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Importance and Implementation of Baldrige Practices for Small Businesses PAUL R. STEPHENS, BRADLEY UNIVERSITY JAMES R. EVANS AND CHARLES H. MATTHEWS, UNIVERSITY OF CINCINNATI © 2005, ASQ

The purpose of this research is to gain insight into how small firms perceive, and to what extent they implement, the high-performance management practices suggested by the Malcolm Baldrige Criteria for Performance Excellence. Using an empirical survey, the authors identify the practices that small firms consider important and determine how endemic these practices are throughout the small company population, focusing on the gap between perceived importance and implementation. The analysis leads them to identify areas of the criteria that are well understood and deployed by small firms, along with areas requiring more attention. The authors attempt to provide some explanation for these observations. Key words: Baldrige Award, high-performance management, quality, SME

INTRODUCTION The Malcolm Baldrige Criteria for Performance Excellence (CPE) is an evolutionary business management framework designed to increase competitiveness through assessment and identification of organizational strengths and opportunities for improvement. The CPE defines a set of contemporary high-performance management practices within six key categories: 1) Leadership, 2) Strategic Planning, 3) Customer and Market Focus, 4) Measurement, Analysis, and Knowledge Management, 5) Human Resource Focus, and 6) Process Management. The seventh category of the criteria, Business Results, focuses on performance. Case studies and empirical research (see, for example, Ahire and Golhar 1996; Barclay 1993; DeBaylo 1999; Hendricks and Singhal 1996; Mendham, Chittenden, and Poutziouris 1994) have shown that such practices result in positive impacts on performance and market competitiveness. The CPE is managed, evaluated, and improved annually by the Baldrige National Quality Program, administered through the National Institute of Standards and Technology (for additional information see http://www.quality.nist.gov). The criteria are also the basis for the Malcolm Baldrige National Quality Award (MBNQA), which honors outstanding U.S. businesses that exemplify the core values of the criteria: visionary leadership, customer-driven excellence, organizational and personal learning, valuing employees and partners, agility, managing for innovation, focus on the future, management by fact, social responsibility, focus on results and creating value, and a systems perspective.

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Importance and Implementation of Baldrige Practices for Small Businesses Despite a high level of practitioner attention, theoretical and empirical research that focuses on the CPE is relatively scarce. Much of the past research on quality management implementation has focused on understanding critical success factors (CSFs) to implementation (Saraph, Benson, and Schroeder 1989; Porter and Parker 1993; Tamimi and Gershon 1995; Black and Porter 1996; and Ahire and Golhar 1996). Garvin (1991) examined the content and purpose of the criteria based on detailed discussions with award examiners. Ahire, Landeros, and Golhar (1995) used a version of the Baldrige framework to classify extant research in quality management. Ford and Evans (1997) examined the relationships between the core values and the managerial processes that are embedded in the criteria, and Evans (1997) proposed a causal modeling approach to describe key linkages in the criteria. Ford and Evans (2000) investigated the theoretical and conceptual foundations of the Strategic Planning category, and Jack and Evans (2003) and Evans (2004) examined issues related to Baldrige and performance measurement. Wilson and Collier (2000) used structural equation modeling to validate an older version of the criteria. In this article, the authors focus on small firms. There are many ways that researchers categorize small firms. Robinson and Pearce (1984) found that firms are typically defined as small based on either annual sales or number of employees. A common employment breakdown is: • Very small: fewer than 20 employees • Small: 20-99 employees • Medium: 100-499 employees • Large: more than 500 employees These size breaks are consistent with standard business employment, asset, and receipt-size classes established in 1982 by the Office of Management and Budget for use by all federal agencies when publishing business data (Hodgetts, Kuratko, and Hornsby 1999). Many government agencies, including the Department of Commerce, use the 500-employee level to distinguish between smaller firms and larger firms, and the authors use this guideline as well.

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Several papers have studied the general role of total quality management (TQM) and quality in small firms. Lee (2004) points out that TQM programs require little capital investment at the beginning stages of implementation, which is in stark contrast to other management programs that can require significant start-up capital. This makes TQM more attractive to small firms. Ahire (1996) found a statistically significant difference in performance between firms that embrace TQM and those that do not. Wilkes and Dale (1998) argue that there is a lot of advice and information on TQM and continuous improvement, and management can easily become confused by the different emphases stressed in each discussion. Yusof and Aspinwall (1999) studied CSFs for quality management implementation for small and medium-sized organizations, arguing that past research “did not incorporate the perceived importance level for the factors proposed.” The CPE is designed to apply to all size firms and sectors; however, early recipients of the Baldrige Award were mainly large manufacturing firms (service firms were slow to adapt to total quality initiatives). Increasingly, small firms—even those with fewer than 100 employees, such as Texas Nameplate and Stoner— are also being recognized and some have received the Baldrige Award. One study by Hodgetts, Kuratko, and Hornsby (1999) suggests that small firms that adopt Baldrige are superior performers. Jones, Knotts, and Brown (2005) found that small firms can and do embrace quality management practices, and those that do are more likely to be successful in making products that are desirable to potential customers. From experiences interacting with small firms and their top managers, however, the authors observed that many small firms believe that Baldrige practices are applicable only to large firms, are too complex, or are too costly to implement. Some literature supports this view, as Rodwell and Shadur (1997) observe that many methods that succeed in large companies are often recommended for small firms despite the many differences that may make such practices unworkable. Additionally, the root cause of small firm unwillingness to consider Baldrige may lie with the apparently nonrational behavior and decision making of the entrepreneur and/or owner/manager who does not obey the “rules”

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Importance and Implementation of Baldrige Practices for Small Businesses of classical management theory (Jennings and Beaver 1997). This characteristic of “independence” in the face of proven methods contributes to the owner/manager’s acceptance of frameworks such as TQM and the CPE. Other research questions the applicability of a highperformance management framework that fits both large and small firms (Ahire 1996). Wilkes and Dale (1998) suggest that further development of the European Federation of Quality Management (EFQM) model, which is similar to Baldrige, is needed to suit the characteristics of small firms, including simplifying the language, the format of the model, and the application process. They state that small firms are aware of the model but do not understand how they can derive benefits from its criteria. These conflicting arguments raise the question of the applicability of the CPE to small firms. Do small firms perceive the management practices in the CPE as important to business success? How extensively do they practice them? Are there areas of the criteria that are not as relevant to small companies as to large ones? This article investigates how managers of small firms perceive the importance of the management practices in the Baldrige criteria. Familiarity with a particular theoretical concept or framework and understanding the underlying principles found in a framework are two different conditions. The authors’ argument draws upon observations by McTeer and Dale (1994) and Van der Wiele and Brown (1998) in the context of TQM: Small firms that may not be specifically familiar with Baldrige may practice its principles routinely without even knowing it. The goal of this research is to better understand how important the principles of the Baldrige criteria are to small firms and to what extent they are practiced, focusing on the gap between perceived importance and the extent of implementation. Data were collected using an instrument developed from the “modern” framework for the CPE, which was revised in 1997. It was revised to better reflect the logical progression of strategic planning driven by customer needs and internal leadership that forms the basis for execution through processes and people, all leading to superior business results and moderated by measurement, information, and knowledge management. This basic framework continues to the present,

although the criteria have been refined and updated to reflect contemporary management practices. Some significant revisions have occurred since 2003, but these are subsequent to the collection and analysis of the authors’ data. Hence, their research generally reflects the CPE from 1997 to 2003.

