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Visionary leadership Customer focus Employee development Process excellence Market leadership Superior financial results
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These business aspects are addressed in the seven categories of Baldrige Criteria for excellence, as shown in Figure 1-4, as
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Category Leadership Strategic Planning Customer and Market Focus Information and Analysis
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Area Organization Leadership Public Responsibility and Citizenship Strategy Development Strategy Deployment Customer and Market Knowledge Customer Relations and Satisfaction Measurement and Analysis of Organizational Performance Information Management Work Systems Employee Education, Training, and Development Employee Well-Being and Satisfaction Product and Service Processes Business Processes Support Processes Customer-Focused Results Financial and Market Results Human Resource Results Organizational Effectiveness Results
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Point Value 120 85 85 90
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Process Management
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Business Results
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FIGURE 1-4. Baldrige Criteria for performance excellence. (MBNQA Guidelines, 2003.)
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CHAPTER ONE
well as in several areas within each category. Each area consists of a set of questions that focus on certain aspects of a business. The objective is to emulate, as much as possible, each guideline in order to achieve superior results. The three major performance measurement and improvement systems of ISO, the Baldrige Criteria, and Six Sigma all launched at about the same time. ISO launched ISO 9000 and Motorola launched the Six Sigma methodology in 1987, and Congress launched the Baldrige Criteria in 1988. Figure 1-5 highlights key differences among the three approaches. Faced with fierce foreign competition in the semiconductor industry, the late Bill Smith invented the Six Sigma methodology in 1985 1986. He realized that the rate of improvement Motorola required to be profitable was so significant that something dramatically different had to be done. Motorola
ISO 9000 A framework for creating Quality Thinking. Facilitates process management through documentation and compliance. Specifies all business functions except Accounting. Promotes Management Responsibility through communication and management review. Main aspect is compliance to documented practices and improving effectiveness. About 500,000 companies have implemented it worldwide. Savings are difficult to quantify. MBNQA A framework for creating Performance Thinking. Facilitates benchmarking to improve performance levels to best-in-class levels. Specifies key aspects of business. Six Sigma A framework for linking improvement to profitability. Facilitates dramatic improvement to achieve performance excellence. Specifies a methodology for improvement irrespective of functionality. Requires leadership to aim at highest performance with highest profitability.
Promotes exceptional leadership behaviors as a way of life in society.
Mass application of the standards. It is a third-party certification.
Main aspect is to achieve total customer satisfaction through superior practices and performance. About 4 to 8 companies win the national level; similar number at state level and in other countries. Performance of publicly traded companies has shown advantage over the others by 3 to 4 times. Limited to a few companies. It is recognition for excellence.
Is on decline due to diversification Stabilized due to limited recognition. in series of industry-specific Has expanded into health care and standards. education.
Main aspect is achieving and maintaining a high improvement rate for business aspects that affect profitability. Has been adopted by several companies to achieve dramatic improvement and profitability. Companies have reported huge amount of savings in production and service areas. Selectively used by companies committing to be a superior company. It is a methodology to optimize performance and maximize profitability. Growing rapidly as an attractive means to realize superior financial results.
FIGURE 1-5. requirements.
Comparison of ISO 9001:2000, MBNQA, and Six Sigma system
TRENDS IN PERFORMANCE MEASUREMENTS
leaders envisioned the state of manufacturing 20 years into the future. They predicted that cellular phones were going to follow a similar route as the commercialization of digital watches. Interestingly, that is exactly what happened. Today, the trend in the cost of a cellular phone is almost like that of a digital watch several years ago. Like the price of digital watches, the price of cell phones has dropped precipitously. Sometimes a cellular phone is even complimentary with the purchase of a cellular service. This is why new processes for improvement must be created continually and not just as a one-time deal. Sustaining the Six Sigma process is critical to maintain performance once the initial success is achieved. Before launching the Six Sigma initiative, Bill Smith had discovered that most customer complaints and failures of the product in the field were primarily caused by errors that the quality control system was unable to detect before the product was shipped. Typically, management focuses on resolving customer complaints through developing a superior customer service team. With Six Sigma, however, improving customer service for fixing field failures may be less important than developing systems that will catch and correct errors before the customer receives the product. The field failures really determine the customers perception of an organization s products or services. To address the customers concerns, therefore, internal operational excellence, driven passionately by the leadership, is mandatory. In addition to widespread programs such as ISO 9000, the Baldrige Criteria, and Six Sigma, several companies have developed their own ways of achieving excellence. These can be effective, but issues arise in the methods such organizations use to rate their performance. Every organization looks at financial performance critically every month or quarter. However, many organizations, small or large, do not review their operational performance as rigorously as they do their financial performance. In essence, they are watching the pennies at the end of the line while ignoring the dollars in the line, which should be subject to even greater scrutiny. Companies with superior performance do so and reap the benefits. However, most businesses struggle to find a method of looking at these costs that is simple, practical, and compatible with profitability.
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