Cargill has an internal assessment program similar to what Tata has now and what Honeywell had in the 1990s, which I wrote about here. Two Cargill business units have won Baldrige Awards, one of them twice. According to the Baldrige program, “Cargill color-codes its businesses based upon their degree of deployment of the Baldrige Criteria. Gold represents businesses with a high degree of deployment; Blue represents businesses with partial deployment; and White represents businesses beginning the Baldrige journey.”

The chart clearly shows the benefit of integrating the Baldrige model, reaffirming the results achieved by Tata, Honeywell, and Baldrige Award winners. According to Jerry Rose, who has spearheaded the Baldrige effort at Cargill, “deciding to embrace the Baldrige program in your company is a commitment to a journey. It takes time, it takes dedication, and it takes resources. What I know for sure is that there is a huge return on your investment.”

To read more about integrating Baldrige to get the results you desire, click on these articles:

• Study Confirms: Baldrige Gets Results
• How to Integrate Baldrige
• Tata: World-Class Baldrige Role Model
• Baldrige Gets Results
• 10 Steps to World Class

The company owns four Rudy’s Country Store & Bar-B-Q stores and three Mighty Fine Burgers, Fries and Shakes, all in or around the city of Austin, Texas. Co-owners Brian Nolen and Ken Schiller started the company in 1993 after a successful partnership in the insurance industry. They went into the restaurant business because they liked the idea of a business where you could distinguish yourself from your competitors—which they have certainly done:

• Gross profit exceeds the industry standard
• Overall guest satisfaction ratings of 4.7 exceed the best competitor’s rating of 4.0
• Order accuracy rate of nearly 100% compared to the industry average of 87%
• A 92% record of passing health department inspections compared to 86% for competitors
• Food costs as a percent of sales 3% below those of similar restaurants
• Turnover rates better than the industry averages
• Absentee rate slightly more than 1% exceeds the 3.5% of benchmarked organizations

K&N Management’s search for excellence led them to Pal’s Sudden Service, which won the Baldrige Award in 2001. To help share the secrets of its success—a requirement of Baldrige Award winners—Pal’s established Pal’s Business Excellence Institute (BEI), which provides training and consulting. You can learn more about the Institute here.

K&N Management brings its entire management team to Kingsport, Tennessee, the home of Pal’s BEI, every year. “It’s something you have to see and experience to appreciate,” says Ken Schiller in a video on the Pal’s BEI site. “If you tell somebody about, it they really don’t believe it until they see it for themselves.”

Although several food service companies have taken Pal’s BEI training, nearly 60% of the participants in 2009 came from healthcare. “We haven’t done anything on food service in healthcare,” says Clay Rolston, marketing director at Pal’s BEI. “They’re focused on things like patient flows through the ER and how to improve patient satisfaction scores. Pal’s is recognized as a well-run business and they want to see first-hand how it works.”

K&N Management partnered with Pal’s BEI to accelerate its Baldrige journey to performance excellence. As Schiller says, “We’ve averaged about 12-14% a year in same store sales growth over this time and part of that’s in a down economy, the quality of our people is up substantially, and Pal’s really allowed us to know where the bar can be set. It gave us a benchmark that we otherwise wouldn’t even know was possible.”

To learn more about K&N Management, Pal’s Sudden Service, and other Baldrige Award winners, click on these articles:

• Seven Win 2010 Baldrige Award
• Ready to Go Big
• First Engineering & Architectural Firm Wins Baldrige Award
• Application Summaries of 2009 Baldrige Award Winners Available
• Small Wonder
• Heartland Health’s Grand Unifying System
• A Role Model for Public Education
• The Only Baldrige City – So Far

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

Those are incredible statistics and they’ve been written about and talked about for years now but nothing is being done about it. It’s like watching that oil spewing into the Gulf of Mexico and everybody knows it’s bad and it matters to oil people because it looks bad, but eventually we turn our attention to other things and it’s back to business as usual. Nothing will be done about the cause of the oil spill or the causes of excessive executive compensation because the people who control those things stand to gain the most from the status quo. If I was making 400 times the average worker, I’d shut the hell up, too.

Ashkenas also quotes a recent study by compensation expert Graef Crystal, reported in Bloomberg Businessweek, that “there is no relationship whatsoever between CEO compensation and shareholder returns.” OK then, how about a relationship between CEO compensation and shareholder value? Steeerike Two! The creation of shareholder value may not show up for a decade or more but CEOs only stay with their companies an average of seven years. Well, maybe the real reason for these ridiculous amounts is to keep pace with all the other ridiculous amounts being paid to other CEOs? Touch ‘em all, David Calhoun! (It’s baseball season and the Twins are playing well. What can I say?) As Ashkenas writes, “Board-level compensation committees (usually including current or former CEOs from other companies) get input from executive compensation consultants (who survey the pay of other senior executives) and make determinations about what kind of pay package will be required to entice the candidate to sign on.”