THE IMPORTANCEIMPLEMENTATION GAP Management staff members of small firms are no less concerned with quality management than their larger company counterparts (Van der Wiele and Brown 1998). Kayis (1998) found that 97 percent of the surveyed population had a formal written statement of quality, while the other 3 percent were in the process of developing a quality policy, and they emphasized their commitment to TQM implementation. Gray (2004) discusses that it has been generally assumed that small firms are too engrossed with entrepreneurial activity and/or survival to take a sustained interest in management development. Yet, he finds that small firm managers are very interested in improving the quality of management. Therefore, the authors believe that small-firm managers recognize the value of high-performance management practices and perceive them as important to their firm. The literature on implementation, however, suggests a different perspective. Goh and Ridgway (1994) argue that although top management may have a high level of commitment to many of the underlying principles of quality management, these ideals are not well communicated to employees. They observe that when managers are specifically asked about TQM implementation, they state that TQM is inappropriate to their company and is applicable to only larger firms. Shin, Kalinowski, and El-Enein (1998) observed that although the principles of quality management appear obvious, many organizations have found them difficult to execute. This is reportedly because the implementation is cumbersome, time consuming, and frequently lacking in focus. Ahire and Golhar (1996) discuss that many of the characteristics of small firms may adversely affect the implementation of TQM. They argue that:

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Importance and Implementation of Baldrige Practices for Small Businesses 1. The lack of market clout may impact a small firm’s ability to get suppliers’ involved in these efforts. 2. Small firms may not recognize the importance of human resource management strategies (AmbaRao and Pendse 1985; McEvoy 1984) and, therefore, small firms experience lower levels of employee empowerment, use of employee involvement strategies, and employee quality training (Kotey and Slade 2005). 3. Lack of professional management expertise (Siropolis 1994) and the short-term focus of many small firms (Verser 1987) may be reflected in inadequate allocation of resources to TQM efforts in these firms. 4. Quality tracking and improvement techniques such as benchmarking and statistical process control (SPC) may also be used less frequently and less effectively in small firms (Ebrahimpour and Withers 1992). 5. Through a less effective use of internal quality information, the lack of an information infrastructure can add to the difficulties experienced by small firms in implementing these techniques (Ashmore 1992). Van der Wiele and Brown (1998) argue that quality management implementation in small firms is a function of organizational change. They point out that change in a small firm is difficult because of many obstacles that must be overcome. These obstacles are not only related to the implementation of a quality philosophy, but are difficulties encountered in any change the small firm experiences. Other research finds that the lack of professional management expertise (Siropolis 1994) and the short-term focus of many small-firm managers (Verser 1987) should result in a low level of commitment to quality management from top leaders that directly leads toward less implementation. Finally, Yusof and Aspinwall (1999) identify resources as a critical factor, unique to small firms, that impacts implementation. If all the practices are considered important, then limited resources have to be spread out over all practices. Thus, the literature suggests an “importance/ implementation gap” for small firms that characterizes

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the authors’ principal hypothesis: A significant gap exists between the perceived level of importance and the extent of implementation of high-performance management practices in the CPE.

METHODOLOGY To investigate this hypothesis, the authors needed to quantify the perceived importance of the criteria to small firms as well as the extent of implementation. This was accomplished by asking the following questions for each of the management practices in the CPE (see the appendix for a complete list): 1. “How important do you believe the following management practices are to achieving performance excellence and improving competitiveness in your company?” 2. “To what extent does your company practice each of the following approaches?” Responses were measured on a 1 to 5 scale, ranging from “low importance” to “high importance” for the first question, and from “not at all” to “extensively” for the second question. Each section of the survey mirrored a major category of the criteria, excluding the demographic information that was collected. Respondents were asked to react to the practices described under each section. The language for each practice was pulled directly from the criteria. The survey was comprehensive in that it addressed every practice described and discussed in the main categories and items. Sixty-eight distinct practices were identified. The authors’ target population was all small firms in the United States with 50 to 500 employees. Specifically, they targeted the owners or top managers at these firms. Top management in such firms acts as the driver of quality management implementation (Nakajo and Kono 1989; Chapman, Clarke, and Sloan 1991). The top management commitment to quality is evident via their communication of this commitment (Ferdows and Demeyer 1990; Saraph, Benson, and Schroeder 1989). As previously discussed, it is typical in research to use “500 or fewer employees” to define a small firm. Additionally, the authors also wanted to eliminate the

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Importance and Implementation of Baldrige Practices for Small Businesses smallest firms from their study (those with fewer than 50 employees). These firms are probably too small and entrepreneurial to effectively use the Baldrige criteria. No single database exists that would allow the authors access to all of these firms. For the purposes of this research, the authors had access to two separate databases that they aggregated into a single frame from which a sample was taken: one from the Greater Cincinnati Chamber of Commerce and a second from The Ohio Manufacturers Association (the OMA membership database). Although this restricted the sample to Ohio businesses and may not be representative of the small-firm community of the United States as a whole, Ohio is the home of a broad range of small businesses. This approach is common in small-business research. For example, in Reynolds and Miller’s (1992) research of the gestation period of new firm startups, which is considered to be the basis of what is currently known about the nascency process in small business venturing, the sampling frame consisted of firms located in Minnesota and Pennsylvania. The survey was initially distributed to 15 firms through the Greater Cincinnati Chamber of Commerce solely for the purpose of evaluating the instrument for content validity. The purpose of the pilot survey was to determine if managers would understand how the survey was intended to be filled out, if they understood the questions being asked, and whether the language needed to be adjusted to make the questions more clear to the respondents. Additionally, the authors needed to know if the managers thought the questionnaire comprehensively covered all aspects of best management practices. They knew that the criteria were a comprehensive framework, but they wanted to make sure that smallfirm managers didn’t find the instrument lacking in content. If they did, this would have provided the authors with some evidence that the criteria might not meet the needs of small firms, which would have merited further investigation. The pilot respondents agreed that the breadth of the survey was comprehensive with no areas left unexplored. Because of this positive feedback, the authors were convinced that they should continue with the instrument as developed. Next, a simple random sample was used for a more extensive mail survey. Childers and Skinner (1996) argue that survey recipients can only be expected to

