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Juhani
Anttila
USING PERFORMANCE EXCELLENCE MODELS
FOR DEVELOPING AN ORGANIZATION'S BUSINESS PERFORMANCE Abstract Practical experiences of the use of the Malcolm Baldrige (MB) Model, the criteria and methodology of the American National Quality Award, are considered in this paper. As a case study the use of the methodology has been considered on the basis of experiences obtained within Sonera Corporation, the leading telecommunications operator in Finland, where performance excelennce models were nearly ten years as a major quality management tool for enhancing the overall business performance towards excellence. Although this paper considers Malcolm Baldrige model as the example the experiences are relevant also to those cases where some other performance excellence model, e.g. the European EFQM model, is used. The case company, Sonera Corporation, and the development of its quality approach Sonera Corporation was a leading provider of mobile and advanced telecommunications services. Sonera was growing as an operator, as well as a provider of transaction and content services in Finland and in selected international markets. The company also offered advanced data communication solutions to businesses, and fixed network voice services in Finland and neighboring markets. In 2003 Sonera was merged into Swedish Telia Corporation and continued as TeliaSonera's country organization TeliaSonera Finland Ltd. Sonera's quality approach and its deployment have been developed over
the several last decades and along with the development of company's overall business
environments and requirements. The following stages and emphases are to be distinguished
during the decades pertaining to quality development at Sonera:
Figure 1. The overall business performance is based on business activity (processes and projects) and their results. For excellence one should compare performance with relevant references The aim of QM approach at Sonera is to contribute for the company's strategic and operational performance goals. QM is a specialized expertise for enhancing effectiveness and efficiency of business management and leadership. Thus genuine realization of the QM practices takes place in real business activities both in the company's strategic leadership as well as in the operational realization of the company's services. In this approach all relevant stakeholders (interested parties) are also associated in accordance with their appropriate roles. This means a business-integrated quality approach. The goal of the overall business performance and also the QM is business excellence (see figure 1).. Business excellence means a competitive balanced business performance including financial, customer-perception, business process, and innovativeness and learning perspectives When considering performance both activity and its results are taken into account. The objectives are reached through innovative management and leadership practices. In order to realize that in all parts of the company and at all levels of business and business management, an organization-wide management structure, a leadership infrastructure framework, has been defined. The framework model (see figure 2) was created at Sonera in early 1990s. This model covers all business activities in a natural and flexible manner, and it also defines responsibilities. This is also the framework to implement all QM-related means, e.g. including the Malcolm Baldrige methodology.
Figure 2: Sonera's QM realization model: The infrastructure framework of four levels of QM learning and competence within the corporation Sonera's QM approach
is well harmonized with the company's business values. On that basis also the
quality policy has been defined. This quality policy articulates general intention
and direction towards quality and includes following items: The overall intention at Sonera has generally been to seek actively original sources of QM information and thus be able to avoid e.g. too extensive use of the services of external consultants. For example, the ISO 9000 standards have been utilized through participating right from the start in their drafting as Finland's national representative and expert in the international standardization committee ISO TC 176 for quality management and quality assurance. Business excellence tool kit A
clear guiding ideas and principles concerning quality and QM as well as a comprehensive,
company-wide realization model (see figure 2) for mobilizing the "ideas"
are not enough for getting quality happen in a professional way. Practical means,
tools, methods, etc., especially relevant management methodology, are necessary
to get the approach concrete in practice. For this purpose, a collection of management
tools has been created at Sonera. In addition to specialized quality management
methodology, Sonera's "Business Excellence Tool Kit" includes also tools
e.g. for finance, human resource, risk management, technology management, acquisitions
and marketing. The most essential quality management tools include: These tools cover the needs
of a comprehensive quality management. One of the principal needs is performance
evaluation. The critical evaluation of the business performance and related strategic
decisions on targets and actions are key measures in continually increasing the
effectiveness and efficiency of the business performance. In order to evaluate
comprehensively the overall situation and its development of the business performance,
the quality award methodology is applied. Assessments based on quality award criteria
have been used in Sonera as internal self-assessments by boards of directors in
different business units since 1992. The assessments are based on the criteria
of the American Malcolm Baldrige National Quality Award. Quality award criteria
based assessments are applied for the whole business units. Thus, they are related
to strategic business management. By utilizing general quality award criteria,
a business is able to be placed on a "global map" of overall business
