The importance of an annual physical cannot be underestimated. Most of us dutifully go in once a year to be poked, prodded, questioned and have blood drawn to make sure there is not something wrong with us that we did not know about. Once you hit 50 you hold your breath waiting for the results, hoping you can skate by another year without some dreaded diagnosis like diabetes or cancer. The annual physical most of us get is pretty simple and anything but thorough.
My friend Ray and his wife pay out-of-pocket each year for a comprehensive three-day physical from the Mayo Clinic in Rochester, Minn. An investment like this in preventive healthcare is expensive, but most problems can be corrected if detected early enough. Ray and his wife are better able to manage their health armed with the wealth of data they get from these physicals.
Most of us aren’t willing to cough up the several thousand it costs for this kind of physical, just as most organizations don’t take the time to get an assessment done of their health. If it doesn’t either save money or make money, most won’t invest in it. Yet, a number of organizations I’ve consulted with have deadly diseases that they are either unaware of or in denial of. These diseases show up as really bad products or services, disengaged employees, declining profits, and a culture of mediocrity.
This article is about two huge, successful and rare companies that believe that business excellence can only be achieved using careful evaluations/assessments that serve as the drivers of strategy and improvement actions. Their business units receive the equivalent of a Mayo Clinic executive physical.
Cargill and Tata
While many organizations do not even get a surface-level assessment of their health each year, some managers do realize the importance of giving their organization an objective annual physical and have found that it pays huge dividends. Two of the largest and most respected corporations in the world are Cargill and Tata. Both are huge conglomerates that operate all over the world.
Cargill is mostly in the food business and is the world’s largest privately owned company. Their name is not well known by consumers because they are mostly on the wholesale end of the business. Cargill is an international provider of food, agricultural and risk management products and services. With 160,000 employees in 67 countries, the company is committed to using its knowledge and experience to collaborate with customers to help them succeed.
Tata is better known for its consumer brands, such as Tetley Tea, Eight O’Clock Coffee, Jaguar and Land Rover. Based in India, Tata has a global workforce of over 425,000, operates in more than 80 countries, and exports products to 85 countries.
What both companies have in common is the adoption of a comprehensive model of business excellence that is used to evaluate and improve businesses on a regular basis. Tata transformed itself from a $4 billion domestic company in 1991 to a $104 billion global enterprise by 2014 with an untiring focus on assessment and improvement using a model derived from the Baldrige Criteria for Performance Excellence. Tata’s rapid increase in revenues through organic growth and acquisitions (see chart below) would be the envy of any corporation. (For more information on Tata’s business excellence program, refer to Transformation With Business Excellence and Innovation: Lessons From the Tata Group.)
Aside from phenomenal results and a huge global reach, both companies have a more than 15-year track record of thoroughly assessing the processes, practices, people and performance of their varied business units. More than the typical SWOT assessment that is akin to the one-hour physical you can get at your local Walgreens or CVS, these assessments are based on the Baldrige criteria, which are the most comprehensive and widely accepted model used around the world to evaluate the health of any type or size of organization.
Whatever Happened to Baldrige?
Remember Total Quality Management, Six Sigma and the Baldrige Award? Started by President Reagan and Secretary of Commerce Malcom Baldrige in the 1980s, the U.S. government created the Malcom Baldrige National Quality Award and a set of criteria for identifying American companies that do a good job with quality products and services. Early winners were household names like Xerox, FedEx, Motorola and IBM. Interest in the award and the criteria exploded and many big companies and all branches of the military started doing Baldrige-style assessments and even had their own internal award programs.
Over the years that followed, most companies found they did not get much better as a result of these assessments, but just learned how to “game” the application to get a better score. By the time the 1990s came to an end, most had lost interest in the Baldrige model and had moved on to some new management fad like Customer Relationship Management or Lean.
What most failed to realize is that the Baldrige model had been going through its own evaluation and improvement cycles. In the year 1995 they changed the focus from quality to all aspects of organizational performance, including financial results. Prior to then the assessment did not even look at revenues, profits, or growth—something business people felt was a huge flaw. As the criteria became more comprehensive and inclusive of all important aspects of running a successful enterprise, they also became denser. In fact, a New Zealand client describes the model as “structured common sense that is incredibly dense.”
From the beginning the Baldrige criteria have been complicated, but each year they have added more words, more arcane terminology, and more notes and sub, sub, sub-points. In a recent focus group attended by the 20 largest manufacturers in the U.S., one VP said, “I would never read this. It looks more complicated than the tax code or Obama’s healthcare bill.”
Predictably, the number of applicants and winners of the award continue to decline. Most applicants today are now from the healthcare sector where the concepts of business excellence are more foreign. So, the award program itself is nowhere near as successful as it once was. Congress even voted to cancel funding for the program that was run out of the National Institute of Standards and Technology with a meager budget of a little more than $1 million.
Whether or not the award program will survive is debatable, but the model lives on and continues to be used in countries and organizations around the world. The biggest value of the criteria is not to win a trophy, but to assess the health of any organization and find areas of misalignment. Millions of copies of the criteria have been distributed. Yet only a handful of organizations use it to apply for the award.