participate in a mail survey if they expect to receive value for value, or an “equitable exchange.” To emphasize the intangible opportunity afforded to recipients, researchers have successfully used appeals in mail surveys, generally incorporated in the cover letter accompanying the questionnaire. Linsky (1965), Champion and Sear (1969), and Dillman (1978) found that stressing the role and importance of the respondent, emphasizing the benefits of the survey, and suggesting that intrinsic rewards are obtained by supporting one’s values all generate a significant positive effect on response rate. The authors make an effort in this regard. The accompanying cover letters from the Greater Cincinnati Chamber of Commerce and OMA both stressed the importance of the research and conveyed the message that response is important not only to the researchers but to the respondents themselves. Because of the survey’s length, there was an issue of obtaining a valid response rate. Torbari (1991) notes that “It is common sense that when one asks for too much time and effort of people, compliance goes down.” On the other hand, Heberlein and Baumgartner (1978) found in their study of 214 mailed questionnaires that there was no significant correlation between any of the length measures and overall responses. Length varied from a single page to 22 pages. Miller (1970) notes, “Based on a large number of studies, one follow-up nets, on average, 20 percent more responses. A second and third follow-up, on average, yield about a 12 percent and 10 percent higher return, respectively.” Therefore, the authors made sure they followed through with reminder cards in order to help increase response rates. Surveys were followed up with two reminder post cards and resulted in a sample of 235 complete surveys, which is a 23 percent response rate. Finally, a short nonresponse questionnaire was used in an attempt to reduce nonresponse bias. The authors pulled 13 questions from the mail survey and were able to collect data from 35 nonrespondents using a telephone survey. Three of the questions were regarding demographic information: 1) type of business, 2) number of employees, and 3) prior exposure to the Baldrige criteria. The other 10 were five sets of importance and implementation responses on: 1) Leadership practice no. 2; 2) Strategic Planning practice no. 3; 3) Customer and

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Importance and Implementation of Baldrige Practices for Small Businesses Market Focus practice no. 2; 4) Human Resource Management practice no. 7; and 5) Business Results practice no. 1. Performing a means comparison between respondents and nonrespondents on each of these measures, the authors found no significant differences between the responses on 12 of the 13 questions (at a 95 percent confidence level).

RESULTS Table 1 shows each category and item found in the CPE. Each item is assigned a code to designate importance and implementation for the analysis. Data were collected in terms of the scalar survey feedback, and the respondent reaction to each practice was aggregated to the item level of the criteria. For example, under the Leadership section of the survey, the first six practices described were aggregated to the Leadership item, Leadership System. It is not the purpose of this research to validate that the underlying management principles described in the items actually represent such latent concepts such as leadership or customer focus. This work was done by Pannirselvam, Siferd, and Ruch (1998). Through confirmatory factor analysis the research found that the underlying management practices factor into the items that in turn factor properly into the seven main categories. Thus, not only can one rationalize the aggregation of responses based on the evolutionary design of the framework, but also there is sound research on which to justify aggregation. Table 2 shows the mean importance ratings for each item, ranked from largest to smallest. Paired t-tests were conducted on all possible combinations of the means to identify significant differences between the importance scores. The ranking shows the significant differences. For example, S1—Strategy Development Process, was found to be significantly higher than the others. The next item, L1—Leadership System, is significantly different from the remaining items. The next two items, IA1—Section and Use of Information and Data and PM1—Management of Product and Service Processes, are not significantly different from one another but are different from the remaining categories and are grouped together. Group four shows that the items in 4b are not significantly different from 4a or 4c, but the

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Table 1 Baldrige categories/items and item codes. Importance

Implementation

Leadership system

L1

L11

Company responsibility and citizenship

L2

L22

Strategy development process

S1

S11

Company strategy

S2

S22

Customer and market knowledge

CM1

CM2

Customer satisfaction and relationship enhancement

CM2

CM21

Selection and use of information and data

IA1

IA11

Selection and use of comparative information and data

IA2

IA21

Analysis and review of company performance

IA3

IA31

Work systems

HR1

HR11

Employee education, training, and development

HR2

HR21

Employee well-being and satisfaction

HR3

HR31

Management of product and service processes

PM1

PM11

Management of support processes

PM2

PM21

Management of supplier and partnering processes

PM3

PM31

BR1

BR11

Leadership

Strategic Planning

Customer and Market Focus

Measurement, Analysis, and Knowledge Management

Human Resource Management

Process Management

Business Results Business results

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Importance and Implementation of Baldrige Practices for Small Businesses

Mean Importance

Rank Code Item

Mean Implementation

Strategy development process

4.42

1

L1

Leadership system

4.34

IA1

Selection and use of information and data

4.27

PM1

Management of product and service processes

4.19

IA3

Analysis and review of company performance

HR1 L2

Rank

Code

Item

1

S1

2 3

4a

4b

4c

5

Table 3 Implementation means.

L21

Company responsibility and citizenship

3.66

S11

Strategy development process

3.63

2

L11

Leadership system

3.51

3

IA11

Selection and use of information and data

3.43

4.10

PM11

Management of product and service processes

3.42

Work systems

4.09

IA31

3.26

Company responsibility and citizenship

4.06

Analysis and review of company performance

PM31

3.25

Customer satisfaction and relationship enhancement

4.06

Management of supplier and partnering processes

BR11

Business results

3.22

HR2

Employee education, training, and development

4.03

CM21 Customer satisfaction and relationship enhancement

3.22

S2

Company strategy

4.00

PM21

3.21

BR1

Business results

3.99

CM1

Customer and market knowledge

3.99

PM3

Management of supplier and partnering processes

3.96

Management of support processes

3.87

CM2

PM2

6

HR3

Employee well-being and satisfaction

3.75

7

IA2

Selection and use of comparative information and data

3.51

items in 4a are significantly different from those found in 4c. Finally, the last three items are significantly different from one another. As for the ranking of the implementation scores, paired t-tests were once again conducted on all possible combinations of the means to identify significant differences between the implementation scores (see Table 3). When examining the frequency of responses from highest to lowest rank, one can see that, at best, less

4

Management of support processes

CM11 Customer and market knowledge

3.16

HR11

Work systems

3.15

5

HR31

Employee well-being and satisfaction

3.06

6

S21

Company strategy

2.97

HR21

Employee education, training, and development

2.96

IA21

Selection and use of comparative information and data

2.54

7

than a quarter of the responding companies reported high levels of implementation. In most cases, less than 15 percent of the companies reported high levels of implementation. If one examines firms that report very low levels of implementation, the stratification is clearer (see Table 4). For example, only 3 percent of the surveyed firms reported low activity with regard to company responsibility and citizenship. On the other hand, 45 percent of the surveyed

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Table 2 Importance means.