performance. One can find the level at which Sonera's business units have also three times applied the Finnish National Quality Award in order to "calibrate" the internal self-assessments. However, even participation in the quality award competition is understood as a part of self-assessment to improve business performance. Assessing business process performance constitutes a central part of the operational QM. The assessment procedure has been developed on the basis of ISO 9000 auditing principles (cf. Standard ISO 19011) and by combining ideas from business requirements and quality award criteria in it. In assessing process performance, the focus is on the critical evaluation of procedures applied in the processes and process results achieved through their implementation. Based on assessment results, Sonera has a corporate-widely used process performance indicator, with which one tracks how the performance of business processes has been developed. Malcol Baldrige methodology for business excellence Different quality awards models have been developed in many countries. The American Malcolm Baldrige Model is generally considered as matured and effective one. Many other national models are based on it. At Sonera this model was selected as a basis of a deep insight from a thorough investigation including training and benchmarking in the USA. The top management of the corporation made the final decision on the methodology and investments into its implementation. The self-assessment activity started at Sonera in 1992. The initiating impact to the activity was a study made on the business performance measures and indicators and the overall performance management in the corporation and in its business units. One observed that the situation was not satisfactory. There were in use a lot of distinct performance indicators without any effective coordination and measurements unsystematically based on separately developed procedures. The situation was a quite natural result from the uncontrolled evolutionary development initiatives. The quality award methodology - learnt by the company's quality experts from the USA - was seen as an opportunity to get a comprehensive grip of the problem. From the original Malcolm Baldrige Model Sonera's own practical MB procedures and software tools for the self-assessment (tailored to Sonera's purposes by a Finnish company Finnevo Ltd) were developed. MB criteria were very suitable when the company was just started orienting towards the competitive international markets including the USA. Benefits for the internal business communication were obvious, too, because with the MB approach it was possible to get an understanding of the overall business performance against a world-widely recognized score. With MB methodology also the quality management approach really got integrated with the key business management activities of he strategic management process. MB
criteria have the following important functions to strengthen organization's competitiveness: The award criteria used in self-assessments have produced highest benefit within a diagnostic framework. In this sense self-assessments differ from quality award assessments which are designed to produce scores to find the winners rather than make diagnoses. The criteria are built upon a set of core values and concepts recognized in modern business organizations. The values and concepts are the embedded beliefs and behaviors found in high performing organizations. These values are the foundation for integrating key business requirements within a results-orientated assessment framework that creates a basis for a strategic action and feedback. The core values and concepts of the MB model - which were very relevant also for Sonera's business development situation - are: -
Visionary leadership The MB model is based on the principle that in order for an organization to succeed, there is a number of key business enablers on which it should concentrate to achieve competitive goals. It also needs to measure its success through a number of key results areas. Thus, the core values and concepts are embodied in seven assessment categories of the MB criteria (see figure 3). These categories include 18 examination items, and these in turn contain a total of 29 areas to address. In the MB procedure, business performance facts are described responding to the questions of the areas to address, and the assessments (according to the scoring principles) are made by examination items. A major part of the examination items refer to the different approaches and their deployment for the business realization, whereas other part refers to performance results.
Figure 3. Malcolm Baldrige criteria structure Malcol Baldrige criteria work well with ISO 9000 standards In general, there are two recognized
principal source materials that are useful for the development of the company's
quality approach: ISO 9000:2000 standards and quality awards models. At Sonera
both are used as general QM references. They support very well each others because
they have the same basic aim, excellence of the business performance, and very
similar structure and contents elements. However, they have also differences that
originate from their backgrounds. While the standards reflect a large international
consensus for harmonization of the approaches for quality management and quality
assurance, the quality awards models are based on the development of a national
competitiveness towards excellence. In the standards the views of quality experts
are emphasized, and the awards models reflect especially the business management
views. It is just due to both the similarities and the differences that their
simultaneous use is beneficial for the company. Thus, it is very important for
the development of the company-wide quality approach to understand the effective
relationship of these important references of the professional quality management.
Then also possible conflicts between them can be avoided. At Sonera self-assessments
started directly using the Malcolm Baldrige Model but later through learning by
action also own insight was born and own practices developed. In that context
also particular material was created including small pocket-books "Good Better
Best" and "ISO 9000 for the creative leader" for company-dedicated
insight of both the Malcolm Baldige quality award model and ISO 9000:2000 standards.
