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Economic Study Shows Value of Baldrige-Based Performance Excellence

From NIST Tech Beat: January 18, 2012

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Contact: Michael E. Newman
301-975-3025

The news in 2001 was impressive, but it’s even more emphatically evident a decade later: the Baldrige Performance Excellence Program (BPEP) significantly benefits the U.S. economy. That’s the finding from a new economic study* to determine the practical value to organizations using the Baldrige Criteria for Performance Excellence—the benefits of the program outweigh the overall cost by 820 to 1.

The new study by professors Albert N. Link of the University of North Carolina at Greensboro and John T. Scott of Dartmouth College follows up on a 2001 analysis by the same team examining the potential benefits versus costs of the Baldrige Performance Excellence Program (BPEP). The program is managed by the National Institute of Standards and Technology (NIST) in conjunction with the private sector.

In 2001, the duo estimated the total potential economic benefits of the Baldrige Program to the U.S. economy at nearly $25 billion and its total operational cost at $119 million, a cost-to-benefit ratio of 207 to 1.** The finding was derived using data from a Baldrige Criteria benefits survey of corporate members of the American Society for Quality (ASQ)—showing an 18 to 1 cost-to-benefit ratio—and then extrapolating the results to the entire country based on the assumption that other companies in the economy used the Baldrige criteria and benefited to the same extent as the firms responding to the survey.

In their latest study, Link and Scott took a more direct approach, surveying the 273 Malcolm Baldrige National Quality Award applicants since 2006. They also expanded their assessment of the practical value of the Baldrige Criteria to these organizations on three levels—cost savings, customer satisfaction and financial gain (gains from increased value of sales). Link and Scott estimate that the benefits outweigh the overall cost of the BPEP by a ratio of 820 to 1.

In their report documenting the new study, Link and Scott explain that even this figure may be on the conservative side. “If the social costs were compared to the benefits for the economy as a whole, the benefit-to-cost ratio would be considerably higher,” they wrote.

The authors summarized their results by stating, “The Baldrige Performance Excellence Program, with the imprimatur of national leadership and a prominent national award … creates great value that could not be replicated by private-sector actions alone.”

The BPEP raises awareness about the importance of performance excellence in driving the U.S. and global economy; provides organizational assessment tools and criteria; educates leaders in businesses, schools, health care organizations, and government and nonprofit organizations about the practices of national role models; and recognizes them by honoring them with the only Presidential Award for performance excellence.

For more information on BPEP, go to www.nist.gov/baldrige.

* Albert N. Link and John T. Scott. NIST Planning Report 11-2: Economic Evaluation of the Baldrige Performance Excellence Program. December 2011. Available online at www.nist.gov/director/planning/upload/report11-2.pdf.

** Albert N. Link and John T. Scott. NIST Planning Report 01-3: Economic Evaluation of the Baldrige Performance Excellence Program. October 2001. Available online at www.nist.gov/director/planning/upload/report01-3.pdf.