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Importance and Implementation of Baldrige Practices for Small Businesses

Rank

Code

Item

4.5 or > % of Responses

< 3 % of Responses

1

L21

Company responsibility and citizenship

23.53

2.94

S11

Strategy development process

15.55

12.18

2

L11

Leadership system

18.49

8.40

3

IA11

Selection and use of information and data

19.07

12.29

PM11

Management of product and service processes

16.03

11.81

IA31

Analysis and review of company performance

12.71

22.03

PM31

Management of supplier and partnering processes

13.92

23.21

BR11

Business results

12.39

15.81

CM21

Customer satisfaction and relationship enhancement

13.08

20.68

PM21

Management of support processes

14.35

30.38

CM11

Customer and market knowledge

10.13

24.89

HR11

Work systems

15.19

23.63

5

HR31

Employee well-being and satisfaction

8.86

28.27

6

S21

Company strategy

6.72

27.31

HR21

Employee education, training, and development

8.02

30.38

IA21

Selection and use of comparative information and data

3.38

44.92

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4.60 4.40 4.20 4.00 3.80 3.60 3.40 3.20 3.00 2.80 2.60 2.40 2.20

Sub-category Importance

Implementation

referring to IA2 (Selection and Use of Comparative Information and Data). The remaining were spread out fairly evenly over the other items. However, HR21 (Employee Education, Training, and Development) had seven respondents report no implementation and HR31 (Employee Well-Being and Satisfaction) and

© 2005, ASQ

Figure 1 Importance-implementation gaps.

L1 L2 S1 S2 CF1 CF2 IA1 IA2 IA3 HR1 HR2 HR3 P1 P2 P3 BR1

companies reported little implementation of the selection and use of comparative information and data. Overall, a minority of firms reported implementing practices extensively, and a significant portion of firms are implementing the practices very little. This seems to be due to the fact that small-firm management is more likely to rely on informal interpersonal networks for this type of information. McGee and Sawyerr (2003, 398) argue “While the owner/manager could research these issues alone, it is often cheaper and more expedient to get information and advice from other people. Who you know is often more important than what you know, because the people known often can compensate for what is not known. In other words, it is important to develop a web of personal contacts, since such networks can play a vital role in reducing uncertainty by facilitating the collection and synthesis of information.” On 42 occasions, respondents reported no implementation at all. Sixteen of these respondents were

High

7

Medium

4

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Table 4 Implementation scores (% of Responses as….).

Low

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Importance and Implementation of Baldrige Practices for Small Businesses Table 5 Paired differences — Importance/implementation gap (sorted lowest to highest). Rank

Pair

– d

Std. dev.

95% C.I. Lower

Upper

t

Sig.

1

L2 – L21

0.3992

0.5545

0.3284

0.47

11.106

0

PM2 – PM21

0.6646

0.8832

0.5515

0.7776

11.584

0

HR3 – HR31

0.6878

0.8308

0.5814

0.7941

12.744

0

PM3 – PM31

0.7075

0.8289

0.6014

0.8135

13.139

0

BR1– BR11

0.7704

0.6501

0.6867

0.8542

18.128

0

PM1– PM11

0.7764

0.6523

0.6929

0.8598

18.322

0

S1– S11

0.7941

0.7531

0.698

0.8903

16.268

0

L1– L11

0.827

0.5924

0.7514

0.9027

21.536

0

CM1– CM11

0.8284

0.7552

0.7318

0.9251

16.888

0

CM2 – CM21

0.8362

0.6478

0.7533

0.9191

19.873

0

IA3 – IA31

0.839

0.7579

0.7418

0.9362

17.005

0

IA1– IA11

0.8404

0.7415

0.7453

0.9355

17.411

0

HR1– HR11

0.9388

0.8323

0.8323

1.0453

17.365

0

IA2 – IA21

0.964

0.8576

0.854

1.074

17.268

0

S2 – S21

1.0292

0.8146

0.9252

1.1332

19.491

0

HR2 – HR21

1.0707

0.856

0.9611

1.1802

19.256

0

2

3

4

PM21 (Management of Support Processes) had five respondents report no implementation. The authors’ analysis and the results illustrated in Table 3 clearly demonstrate that there are statistically significant differences between the top and bottom rankings in terms of implementation. This reflects the authors’ assertion that small-firm management has to make choices about how to use their limited resources and that the rankings the authors have developed show how those resources are typically deployed. Figure 1 shows clearly that implementation lags importance and that generally higher levels of importance are mirrored by higher levels of implementation. This is reasonable, as firms that perceive practices to be more important would logically place more emphasis on implementation. However, the authors did find some statistically significant differences in these gaps. To do this, the authors analyzed whether the variation between importance and implementation was

greater than the variation within each group using paired t-tests. The t-test assumes a normal distribution of the differences and they used the Kolmogorov-Smirnov statistic (Lilliefors 1967) to test this assumption. For the K-S Lilliefors test, if the significance level was greater than 0.5, then normality was assumed (Norusis 1995; Coake and Steed 1996). In all cases the Lilliefors significance level for testing normality confirmed the underlying assumption. The normality assumption of the response data was also tested by examining the normal probability plot. In the normal probability plot, if the sample is from a normal distribution the cases fall more or less in a straight line. This test also confirmed the underlying assumption. The t-test proves to be a more sensitive test than ANOVA under these conditions. The reason a paired t-test provides a better measure of significance than ANOVA for two measures from the same respondents can be understood intuitively. ANOVA ignores the fact that some people

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Importance and Implementation of Baldrige Practices for Small Businesses tend to rate both measures Figure 2 Importance vs. implementation (normalized). relatively high or relatively low. By contrast, paired Below avg. importance/ Above avg. importance/ 3.7 above avg. implementation above avg. implementation t-tests focus on the differL2 ence between each pair of 3.6 S1 the scores. In effect, this 3.5 L1 controls for the variance in 3.4 both measures from one PM1 IA1 respondent to the next. PM3 3.3 BR1 CM2 IA3 Therefore, if one wants to PM2 CM1 3.8 3.5 3.6 3.7 3.9 4.1 4.2 4.3 4.4 4.5 test if a significant differHR1 ence exists between how 3.1 small-firm managers view HR3 3 S2 the importance of employHR2 2.9 ee education and training versus the extent to which 2.8 they actually implement Below avg. importance/ Above avg. importance/ 2.7 employee education and below avg. implementation below avg. implementation training, he or she simply 2.6 IA2 runs a paired comparison 2.5 of the responses to each Implementation question that deals with employee education and If one normalizes the scales and plots the aggregated training. Then he or she can determine if there is a responses using the median response as the point significant difference between their means. where the two scales cross, one can examine the relaTable 5 shows the results. The gap is significant for tive ranking of each item (see Figure 2). By doing each item. In every case, small-firm managers rated the this, one finds a somewhat linear relationship where importance of the item significantly higher than the items that are ranked high in terms of importance level at which they are implementing such practices. are also ranked high in terms of implementation. One can logically argue that implementation might In most cases, items fall in the two categories equal importance, but will rarely, if ever, exceed imporof extremes (high-high or low-low). In a few cases, tance. The reason for this becomes apparent when this means crossover into contradiction (high-low) examining how managers rank the importance of the and these cases (PM3—Management of Supplier and criteria. The lowest mean importance score was 3.51, Partnering Processes, HR1— Work Systems, and ranging to a high of 4.42. This means that every item is CM2 — Customer Satisfaction and Relationship considered, at the very least, moderately important, with Enhancement) are borderline. Figure 2 indicates that many items being considered highly important. Given there are some areas (IA2 — Selection and Use of the limited resources of small firms, managers at these Comparative Information and Data, HR3—Employee firms have to compromise on the allocation of time and Well-Being and Satisfaction, and, to a lesser extent, money. Therefore, small firms implement such pracS2—Company Strategy) that are perceived to be less tices as best they can given their limited resources. To important, and thus little effort is put into implemendetermine whether these gaps are the same for all items, tation. An interesting note is that the emphasis on the one can sort them from highest to lowest and test for use of benchmarking and comparative data has been significant differences. This resulted in four distinct reduced in subsequent revisions of the Baldrige criteria. groupings of the gaps, as noted in Table 5.

