They tackle challenges like a well-seasoned team conquers a mountain: in synch, working together, all eyes on the goal.

5. They blur boundaries. It’s no surprise that one of the focal points in business in the past decade has been supply chain management, and the focus goes well beyond the quality of goods and services received. For many companies, key suppliers have become partners in the production process, involved in the design of new products and services, strategic planning, quality improvement, and customer service.

Great companies blur the boundaries on the other end of the pipeline as well. They deploy myriad strategies to listen to and learn from their customers and use this knowledge to delight their customers. And delight is what they seek. I’ve worked with Baldrige winners who pay little attention to the percent of “satisfied” customers in surveys, not because they don’t care, but because the percent has been at or near 100 for so long that the data can’t help them improve. Instead, they work to boost the percent of “very satisfied” customers because studies have shown that such customers are six times more loyal than “satisfied” customers. Loyalty breeds repeat business and referrals, the twin engines of sustainable growth.

To check out the results Baldrige Award winners have achieved, click on these articles:

• Baldrige and Quality Results
• Baldrige and Financial Performance
• Baldrige and Customer Results
• Baldrige and Workforce Results

Over the last twenty years working with dozens of organizations on Baldrige assessments and with five Baldrige Award winners, I’ve identified seven characteristics that differentiate organizations with sound management systems from those without. Here are the first two:

1. They think process. All work is process. The process flows through people: those who supply it on the front end, those who use those materials to produce products or services, and those customers who receive the products or services.

Companies don’t naturally think process, often because their structures prevent it. They organize around functions—finance, human resources, operations, administration, etc.—but processes, especially those processes critical to a company’s success, are not bound by functions. They are cross-functional. Mediocre companies manage their functions but not their processes. When problems occur, they blame them on departments or work units or, if their “culture of blameology” is really mature, on specific individuals. W. Edwards Deming believed that less than 4% of the problems any company faces can be attributed to individual employees. Leaders blame people when they should be blaming—and managing—the process.

2. They act on data. At Medrad, the world’s leading manufacturer of disposable medical imaging products, the mantra is: “How do we know that?” No assumptions. No best guesses. No unsupported claims. No slack for office or position. If you lack accurate, reliable, and timely data to define a problem, propose a solution, improve a process, develop a plan, serve a customer, review performance, or do any other task that depends on sound data for success, you cannot proceed. You manage by fact or you fail.

Companies like to think they rely on data to make decisions, but an assessment of their performance measurement systems will likely prove them wrong. Most do a fine job of measuring financial performance but that’s about it. They may have customer and employee satisfaction survey results once a year. Product or service quality measures. A few other random measures and little else. That’s not a measurement system. A measurement system includes indicators of performance for every area critical to the company’s success. It includes in-process and end-of-process measures. It shows trends and compares your performance to that of your competitors, industry best, or world-class benchmarks. Leading a company with anything less is like flying a plane without gauges.

To read more about how to assess your management system using the Baldrige Criteria, click on these articles:

• The Baldrige Criteria
• 10 Steps to an Effective Baldrige Assessment
• Learn from the Best: Application Summaries
• 80 Critical Questions

John Friel, former president and CEO of Baldrige Award-winner Medrad and the man responsible for leading the metamorphosis of its management system, answered that question for himself in 1989 when he visited Milliken, a textile manufacturer that had won the Baldrige Award the previous year. “They talked about two things that struck me,” said Friel. “They were the market share leader, charging the highest prices and getting the highest margins in the industry, and they had the highest customer satisfaction and retention. That’s when I was converted.”

Milliken’s second point put the responsibility to act on Friel’s doorstep. “They told everyone to stand on a chair and yell at the top of their lungs, ‘Management is the problem!’”

When Friel took over as Medrad’s CEO in 1998, he solved that problem by committing Medrad to annual Baldrige applications. The results came quickly. The company’s revenue started growing at 15% a year. It increased operating income as a percent of revenue, a measure of profitability, from 16 percent in 1999 to 20 percent in 2002. Its percent of “very satisfied” customers exceeded 70, with more than 80% very satisfied with its service. Employee satisfaction exceeded the best-in-class industry benchmark. In a national survey of 57 medical imaging companies, Medrad ranked second. None of its direct competitors finished in the top 20.

