Benefit-to-Cost Ratio for Baldrige: 820-to-1

A new study of the net social value of the Baldrige Performance Excellence Program concludes that the program “creates great value for the U.S. economy.”

Economists Albert N. Link from the University of North Carolina and John T. Scott from Dartmouth College published their evaluation of 45 Baldrige Award applicants on December 16, 2011. The report is available here (pdf). The Baldrige program asked the 274 organizations that submitted applications from 2007 to 2010 to participate in the study and 45 accepted the invitation. Link and Scott used a counterfactual evaluation method to determine the benefit-to-cost ratio, asking what the private sector would have had to invest to achieve the same level of benefits through the Baldrige program. Benefits were realized in three areas:

• Savings to the applicants in investment costs to achieve the same level of benefits from their performance excellence strategies as they realized from the Baldrige program
• Gains by consumers in greater satisfaction from higher quality products and services
• Gains to the economy from saving scarce resources because the Baldrige Criteria were available

As I understand it, the counterfactual evaluation case made by the study is that organizations that integrate Baldrige increase demand because they offer higher quality products and services and they reduce costs because of more efficient operations. They earn more and spend less.

Link and Scott describe the methodology in their report. They concluded that the ratio of social benefits to social costs among the 45 organizations that responded to the survey was 351:1 while the ratio for all Baldrige Award…

Publisher Wins Baldrige Award

I grew up in the Lutheran Church-Missouri Synod: baptized and confirmed, eight years in parochial school, Sunday School and church every Sunday, graduated from Concordia College in St. Paul and taught for four years in a Missouri Synod elementary school. Concordia is a popular Missouri Synod name: The Concordia University System includes ten colleges and universities, many of the synod’s churches use the Concordia name, and the publishing arm of the synod is the Concordia Publishing House (CPH), which is the only non-healthcare recipient of the 2011 Baldrige Award.

It’s a well-deserved honor. CPH has 247 employees and revenues of $35 million and provides more than 8,000 products to members of the Lutheran Church-Missouri Synod. It excels at customer service, starting with 98% customer satisfaction scores, exceeding the benchmark for U.S. call centers. It’s Customer Call Center has been considered a “Center of Excellence” by Purdue University each of the last three years.

Innovation helps CPH build customer relationships. Its Center for Client Retention collects and analyzes data from customers of competitors, categorizing sales and customer trends in more than 50 different ways to correlate product sales and types of customers. Its Emerging Products team studies how to use new technologies to deliver innovative products. The number of electronic products offered by CPH grew from 457 in 2008 to 1,927 in 2010.

CPH also excels at building relationships with its employees. Overall workforce engagement has exceeded the AAIM (formerly known as American Association of Industrial Management for Employers Association) national benchmark in seven…

The Real Value of a Baldrige Site Visit

Of the 69 applicants for the 2011 Baldrige Award, 11 have made it to the final stage. They will receive site visits in October by a team of examiners who will verify and clarify their applications.

The finalists for the Award are:

• 6 healthcare organizations (40 submitted applications)
• 3 nonprofits/government organizations (14)
• 1 educational organization (8)
• 1 small business (2)

Two manufacturers and three service companies also submitted applications but none was awarded a site visit.

According to the press release from the Baldrige program, “examiners will provide 300 to 1,000 hours of review to each applicant receiving a site visit, and all applicants will receive a detailed report on the organization’s strengths and opportunities for improvement.”

Organizations that take integrating Baldrige seriously recognize that the site visit and resulting feedback are the real value of the Baldrige process. Sure, winning the Baldrige Award is satisfying and rewarding, a testament to the hard work you’ve been doing, but visionary leaders see the Award as recognition for the quality of their management systems while the site visit and feedback drive significant improvements to those systems. They are passionate about improving performance and a Baldrige site visit and feedback report feed that passion.

This has been true since the earliest days of Baldrige. In my book, The Baldrige Quality System, Bill Lesner, a Cadillac plant manager, described the site visit it received in 1990, the year Cadillac won the Baldrige Award:

“Part of the problem in the day-to-day operation of business is that you see and respond to problems. You ask yourself, ‘Are…

How Would You Measure a Society’s Performance?

If you could apply the Baldrige model to a society, how would you measure its performance?

One way would be to identify key indicators of performance excellence. One indicator would be productivity, which many organizations include in their Baldrige applications. The following chart, from an article in Mother Jones, shows that productivity in the U.S. has improved by 80% since 1979. According to NationMaster.com, the U.S. ranks second in overall productivity behind only Luxembourg.

Some of that is due to automation and technology, but it’s also because Americans are working harder. Forty percent of professional men and 23% of middle-income men work more than 50 hours a week. In a healthy society, one would expect that the people responsible for improving productivity—and working longer and harder to do it—would benefit from their efforts. Not in the United States. As the blue line on the chart shows, average overall wages increased about 3% in 30 years. As Mother Jones reports, “If the median household income had kept pace with the economy since 1970, it would now be nearly $92,000, not $50,000.”

The red line on the chart shows where some of the value of our productivity increase has gone. More is going for corporate profits, which are up 20% in 20 years. As the blue line on the chart and our high unemployment rate indicate, tax cuts for the rich and tax breaks for businesses do nothing to improve the employment or wage picture for 99% of Americans.

A healthy society would promote the best…