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Importance

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Importance and Implementation of Baldrige Practices for Small Businesses As noted, items that ranked higher in importance generally receive higher rankings in implementation; for example, S1—Strategy Development Process, ranks first in importance and also in implementation, and so on. L2—Company Responsibility and Citizenship is the lone exception in the higher-ranking items. However, there tends to be more deviation from the mean for lowerranked items. One might expect that as an item ranks lower in importance, proportionately fewer resources are put into implementation and the gap should become significantly larger. This is evident in Table 5. The information provided in Figure 2 leads to questions as to why particular items fall where they do and whether previous research that focused on the characteristics of small firms supports these positions. The authors believe there is a significant opportunity to extend this research to explore these questions. As an example, when they examine the relative literature on various items, sometimes conflicts appear between their results and what researchers who examine small-firm managers have to say about a particular item. In the authors’ study, small-firm managers reported both a relatively high level importance and implementation with the strategy development process (S1). The relevant literature in this area focuses on the execution of the strategy development. For example, Ahire (1996) explains that small firms are characterized by a myopic view of management, which focuses on meeting day-today survival challenges, partly due to a lack of resources and partly due to the inability of the owner/manager to exhibit understanding of the strategic aspects of business. Robinson and Pearce (1984) suggest that small firms lack the necessary staff and time to engage in strategic planning, and they conclude that small firms generally do not plan. Gisbon and Cassar (2002) found in their study that only 35 percent of the small firms planned and only half of these firms consistently planned. They suggest that small firms use planning only for specific purposes, such as when the manager foresees a particular competitive threat that needs to be addressed. Small firms are generally considered more vulnerable to competitive challenges in part because they spend more time adjusting rather than predicting and controlling the business environment (D’Amboise and Muldowney 1988).

Scully and Fawcett (1994) reiterate that change (in the small firm) is often incremental without a customerfocused strategic assessment and, moreover, small firms often fail to develop true strategic initiatives. Matthews and Scott (1995) point out “While large firms have been reported to increase planning in the face of turbulent environments (Lindsay and Rue 1980), small firms, constrained by their resources and their range of strategic options (Dandridge 1979; Robinson and Pearce 1984), may be less likely to do so.” The authors’ study indicates that small firms are addressing the strategy development process, giving it priority over other items. They believe the explanation for this is that small-firms management tends to eschew formal strategy development processes for more personal and informal methods. Deeper research, perhaps through detailed case analysis, may reveal that small-firm managers actually spend a significant portion of their time (both while at work and away) thinking about, researching, and developing strategic initiatives. Because this process is very personal and informal, it doesn’t appear to be happening when one just passively observes the activities of the firm. Also, most research doesn’t capture the consistency in planning. The manager may consider planning important, but the company will make planning a priority only when significant changes are being contemplated (Gibson and Casson 2002). Another interesting aspect of Figure 2 is that L2— Company Responsibility and Citizenship is the exception in the higher-ranking items, with a disproportionate amount of implementation with respect to importance. If one considers why small firms tend to implement this item more than one might expect, the literature provides some insight. This item deals with the legal, ethical, and risk requirements of its products, services, facilities, and operations on society. This area has a significant impact on the operation of the business, and the small-firm manager considers it important. The small business must consider these issues when making decisions because the impact could seriously threaten the existence of the business (Reiland 1999). Small firms that ignore such issues usually do not survive. Although it is beyond the scope of this research to fully explore the myriad questions that arise from the

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Importance and Implementation of Baldrige Practices for Small Businesses results, the authors encourage others to verify and extend these findings in order to answer such questions.

Limitations This research is exploratory and several limitations are evident. One is the possibility of self-reporting bias. Ahire and Golhar (1996) point out that “When one collects data from managers about their own organizations, and specifically about managerial issues with which they are closely associated, there is a potential for self-reporting bias.” Ideally, research should seek multiple responses from each firm to reduce this bias. However, identification of respondents with appropriate functional background and management level was difficult to do in this study. Because of the complex nature of the CPE questions and the need to maintain a survey of reasonable length, some survey questions contained multiple ideas. Alreck and Settle (1995) describe these as “double-barreled” questions. Therefore, the authors had to make some judgmental tradeoffs. Note that their goal was not to draw any inferences about a specific response. Each question is a smaller part of an overall factor that was aggregated in the analysis. This mitigates the potential weakness inherent in multiple constructs. In the authors’ study, respondents may tend to rate implementation in relation to how they rated importance. The importance rating will be looked at as the benchmark, and the implementation will be how well they measure up to that benchmark, leading to a potential problem of “social desirability.” Alreck and Settle (1995) note that “When personal preferences, opinions, or behavior deviate from what’s socially prescribed, respondents are very prone to report what’s socially acceptable, rather than the true answers.” The authors tried to clarify this in the survey instructions to reduce this bias: “Rating a practice as ‘low’ in importance or ‘not practiced in your company’ does not in any way suggest poor management. Your answers may reflect unique business factors or resource constraints in your company. If fact, there is no company, large or small, that extensively implements all of the practices.”

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Although these limitations can weaken the strength of the conclusions, they should not detract from the research effort.

CONCLUSIONS AND RECOMMENDATIONS This research is exploratory in nature and focuses on better understanding small firm perceptions of the importance and implementation of the highperformance management practices found in the CPE. Although the literature sometimes suggests that there are certain practices that small firms might find unimportant, not implementing a practice is not an indication of nonimportance. The authors’ results found that small-business leaders rate the practices at least moderately important, and many practices as highly important. This validates the usefulness of the criteria as a small organization management guide, one that will allow firms to improve their competitiveness. The authors discovered that small-business leaders rank the strategy development process and leadership systems as most important to the success of their business. Because small-firm leaders tend to spend more time dealing with day-to-day operational concerns, they also find operational practices to be critical. Customer-related items and human resource issues, however, were identified as being less important. Smallfirm leaders have less control over such issues. They can develop good relationships with their customers and work hard to meet customer requirements, but they tend to be subservient to their customers because of their size (Raymond and St. Pierre 2004). Kotey and Slade (2005) found that the use of formal human resource management (HRM) practices is related to the size of the firm. In small firms, the adoption of formal HRM practices at the managerial level lags behind that at the operational level. The development of managers in terms of HRM practices is more likely with larger firms, and small firms are less likely to have standardized and documented HRM practices. Additionally, small firms have many difficulties with employee retention, finding qualified workers, and providing competitive pay and benefits.