My only issue with Ashkenas is his business-talk, wimp-out conclusion that the credibility of a company’s leadership may be compromised if compensation doesn’t correlate with results and that it might be time to rethink some of the assumptions behind senior executive pay.

The only ones who don’t know leadership has been compromised are the leaders. It’s way past time to rethink executive pay. And I’d like to know which assumptions are still valid.

To read more about immoral and excessive executive compensation and what it does to the employees who have to carry these boneheads (okay, that might be a bit strong), click on these articles:

• Seeking Authentic Leaders
• Layoffs and the Failure of Leadership
• Why Organizations Fail

Business leaders have long sought proof that embracing the Baldrige model, implementing Total Quality Management, or applying for Baldrige Award or state quality awards pays. Does it make our company more profitable? Does it return value to our shareholders? Is it worth the effort and changes involved?

The answer to all three questions is, “Yes.”

Dr. Vinod Singhal of the Georgia Institute of Technology and Dr. Kevin Hendricks of the College of William and Mary did a five-year study of more than 600 quality award winners. They compared the financial performance of these winners with a control sample of companies similar in size and operating in the same industries. Singhal and Hendricks tracked both groups for ten years: six years before the award winners won their award and four years after.

Their study revealed that, over a five-year period starting one year before the winners won their first award, the award winners averaged significantly larger increases in several key measures of financial performance:

• 44% higher stock price return
• 48% higher growth in operating income
• 37% higher growth in sales

When Singhal and Hendricks separated the independent award winners (Baldrige and state quality award winners) from those companies winning supplier awards, the results were even more dramatic:

• 61% increase in stock returns over the control group
• 73% increase in operating income
• 33% increase in sales
• 21% increase in return on sales
• 25% increase in employment
• 49% increase in assets

Other insights from the study included:

• For the first five years of the study (up to one year before the award winners won their first award), the award winners and control groups showed little change in operating-income measures. According to Singhal and Hendricks, “this suggests that implementing an effective TQM program may not necessarily result in poor performance during the implementation stage.” In other words, the cost of implementing TQM programs may be balanced by early savings from improvements.

• Smaller companies actually performed better than larger firms, contradicting the belief that performance excellence criteria are not relevant for small companies.

• Lower capital-intensive award winners performed significantly better than higher capital-intensive award winners, reinforcing the importance of employees as the driving force for improvements.

• It can take two years after winning a quality award before a company begins to see the benefits of TQM programs in its stock price.

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

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

A provocative report by Deloitte claims that the best practices of “great companies” may be more instructive as fable than fact. In “A Random Search for Excellence,” available here, Michael E. Raynor, Mumtaz Ahmed, and Andrew D. Henderson argue that success studies such as Good to Great, Built to Last, and In Search of Excellence are just as likely to be studying lucky companies as good ones.

“It’s only too likely that whatever benefit practitioners have realized has been distressingly haphazard, the consequence of a form of placebo effect (you expect it to help, so you perceive that it does, quite independently of any true causal connection), a Hawthorne effect (the mere act of focusing on something you were neglecting improves performance regardless of what motivated the increased attention), or luck (even a broken clock is right twice a day).”

The report backs up this assertion with detailed analysis of more than 230,000 firm-year observations using a “regression algorithm to create an ROA value stripped of everything but firm-level, or management, effect.” You’ll have to read the report to understand what that means, and even then it’s a struggle.

In the end, the authors don’t suggest that you dismiss the advice offered by existing success studies but that you treat such advice more as fables than science. “Their value is not what you read in them, but what you read into them,” they conclude.

One big problem with most success stories is their total reliance on financial performance to separate great from good from average or worse. The Baldrige model recognizes that world-class performance requires stellar results in several critical areas: product and service performance, customer satisfaction and loyalty, workforce satisfaction and engagement, process effectiveness, leadership—and financial outcomes.

That may mean that the best practices of Baldrige Award recipients can be treated more as science than fable—or it may not. Until someone applies the methodology outlined by Deloitte to the organizations that have won the award, we will not know with any certainty just how effective their approaches are.

To read more about Baldrige Award recipients, click on an article:

• Baldrige Gets Results
• An Achievable Mission and Vision
• How to Deploy Your Strategic Plan
• Ground Zero for Customer Service
• World-Class Employee Orientation
• What Employees Want
• Identifying Key Work Processes

We cherish cost-consciousness at Berkshire. Our model is the widow who went to the local newspaper to place an obituary notice. Told there was a 25-cent-a-word charge, she requested “Fred Brown died.” She was then informed there was a seven-word minimum. “Okay,” the bereaved woman replied, “make it ‘Fred Brown died, golf clubs for sale.’”

The quote is from Warren Buffett on Business: Principles from the Sage of Omaha by Richard J. Connors (Wiley, 2009). Most of the book is from Buffett’s letters to shareholders written from 1977 to 2008. Topics include:

• Corporate culture
• Governance
• Management: people, risk, and time
• Communication
• Managing a crisis

I’m reminded of one of my favorite Buffet quotes: “There seems to be some perverse human characteristic that likes to make easy things difficult.” Especially when humans come together in an organization.