A management system consists of interrelated parts. Medrad’s approaches deliver the results described above, but what makes it the industry leader is how it manages the system in which those parts operate. Each element in the system serves Medrad’s mission and vision and not its own self-centered agenda. The synergy of this systems approach produces the company’s outstanding performance.

If you want to move your organization from the rutted path of mediocrity to the road to greatness, you must whip your management system into shape.

To read more about great organizations, click on these articles:

• Small Wonder
• A Healthcare Innovator
• A Healthcare Role Model
• Great, Not Perfect
• Why Baldrige? Saint Luke’s Makes the Case
• Baldrige and K-12: Not for the Faint-Hearted

Executive attitudes toward creating a sound management system regularly surprise me. Those who recognize its value preach this systems perspective with the fervor of true believers. Those who don’t buy into it bide their time until the boss leaves and they can return to what they know is best. The trouble is, what they know is best is rarely as good as the systems approach they abandon.

Motorola, IBM, and AT&T dominated in the late 1980s and early 1990s when their leaders conducted regular, formal assessments of their management systems. As that process waned, so did their fortunes. AT&T formed its Universal Card Services division in 1990 with a management system based on the Baldrige model. In its first 30 months of existence it rocketed to second largest in the U.S. credit card industry, winning the Baldrige Award in 1992.

Thirty months after that it floundered, hobbled by new leadership that deserted the systems approach in favor of “better ideas.” Thirty months after that, in October 1997, AT&T sold the sputtering unit to Citigroup, by which time it had dropped to eighth in the industry.

The tragedy of such stories is not that new leaders bring new agendas. As the ones ultimately accountable for their companies’ success, they must do what they believe will bring that success. The tragedy is that they do not understand that their agendas are more likely to succeed within a sound management system.

To read more about visionary leadership, click on these articles:

• A Leader’s Job
• Seeking Authentic Leaders
• Shrink the Change
• Making Change Happen
• CEOs Look Ahead

The researchers measured job engagement through 18 questions organized by physical engagement, emotional engagement, and cognitive engagement. According to the article abstract, they found that “engagement, conceptualized as the investment of an individual’s complete self to a role, provides a more comprehensive explanation of relationships with performance relative to well-known concepts that reflect narrower aspects of the individual’s self.” The researchers were able to evaluate the impact of other factors including job involvement, job satisfaction, and intrinsic motivation on performance and behavior; they concluded these factors did not predict performance and behavior while engagement did.

According to Simmons, the researchers identified three antecedents of engagement: value congruence, perceived organizational support, and core self-evaluations. In other words, hire people who share and support your organization’s mission and values and who are self-sufficient and confident, and then provide development opportunities that align with your organizational values and your employees’ developmental needs.

In “Bottom-Line Value of Employee Engagement,” I wrote about a Gallup report that came to similar conclusions. Gallup defined a fully-engaged employee as emotionally attached to the unit and rationally loyal and found that “organizations that employ performance optimization management principles have outperformed their competitors by 26% in gross margin and 85% in sales growth.”

In “Employee Engagement and the Bottom Line,” I pointed to two specific cases where employee engagement had a direct correlation with financial results:

• Best Buy sees a $100,000 annual increase in sales at any location where employee engagement rises 2%.

• JC Penny had 67% of its employee engaged in 2005 and 80% engaged in 2009. Its earnings per share growth over the last five years is five times the industry average.

The key to getting similar results at your organization is to: (1) figure out how to measure employee engagement as the researchers quoted above have done; (2) use your measurement tool to assess engagement; (3) identify opportunities to improve performance; and, (4) close the gap.

To read more about employee engagement, click on these articles:

• What Drives You?
• Paying Disengaged Employees
• Why HR Needs Baldrige
• Recruiting, Retaining, and Engaging
• Valuing Employees – and HR