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Importance and Implementation of Baldrige Practices for Small Businesses Small-firm managers rank items such as supplier and partnering processes, employee well-being and satisfaction, and the collection and analysis of comparative data as the least important. Small firms tend to have less leverage with large suppliers and other business partners because they don’t normally represent a major part of their suppliers’ business. Yet, many small firms develop close, trusting, and cooperative relationships with suppliers (Overby and Servais 2005). Perhaps small firms rely more on informal methods such as “word of mouth” recommendations to find and develop supplier relationships. Small firms also have less opportunity and resources to provide advanced training, reimbursement of educational expenses, and other employee benefits, or to use benchmarking to the extent that larger firms can. Small firms tend to have more competition in the form of small, privately held firms such as themselves, and access to comparative data is generally limited or too costly. The authors found that most small firms implement all practices to some extent but none of the practices are implemented to their full extent. The CSF literature provided much insight into why small firms have difficulty implementing quality management practices. The authors believe that the overriding factor is a matter of resources. Since small-firm leaders characterize all the practices as at least moderately important, they are forced to spread limited resources in the implementation process. The hierarchy of implementation closely mirrors that of importance, as it should. While it was not a goal of this article to predict the rankings, there is clearly opportunity for extension of this research to further explain and verify the rankings. The literature suggested that the authors would find that implementation lags the importance hierarchy, and this study provided validation of this premise. The “importance-implementation gap,” as the authors call it, indicates that small firms do not appear to implement a practice to the extent that the level of importance would indicate. The authors, however, observed that most firms implement the practices at levels in line with their perceived level of importance. An extension of this research might be to explore this further through targeted case studies. Additionally, one should look for factors that differentiate these firms from others. One

might begin by exploring demographic differences to see if they act as control variables. Since resource paucity is a key issue, one might try to identify what specific factors impact resources. The authors’ purpose was to explore the characteristics of small firms, using the literature to build a case for the uniqueness of small firms. Yet, they recognize that a review of the literature contrasting the characteristics of small firms to large firms would be helpful in motivating additional work in this area. An interesting extension of this research would be an empirical study that replicates this work for large firms. This would provide an opportunity to contrast large and small firms and provide significant insight to the questions raised in this article. REFERENCES Ahire, S. L. 1996. An empirical investigation of quality management in small firms. Production & Inventory Management Journal 37, no. 2:44-50. Ahire, S. L., and D. Y. Golhar. 1996. Quality management in large vs. small firms. Journal of Small Business Management 34, no. 2:1-13. Ahire, S. L., R. Landeros, and D. Y. Golhar. 1995. Total quality management: A literature review and an agenda for future research. Production and Operations Management 4, no. 3:277-306. Alreck, P. L., and R. B. Settle. 1995. The survey research handbook: Guidelines and strategies for conducting a survey. Chicago: Irwin. Amba-Rao, S. C., and D. Pendse. 1985. Human resources compensation and maintenance practices. American Journal of Small Business (Fall): 19-29. Ashmore, G. M. 1992. Better information means better quality. Journal of Business Strategy 13, no. 1:57-60. Barclay, C. A. 1993. Quality strategy and TQM policies: Empirical evidence. Management International Review 33 (Special Issue): 87-98. Black, S. A., and L. J. Porter. 1996. Identification of critical factors of TQM. Decision Sciences 27:1-21. Champion, D. J., and A. Sear. 1969. Questionnaire response rate: A methodological analysis. Social Forces 47:335-339. Chapman, R. L., P. Clarke, and T. Sloan. 1991. TQM in continuous process manufacturing: Dow-Corning (Australia) Pty. Ltd. International Journal of Quality and Reliability Management 8, no. 5:77-90. Childers, T. L., and S. J. Skinner. 1996. Toward a conceptualization of mail survey response behavior. Psychology and Marketing 13, no. 2:185-209.

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Importance and Implementation of Baldrige Practices for Small Businesses Coake, S. J., and L. G. Steed. 1996. SPSS for Windows: Analysis without anguish. New York: John Wiley and Sons. D’Amboise, G., and M. Muldowney. 1988. Management theory for small business: Attempts and requirements. Academy of Management Review 13, no. 2: 226-240. Dandridge, T. 1979. Children are not little grown-ups: Small business needs its own organizational theory. Journal of Small Business Management 17:53-57. DeBaylo, P. W. 1999. Ten reasons why the Baldrige model works. The Journal for Quality & Participation 22, no. 1:24-28.

Hodgetts, R. M, D. F. Kuratko, and J. S. Hornsby. 1999. Quality implementation in small business: Perspectives from the Baldrige Award winners. SAM Advanced Management Journal 64, no. 1:37-47. Jack, E., and J. R. Evans. 2003. Validating key linkages in the Baldrige Performance Excellence Model. Quality Management Journal 10, no. 2:7-24. Jennings, P. L., and G. Beaver. 1997. The managerial dimension of small business failure. Journal of Strategic Change 4, no. 4:185-200.

Dillman, D. A. 1978. Mail and telephone surveys: The total design method. New York: John Wiley and Sons.

Jones, S., T. Knotts, and K. Brown. 2005. Selected quality practices of small manufacturers. Quality Management Journal 12, no. 1:41-53.

Ebrahimpour, M., and B. E. Withers. 1992. Employee involvement in quality improvement: A comparison of American and Japanese manufacturing firms operating in the U.S. IEEE Transactions on Engineering Management 39, no. 2:142-148.

Kayis, B. 1998. Assessing the differences in total quality management in implementation: Behavior of the Australian manufacturing industry. Total Quality Management 9, no. 8:741-751.

Evans, J. R. 1997. Critical linkages in the Baldrige criteria: Research models and educational challenges. Quality Management Journal 5, no. 1:13-30. – – –. 2004. An exploratory study of performance measurement systems and relationships with performance results. Journal of Operations Management. Ferdows, K., and A. Demeyer. 1990. Lasting improvements in manufacturing performance: In search of a new theory. Journal of Operations Management 9, no. 2:168-183.

Kotey, B., and P. Slade. 2005. Formal human resource management practices in small growing firms. Journal of Small Business Management 43, no. 1:16-40. Lee, C. 2004. Perception and development of total quality management in small manufacturers: An exploratory study in China. Journal of Small Business Management 42, no. 1:102-115. Lilliefors, H. W. 1967. On the Kolmogorov-Smirnov test for normality with mean and variance unknown. ASA Journal (June): 399-402.

Ford, M. W., and J. R. Evans. 1997. Value-driven quality. Quality Management Journal 4, no. 4: 19-31.

Lindsay, W. M., and L. W. Rue. 1980. Impact of the organization environment on the long-range planning process: A contingency view. Academy of Management Journal 23, no. 3:385-404.

– – –. 2000. Conceptual foundations of strategic planning in the Malcolm Baldrige Criteria for Performance Excellence. Quality Management Journal 7, no. 1:1-25.