Self-assessment is a way of looking at how well a business unit is performing. It enables a unit to look across all its activities, set a stake in the ground for its performance to date and determine what it now needs to do to make improvements in that performance. The
key enablers by which the top management judge the unit's performance are: The key results areas by which
the criteria then measure successes are: Basically MB criteria measure how well all the stakeholders 'requirements' are being met. Using the criteria a business unit can score up to 1000 points on their performance. In scoring there is considered both approach (i.e. how to do things) and the results thereof. The criteria are divided into 18 assessment items that are all interlinked through the business logic (i.e. cause-effect relationships) (see table 2). What is significant in the score? A very important score (directly 170 points) is for customer relationship approach and satisfaction results. The best units focus on meeting all their customers' needs by providing them with a product that delights them. Practices for human resource management and people satisfaction are also seen as most important area with 165 points. Happy people serve their customers best and also do business best! This is closely followed by the measure of financial business results at possible 125 points, and process approach with 85 points and internal effectiveness results 120 points. In fact, achieving and exceeding business goals and targets is the most recognized result area in Malcolm Baldrige criteria. All these then are seen to be the most important measures of how well the unit is performing. But a unit will achieve little in these areas without effective leadership (a possible 120 points), and strategic planning (85 points). So far the best companies in the world are scoring around 800 points. A score of 500 points is already very good. Practices of self-assessment There
are several ways in which self-assessments have been carried out at Sonera. The
most usual way is that the top management team of a unit holds a self-assessment
workshop going through all of the 18 assessment items of the criteria. To get
maximal benefits from the assessment, written descriptions of strengths and weaknesses
are at first collated per each item, and then the recorded facts are assessed
by the team using the scoring principles. Also a Web-based software that was specially
developed for Sonera is used to support the assessment. As a general rule self-assessment
has been shown to work well when an unit: In the early stages of the self-assessment the scoring should not be emphasized too much. There is a danger that the assessment is seen as a number-game. The quality award self-assessment is not, however, any mathematics but a systematic and critical business management task enhancing satisfaction of all interested parties (stakeholders) and company's own business effectiveness and efficiency. Finding strengths and weaknesses is in practice much more important than the scores. The assessment
as a whole consists of the following tasks (see figure 4): Preliminary considerations necessary for a self-assessment
include:
Before starting a particular assessment, a general organizational business profile description is prepared. It is a good basis for the further actions and decisions during the assessment. Malcolm Baldrige criteria give good guidance for defining the profile. It consists of general descriptions of business environments, relationships with customers, suppliers, and other partners, and key strategic challenges, and practice for performance improvement. Another useful preliminary task before the assessment is to define company's current competitive edges. These are those issues that enable one to succeed repeatedly better than the competitor when utilized skillfully, regardless of any random factors. Competitive edges are superior when changing the situation would require significant amounts of resources, time, fundamental structural changes, another operating environment, renewal of technology, etc. from the competitors. Most competitive edges have to do with size, position, unique reciprocal relationships, special know-how, flexibility, speed, linkages, outstanding effectiveness and efficiency, etc. Competitive edges do not last forever. Excellence in current markets, with respect to current customers and in current product groups do not necessarily imply even mediocre competitive edges in the case of new customer groups and when introducing new products into the (new) market(s). Max. two most promising challenges should noted for the competitive edges pertaining to implementing the strategy of the organizational unit in focus. For description purposes all the assessment questions of the criteria should be understood as "How" questions. In order to understand the hierarchy of the questions, at Sonera a particular hierarchy-navigation methodology was developed. The assessment criteria and scoring guidelines have to be understood in the light of the unit's own business requirements (cf. business profile). This calls for an interpretation as to how issues in the criteria are relevant in the light of the unit's business requirements and how such issues ought to be interpreted. The interpretation becomes clear when one asks oneself "should we also?" and, if so, "do our business requirements require something special regarding the approach or its deployment?" Also the business results must be relevant from the unit's business viewpoints. The fact-description technique requires methodological decisions. Very short descriptions are fast, but they are not very communicative outside the assessment team - even there may be difficulties within the team. Also scoring is unsure and subjective when based on inadequate descriptions. Fact-descriptions for the assessment implies that objective evidence is searched regarding company's strengths and weaknesses relating to the assessment items of the criteria. At Sonera there are quite rigorous definitions for the both concepts. Strengths are those facts that distinguish you as a success from others. Unique strengths are those singular issues which your most important competitive edges are based upon or on the basis of which you are able to meet new challenges exceptionally competitively. With the strengths one differs from others as a success when one thinks about competition at the levels of the line of business, organization, and product. Weaknesses are the hindrances to utilizing strengths in a superior manner. Competitiveness - superior competitiveness in particular - can't be created through patching up weaknesses. Success is based upon exceptionally skillful utilization of unique strengths. The question here does not, then, relate to any weaknesses whatsoever, but rather to those weaknesses which have relevant significance with respect to the competitive utilization of the strengths. In addition to the strength and weakness statements it may be useful also to note some informative issues regarding particular business activities and results. These may be facts that do not seem to be strengths nor weaknesses, i.e. they do not seem to be relevant at all for performance assessment purposes but may be noted for possible future needs. Causal
relations of the business management issues (e.g. strategic plans -> process
operations -> business results) should be clearly understood in the business
facts descriptions. These relations become significant particularly when scoring
is above the level of 400 points. Realizing causal relations is promoted e.g.