Business Excellence Results
So what is “business excellence” and what gets assessed in the Baldrige model? Well, half of the assessment is an evaluation of your performance, and half is an assessment of how you achieved that performance. Results are evaluated in five categories:
- Products and services
- Human resources/workforce
- Leadership and governance
- Financial and market.
What’s important to understand is that a healthy enterprise is not just one with solid financial results over 5-10 years. A healthy enterprise is one that is a great place to work, a great neighbor in the community, takes care of the environment, and provides excellent products and services for customers. Of course, a healthy business also achieves growth in revenue and maintains reasonable profit margins, growing value for shareholders.
A business excellence assessment involves looking at levels and trends in key measures of the performance dimensions listed above, compared with industry averages, benchmark bests, competitors, and your own targets and goals. Of course, the people looking at your results at either Tata or Cargill are internal managers and technical professionals with in-depth knowledge of the business so they can ensure the validity of the measures and data.
Every other business assessment model I’ve seen requires that you follow a very prescribed program or methodology and then get assessed on the degree to which you’ve done it properly. Since the early days, the Baldrige model has been non-prescriptive. Authors of the criteria learned that there are many ways to run a solid enterprise, though all have basic principles and systems that need to be addressed. For example, all organizations need strong leadership with a clear mission, values and strategy. However, there are many different styles of leadership, strategies and cultures.
The second half of the business excellence model involves evaluating your approaches for achieving good results. This segment of the assessment is not so black and white and is more complicated than reviewing performance charts for levels and trends in data. Because there is no one prescribed answer for questions like: “How does your organization lead?” assessors must be flexible and willing to consider new and unique approaches even though they may be very different from those practices in their own business. It’s kind of hard to be objective if you are giving yourself a physical.
The six categories of the business excellence assessment model that look at your approaches/processes are:
- Strategic planning
- Customer focus
- Information and data
- Workforce focus
- Operations focus.
Systematic, Logical and Innovative Approaches
When assessing how an organization does anything, assessors spend as much time asking “why” as they do asking “how.” The “how” questions are really important in understanding the approaches and processes uses, but assessors can only judge them by looking at their appropriateness for the organization and based on solid evidence that the approaches can be linked to results.
A non-traditional approach to planning, for example, might work well. A consumer products company I work with writes all their plans on two pages, realizing that plans always change. A two-page plan is easy to trash in the first quarter if unforeseen circumstances occur, but people will stick to a 300-page plan that went through nine drafts, in spite of its obsolescence.
Within these two huge corporations there are hundreds of different approaches. For example, one Cargill business unit has a huge database of best practices called “Cargill Gems.” Others around the globe can access the knowledge and implement practices discovered and proven in another business segment or part of the world. Titan, a Tata business that manufactures watches, jewelry and prescription glasses, holds an “Innovation Bazaar” for its employees to showcase innovations and cross-fertilize ideas across other businesses.
A factor that is common to both Cargill and Tata is there is not a unified approach that is dictated from the top down. Individual business units develop their own processes and systems, which drives innovation and ensures that approaches are tailored to the business. Because of the diversity of the various businesses that make up both companies, it makes sense to allow for this diversity of approaches. The business excellence assessment allows each unit to get feedback and the appropriateness and effectiveness of their approaches.
Alignment: The Biggest Driver of Business Excellence
The most brilliant part of the business excellence model derived from Baldrige is the concept of alignment. Every organization I have ever consulted with is misaligned to some degree. One of the major factors that is assessed in all seven categories of this model is alignment. It’s easy to see why almost all organizations are not aligned—they were not designed from the ground up, but evolved over time. Systems and sub-systems were designed by specialists in their fields who often did not talk to others or consider how the processes and systems they were designing had to integrate with other processes and systems.
The most complicated part of a business excellence assessment and the area in which the biggest “a-ha” moments are gleaned by the organization being assessed relate to alignment. The business excellence assessment looks at alignment of all major systems, such as measures, goals, strategies, products, services, policies, hiring, training, information technology, customer relationship management, suppliers/partners, and other processes and makes sure all these things are linked to results.
One of the most well aligned organizations I’ve worked with is Purina Pet Foods, part of Nestlé. Purina won the Baldrige Award in 2010 the first time they applied having spent more than 20 years designing new organizational systems, making sure each was aligned with other relevant systems and processes. All this alignment paid off with a 15-year revenue growth trend, double the market share of any competitor, and employee satisfaction levels that are better than Google and other companies recognized as great places to work. Business units of Cargill have also won the award, such as their corn milling business unit, and Sunny Fresh and their egg business has won the award twice.
Other than being gigantic conglomerate and successful companies, there are more differences between Cargill and Tata than there are similarities. But one of their common practices is a willingness to thoroughly evaluate the health of each business and use the wealth of information gleaned from those assessments to drive improvement actions.
Both companies have seen the value of these comprehensive organizational physicals and rather than make excuses or challenge the findings, they embrace them as opportunities to get healthier. Judging by their results, it seems to be working.
Mark Graham Brown has been consulting with organizations for over 30 years and wrote the first book on understanding the Baldrige model for business excellence that is currently in its 18th edition. He has trained thousands of people all over the world on this model, including examiners for the New Zealand and California versions of the Baldrige Award.