Linsky, A. S. 1965. A factorial experiment in inducing responses to a mail questionnaire. Sociology and Social Research 49:183-189.

Garvin, D. A. 1991. How the Baldrige Award really works. Harvard Business Review 69, no. 6: 80-95. Gibson, B., and G. Cassar. 2002. Planning behavior variables in small firms. Journal of Small Business Management 40, no. 3:171-186. Goh, P. L., and K. Ridgway. 1994. The implementation of total quality management in small and medium-sized manufacturing companies. TQM Magazine 6, no. 2:54-60. Gray, C. 2004. Management development in European small and medium enterprises. Advances in Developing Human Resources 6, no. 4: 451-469. Heberlein, T. A., and R. Baumgartner. 1978. Factors affecting response rates to mailed questionnaires. American Sociological Review 43:447-462. Hendricks, K. B., and V. Singhal. 1996. Quality awards and the market value of the firm: An empirical investigation. Management Science 42:415-436.

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Matthews, C. H., and S. G. Scott. 1995. Uncertainty and planning in small and entrepreneurial firms: An empirical assessment. Journal of Small Business Management 33, no. 4:34-52. McEvoy, G. M. 1984. Small business personnel practices. Journal of Small Business Management (October):1-8. McGee, J., and O. Sawyerr. 2003. Uncertainty and information search activities: A study of owner-managers of small hightechnology manufacturing firms. Journal of Small Business Management 41, no. 4:385-401 McTeer, M. M., and B. G. Dale. 1994. Are the ISO 9000 series of quality management system standards of value to small companies? European Journal of Purchasing and Supply Management 1, no. 4:227-235. Mendham, S., F. Chittenden, and P. Poutziouris. 1994. Small business and BS 5750/ISO 9000. Small Business Research Trust. England: Milton Keynes. Miller, D.C. 1970. Handbook of research design and social measurement. New York: Mckay.

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Importance and Implementation of Baldrige Practices for Small Businesses Nakajo, T., and T. Kono. 1989. Success through culture change in a Japanese brewery. Long Range Planning 22, no. 6:29-37. Norusis, M. J. 1995. SPSS 6.1, Guide to data analysis. Englewood Cliffs, N. J.: Prentice-Hall. Overby, J., and P. Servais. 2005. Small and medium-sized firms’ import behavior: The case of Danish industrial purchasers. Industrial Marketing Management 34:71-83. Pannirselvam, G. P., S. P. Siferd, and W. A. Ruch. 1998. Validation of the Arizona governor’s quality award criteria: A test of the Baldrige criteria. Journal of Operations Management 16:529-550. Paxson, M. C. 1995. Increasing survey response rates: Practical instructions from the total-design method. Cornell Hotel and Restaurant Administration Quarterly (August): 66-73. Porter, L. J., and A. J. Parker. 1993. Total quality management: The critical success factors. Total Quality Management 4:13-22. Raymond, L., and J. St. Pierre. 2004. Customer dependency in manufacturing SMEs: Implications for R&D and performance. Journal of Small Business and Enterprise Development 11, no. 1:23-33. Reiland, R. 1999. Hey, government, lettuce alone. Restaurant Hospitality 83, no. 1:18. Reynolds, P. D., and B. Miller. 1992. New firm gestation: Conception, birth, and implications for Research. Journal of Business Venturing 7:405-417. Robinson, R. B., and J. Pearce. 1984. Research thrusts in small firm strategic planning. Academy of Management Review 25:80-93. Rodwell, J., and M. Shadur. 1997. What’s size got to do with it? Implications for contemporary management practices in IT companies. Small Business Journal 15, no. 2:51-62. Saraph, J., P. Benson, and R. Schroeder. 1989. An instrument for measuring the critical factors of quality management. Decision Sciences 20, no. 4:810-829. Scully, J., and S. Fawcett. 1994. International procurement strategies: Challenges and opportunities for the small firm. Production & Inventory Management Journal 35, no. 2:39-46. Shin, D., J. Kalinowski, and G. El-Enein. 1998. Critical implementation issues in total quality management. SAM Advanced Management Journal 63, no. 1:10-14. Siropolis, N. 1994. Small business management: A guide to entrepreneurship , fifth edition. Boston: Houghton Mifflin Company. Stephens, P., 2001. Small business and high performance management practices. Ann Arbor, Mich: University Microfilms. Tamimi, N., and M. Gershon. 1995. A tool for assessing industry TQM practice versus Deming philosophy. Production and Inventory Management Journal 36:27-32. Torabi, M. R. 1991. Research notes: Factors affecting response rate in mail survey questionnaires. Health Values 15, no. 5:57-59.

Van der Wiele, T., and A. Brown. 1998. Venturing down the TQM path for SME’s. International Small Business Journal 16, no. 2:50-68. Verser, T. G. 1987. Owners’ perceptions of personnel problems in small business. Mid-American Journal of Business (September):13-17. Wilkes, N, and B. G. Dale. 1998. Attitudes to self-assessment and quality awards: A study in small and medium-sized companies. Total Quality Management 9:731-739. Wilson, D., and D. Collier. 2000. An empirical investigation of the Malcolm Baldrige quality framework. Decision Sciences 31, no. 2:361-390. Yusof, S. M., and E. Aspinwall. 1999. Critical success factors for total quality management implementation in small and medium enterprises. Total Quality Management 10, no. 4/5:S203-S209 BIOGRAPHIES Paul R. Stephens earned his bachelor’s and master’s degrees in engineering and business from Illinois State University and Bradley University. He earned his doctorate in operations management from the University of Cincinnati. Prior to entering an academic career, Stephens was employed as a manufacturing engineer and production manager at small firms that competed in the customized electronics and mining equipment industries. He started his own consulting business and provided custom cost estimation and quotation software solutions for small business. Stephens has published in a variety of outlets that serve a diverse group of stakeholders, including operations management, quality management, information systems, and entrepreneurship. He can be reached by e-mail at [email protected]. James R. Evans holds bachelor’s and master’s degrees in industrial engineering from Purdue, and a doctorate in industrial and systems engineering from Georgia Tech. Evans is the lead author of two of the leading quality management textbooks used in business schools worldwide: The Management and Control of Quality, 5th Edition, and Total Quality: Management, Organization, and Strategy, 3rd Edition, and has also written books on statistical process control, management science, operations management, simulation and risk analysis, statistics and data analysis, and creative thinking. Evans served as an examiner for the Malcolm Baldrige National Quality Award from 1994-1996, senior examiner from 1997-1999, and alumni examiner from 2000-2001. He has been a senior examiner with the Ohio Award for Excellence since 1999, and a member of the Examiner Training Committee. He has also been involved in the design of the Greater Cincinnati Chamber of Commerce Small Business of the Year Award Program and serves as a judge for the award, and was selected as a judge for the 2002 U.S. Army Communities of Excellence ACOE Award Program. Charles H. Matthews is an internationally recognized scholar and innovative teacher in the field of entrepreneurship. His teaching and research interests include: strategic management;

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Importance and Implementation of Baldrige Practices for Small Businesses small, entrepreneurial, and family-owned ventures; and leadership succession in family/privately held firms. His research has been published in the Journal of Small Business Management; the Journal of Small Business Strategy; Entrepreneurship & Regional Development; Frontiers of Entrepreneurship Research; Family Business Review; and The Center for the Quality of Management Journal. Matthews has facilitated more than 400 faculty-guided, student-based field case studies and has served as a consultant to numerous organizations including many family businesses. In addition to his consulting practice, Matthews has entrepreneurial and family business experience in the photographic, automotive, and real estate industries. An educational entrepreneur as well, he is the founder of the UC Center for Entrepreneurship Education & Research in 1997, which was named one of the top 50 entrepreneurship programs in the United States in 2001 (Success magazine).

