Total Quality Management and corporate financial performance: An analysis of the Malcolm Baldridge National Quality Award criteria

The impact of the Malcolm Baldrige National Quality Award (MBNQA) Performance Excellence Criteria on corporate financial performance is examined. Three independent studies were performed to assess this relationship. The first included Malcolm Baldrige National Quality Award (MBNQA) winners. The second study involved 69 firms identified as Total Quality Management (TQM) firms and for the final study a sample of large American corporations who completed surveys which provided an estimate of the score the companies would have received on a MBNQA assessment were examined. The method for assessing the financial strength for all three studies was the metric Market Value Added (MVA). In the three studies the change in the financial strength was tracked for three years before TQM implementation began, and for seven years after implementation, as the companies’ quality programs developed. These results were compared to industry control groups to establish relative financial strength. Analysis of the MBNQA winners and the identified TQM firms’ relative financial strength overtime reveals long-term financial gains from implementing the performance excellence criteria. For the third study an estimate of the companies’ MBNQA score was calculated. These scores were correlated to the companies’ standardized MVA. A simple correlation analysis was performed. When grouped by similar company types all showed a positive correlation between MBNQA scores and company financial strength. These studies indicated that companies experience declining financial strength before TQM implementation. Financial strength tended to remain below the industry average for one to five years implementation, by the end of the period under study the financial strength was stronger than the industry average. This supports the idea that the MBNQA criteria will improve the long term financial strength of a company though this improvement may take up to five years to realize --Abstract, page iv