by: Among the assessment team, different conceptions
of one and the same issue provide an opportunity to learn. When proceeding appropriately
in a self-assessment the outcome is either genuine consensus or a shared view
of the diversity of views. Differences may concern relevant facts or scores. A
true consensus on descriptions is most important. A consensus reached through
a good interaction, an "argumentated and unauthoritarian discourse",
creates a strong commitment to the preconditions of effective development. The
factors that have a positive influence in achieving consensus include: Who should
do the assessments? Roughly there are three possibilities: Preferable there should be in the assessment team at least four persons who know the assessment methodology. The highest business officer, e.g. the CEO, should always be one of the assessors in self-assessments. It should never be trusted only in one single expert in the assessment. The possible external assessments, e.g. the assessments in context of applying the national quality award, should be reviewed and interpreted by the business leaders for necessary actions. Thus, those assessments are understood as a part of the own self-assessment. The assessments should be carried out as an assessment process (see figure 5).
Professional Malcolm Baldrige scoring is fairly accurate (about 10 %-units), i.e. the same result may be obtained by different competent assessors. In internal self-assessments, however, differences may arise from the reason that the attending persons (although they were leaders of the same business unit) often have different tacit knowledge of the performance item). Then the assessment is not based is not only based on written descriptions of the facts but also on their personal opinions.
Figure 6. Scoring is a multi-facet task Due to comparability, it is essential to
use internationally recognized criteria and scoring principles also in internal
self-assessments. Comparability can be ensured by: Self-assessment using a quality award model is not any easy task (see figure 6). However, the assessment technique is quite simple and easy to learn. The difficulty is originated from the substance itself. Critical understanding of a complex business performance requires competent resources and initiativity and commitment of the top management. Difficult issues are the understanding the multi-dimensional assessment entirety and the individual criteria items in terms of the own company. Always after self-assessments, the management team should consider performance improvement actions as a part of the business strategies. ISO 9000:2000 standard gives good general guidance for the improvement methodology both regarding strategic breakthrough improvements and step continual improvements. It is impossible to reach above the level of 500 points without a systematic improvement practice in use. Benefits of the self-assessment One
can find both internal and external benefits from using quality awards methodology
and self-assessments for business performance improvement. Internal benefits include: Correspondingly
external benefits include:
Figure 7. Enhancing business performance towards excellence may happen only systematic assessments and improvement activities, i.e. PDCA cycles Conclusions The business
leaders and employees have felt self-assessments that have based on the quality
award methodology as positive and interesting learning experiences. The assessments
have easily created development dialogues genuinely participated also by the top
management. Systematic and objective self-assessment practice has created in the
organization generally critical and analytical thinking. Self-assessment - especially
finding, understanding, and describing real strengths of the business performance
- has been a demanding management task. Based on many years' experience, one does
know any better methodology for this task than a quality award model, especially
the Malcolm Baldrige Criteria. From the experiences at
Sonera one can draw conclusions that self-assessments using the Malcolm Baldrige
or any other quality awards criteria based methodology can be carried out more
effectively and efficiently if: The last ten years in Sonera have been a tough period, but the professional quality management efforts are definitely paying off. There have been great strides in its products and partnership with its customers and the community. The Finnish National Quality Award has been applied and finalist position achieved but still it is to challenge to the world class business excellence, i.e. a score around 800 points as measured by the MB criteria. Using self-assessment across the business units is helping the corporate continue to raise standards in every aspect of the business, thus enabling achieve the vision and strategy to became a most successful and competitive worldwide telecommunication business. References 1. Anttila
J., Vakkuri J.: Good Better Best, Sonera Corporation, Helsinki 2000
[This material has been presented in different forms in differerent seminars or conferences, e.g. in Mumbai, India 2002] |
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