Strategic Planning Strategy Development Process • The strategy development process considers customer expectations, the competitive environment, and all risks. • The strategy development process assesses the markets in which to compete, taking into consideration the firm’s operational capabilities, human resources, and supplier relationships. Company Strategy • Strategy is translated into action plans. • Progress toward meeting action plans is tracked.

APPENDIX Baldrige Categories, Items, and Practices

• Action plans are clearly defined including measures of effectiveness and resources needed for implementation.

Leadership

• Two- to five-year projections are made for key areas and compared with projected competitor performance.

Leadership System • Leaders evaluate the needs of all stakeholders when setting company direction. • The company uses formal and informal methods for selecting managers and developing leadership skills. • The leadership system is designed to sustain individual development, initiative, and organizational learning. • Leaders demonstrate their expectations in their behaviors. Leaders communicate expectations throughout the entire work force. • Leaders review overall firm performance and use this process to build consistency in goals. • The leadership system is periodically evaluated and improved. Company Responsibility and Citizenship • The company considers the legal and ethical ramifications of their actions and when making decisions. • The company meets all regulatory requirements and treats these as areas for improvement. • Senior leaders support employee involvement in their communities.

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• Human resource plans are derived from overall company strategy.

Customer and Market Focus Customer and Market Knowledge • Customer groups and/or market segments are clearly defined. • Approaches for listening and learning from customers are established. • The firm uses what it learns from listening to customers. • The company evaluates and improves its methods of listening and learning from customers. Customer Satisfaction and Relationship Enhancement • The company provides easy access for customers when they are seeking assistance and/or they wish to complain. • Performance requirements for employees who interact directly with customers are well defined, understood, and applied. • Performance requirements for employees who interact directly with customers are periodically evaluated and improved.

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Importance and Implementation of Baldrige Practices for Small Businesses • A complaint management process exists that ensures complaints are resolved effectively and promptly. • Complaints received by all company units are aggregated and analyzed for use throughout the company. • The company continuously follows up with customers to receive actionable feedback and improve processes. • The company gathers information about customer satisfaction and captures information that reflects customers’ repurchase, new business, and positive referral. • Objective and reliable information on customer satisfaction relative to competitors is obtained from comparative studies. • Customer satisfaction measures are used to drive improvement and better understand the factors that drive markets.

Information and Analysis Selection & Use of Information and Data • Data needs are linked to company processes and goals, and are gathered. This information is used to track and improve the company’s performance at all levels. • Stakeholders who need data to effectively perform their work have convenient access to all necessary information. • The types of data the company collects, as well as its usage and effectiveness, are periodically evaluated, improved, and kept current. Selection & Use of Comparative Information & Data • The company evaluates its needs for comparative information (including both competitive comparisons and best practices outside of your industry). The firm has established criteria for seeking sources of such data. • Comparative information is used to set goals and to encourage performance breakthroughs. • How comparative information is gathered and used is periodically evaluated, improved, and kept current.

Analysis & Review of Company Performance • Performance data from all parts of the company are integrated and analyzed to assess overall company performance. This information is used to understand cause/effect connections among processes and between processes and business results. • Company performance and capabilities are reviewed to assess progress relative to goals, plans, and changing business needs. • Performance reviews are used to determine improvement priorities. These reviews are translated into improvement actions throughout the company, to the company’s suppliers and business partners.

Human Resource Management Work Systems • Jobs are designed and managed to provide opportunities for individual initiative and self-directed responsibility. The designs ensure high performance and flexibility in response to changes in the marketplace. • Jobs are designed to ensure effective communications and skill sharing across the firm. • Compensation and recognition programs reinforce performance, teamwork, and learning objectives. Employee Education, Training, and Development • Education and training activities are structured to address the knowledge and skills employees need to meet their work and personal development objectives. • Employees and their managers have important input in designing education and training activities. • The delivery of education and training activities are designed to best support the achievement of the company objectives. • Knowledge and skills acquired through training are reinforced on the job. • Education and training activities are evaluated and improved. Employee Well-Being and Satisfaction • The company sets goals for health, safety, and ergonomics.

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Importance and Implementation of Baldrige Practices for Small Businesses • A variety of employee well-being and motivation services are available, and are periodically evaluated and improved. • Both formal and informal methods are used to determine employee well-being, satisfaction, and motivation. • Results related to employee well-being, satisfaction, and motivation are evaluated relative to business objectives.

Process Management Management of Product and Service Processes • The designs of product and service processes are addressed systematically, incorporating all stakeholders and accounting for the changing environment. • The design of production/delivery processes incorporates quality and operational performance requirements. • Design and service processes are coordinated among individuals to ensure trouble-free introduction and delivery of products and services. • Product and service processes are clearly defined, in-process measurements are taken, and a corrective action approach is established to ensure that products and services meet requirements. • Product and service processes are evaluated and improved to achieve better performance. • Results from the evaluation of product and service processes are shared throughout the company. Management of Support Processes • Support processes are clearly defined, incorporating important internal customer requirements. Support processes are measured and managed to ensure that products and services meet requirements.

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• Key support processes are systematically evaluated and improved to achieve better performance. Management of Supplier & Partnering Processes • Important performance requirements are carefully defined and used to select suppliers and partners. • The company ensures that supplier and partner requirements are met by requiring feedback to inform suppliers and partners of their performance. • Supplier and partnering processes are periodically evaluated and improved.

Business Results • The company captures, trends, and analyzes key measures of customer satisfaction. • The company captures, trends, and analyzes key measures of financial and market performance. • The firm captures, trends, and analyzes key measures of employee well-being, satisfaction, development, work improvement, and effectiveness. Results are compared against benchmarks. • The company captures, trends, and analyzes key measures of supplier and partner performance. • The company captures, trends, and analyzes important measures of product quality, service performance, and productivity. Results are compared against industry or best-in-class benchmarks. • The company captures, trends, and analyzes important measures of regulatory compliance and environmental improvements. These results are compared against industry or best-in-class benchmarks. • The company captures, trends, and analyzes key measures of other unique measures such as innovation rates and order accuracy. Results are compared against industry or best-in-class benchmarks.