Benefits of Business Excellence Use

Research indicates that organisations with a business excellence approach obtain significant benefits. This research includes that conducted in US, Europe, Australia and NZ. Beyond improvement in financial indicators, other benefits include

  • enhanced innovation and idea generation,
  • increased customer satisfaction,
  • organisational growth (employees),
  • increased employee satisfaction and involvement,
  • improved efficiency and effectiveness, and
  • product reliability

Notwithstanding these benefits, of which there is considerable evidence and also debate, one key benefit of award-based models is that they provide a ‘balanced scorecard’ of criteria and measures against which organisations can objectively evaluate their management systems and performance, and compare that performance with world standard benchmark levels, or with the performance of other organisations.

US evidence that business excellence works
Sources of evidence of the financial impact of business excellence include the US ‘Baldrige index’. This was used over the past ten years to track the share value performance of award winners against a control group of Standard & Poor’s 500 companies. A notional US$1000 was invested in Baldrige award winners and its subsequent growth compared against the equivalent amount invested in the S&P companies. After eight years of outperforming the S&P 500 companies by as much as 6.5 to 1 on stock price performance, Baldrige award winners underperformed against the comparison group in 2003 and 2004. This is attributed to the relatively poor performance of technology companies in recent years, and the index has now been discontinued for reasons that are detailed by NIST.

Hendricks & Singhal studied the long-term effects of implementing effective BE programs. Using the winning of Criteria for Performance Excellence (Baldrige) awards as the criterion to select organisations their research shows a strong link between BE and financial performance. The study found that US Business Excellence award winners experienced increased income, sales and total assets during their respective post-implementation periods as compared with their controls.

European evidence that business excellence works
In a similar study to the Hendricks & Singhal study conducted in the US a study sponsored by the European Foundation for Quality Management and British Quality Foundation of 120 award winners found that the winners outperformed comparison companies similar in size and operating in the same industries over a 11 year period.

Australian evidence that business excellence works
A similar index to the US ‘Baldrige index’ was developed in Australia, whereby AU$5000 was notionally invested in business excellence award winners stock in 1990 and compared against the same amount invested in S&P companies. This index reported improved share performance of a factor of 3.5 to 1 among award winners over thirteen years up to 2003. No more recent data on this index are currently available at the time of writing.

In terms of general benefits, a study by Hausner of the University of Wollongong, Australia, examined the performance of 15 manufacturing firms that had participated in the Australian Quality Awards (not only award winners) and demonstrated improvements against a range of KPIs. Hausner requested 15 firms to list the 10 most important performance indicators, and provide quantitative data in respect of those KPIs over an 8 year period.  Hausner found a strong positive correlation between KPI improvement and total business excellence score, and hence concluded that striving for improvements against the Australian Business Excellence Framework (ABEF) is of interest to all stakeholders as organisational success is tied to the effectiveness of its management practices as reflected through the ABEF.

Click here for additional Australian Evidence.

NZ evidence that business excellence works
A study conducted by Mann and Saunders identified a strong correlation between “Enablers” and “Business Results” when studying Baldrige self-assessment results. Their data indicated that organisations with excellent approaches to leadership, strategic planning, customer and market focus, information and analysis, human resource focus and process management are more likely to achieve excellent Business Results (comprising customer satisfaction results, financial and market results, human resource results, and organisational effectiveness results).