Teschler on Topic
Leland Teschler • Executive Editor
On Twitter @ DW_LeeTeschler
Many of us who were around in the late 1980s remember the debut of the Malcolm Baldrige National Quality Award. The Baldrige Award, administered by NIST, is supposed to enhance the competitiveness of U.S. businesses. Recipients are selected based on factors such as how upper management leads the organization and how the organization leads within the community. With these noble goals, the Baldrige has been called “the best and most cost-effective and comprehensive business health audit you can receive.”
The problem is that history hasn’t been kind to many Baldrige winners, particularly those in manufacturing. The first winner in that category was Motorola in 1988. It was the premier cell phone maker back then and had several thriving business segments. Today, most of its businesses have been sold off. Now called Motorola Solutions, its shares still trade on the N.Y. Stock Exchange.
But had you bought shares on the day Motorola’s Baldrige Award was announced and still held them today, your annual return would be in the low single-digit percentages. You would have been about as far ahead just sitting on your hands in 1988 and buying Tesla stock at the end of 2019.
Investors in IBM, the 1990 manufacturing winner, would have fared no better. Besides giving shareholders low-single-digit returns for 30 years, the firm now struggles for relevancy. Mention IBM in conversations about today’s top technology firms and you are likely to get funny looks.
Then there is 1989 manufacturing winner Xerox Corp. I still recall the words of an acquaintance who did business with Xerox in that era. After one particularly frustrating interaction, he remarked, “Those guys sure spend a lot of time contemplating their navels.”
His exasperation stemmed from the large, slow-moving quality bureaucracy Xerox had created in the quest for its Baldrige. Bureaucracy may be one reason Xerox had trouble navigating the move from behemoth-sized copying machines to desktop appliances that double as printers. In 1989 its stock traded for about $28/share. It recently was changing hands for about $20/share.
Much has been written over the years about why Baldrige Award winners shouldn’t be judged by financial success. But time has made these arguments sound more like excuses. Consider one Harvard Business Review article in 1991 that claimed “Baldrige winners are as vulnerable as other companies to economic downturns, changes in fashion, and shifts in technology. But they are far better positioned to recover gracefully because they have superior management processes in place. The Baldrige Award is thus a strong predictor of long-term survival and a leading indicator of future profitability.”
Cynics might say the HBR was right only for firms satisfied with long-term survival defined as an absence of auctioneers in the parking lot disposing of the company assets.
It looks as though manufacturers may have independently come to similar conclusions about the Award. The last manufacturing winner was Lockheed Martin in 2012. Since then, the Award list has mainly consisted of non-profits, educational institutions, and health-care organizations.
But even these winners prompt questions among skeptics about the behaviors being recognized. For example, one health-care institution wrote proudly that 100% of high-risk mothers under its care received antenatal steroids. In a nation whose health care is the most expensive in the world, it seems surprising that facilities deserve an award for treating 100% of their patients.
There are plenty of reasons to doubt the Baldrige Award ever rewarded performance that mattered. That’s why it’s time to put it to sleep. DW