January 23, 2012    Volume 19, No. 1

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Bye-Bye Baldrige: U.S. Decides Quality Is Not Worth $9 Million

By Richard A. McCormack

It will now be up to the private sector to keep the Baldrige award operational. But the private foundation that supports the program isn't so sure it can do so for very long.

"Right now, we're spending $5.2 million to keep the program alive this year, but the endowment is only $17 million so it won't last very long," says Thomas Schamberger, executive director of the Foundation for the Malcolm Baldrige National Quality Award. "Are we angry? Yeah. Are we frustrated? Yeah. Will we try another business model? Yeah, we'll try."

Support for the Baldrige Award started being undercut by former Commerce Secretary Gary Locke, who believed that it should be funded outside of government. In President Obama's Fiscal Year 2012 congressional budget submission, the president said the program needed to look for other sources of support, and he proposed a $2.2 million cut in funding.

The Fiscal Deficit Commission further undermined the program in late 2010 when it recommended that it be eliminated. The Fiscal Commission said it was not the government's role to be making awards because other award programs exist in the private sector. "Businesses should already have enough incentives to maintain the quality of their products without awards from the Baldrige National Quality Program," said the Fiscal Commission in a report titled "$200 Billion Illustrative Savings."

"Really?" said Schamberger. "You have the audacity of putting that in there when British Petroleum did what it did -- along with uncounted examples of how quality is circumvented because of money?" he says. The private-sector Baldrige Foundation tried to get the Fiscal Commission to remove the recommendation in its final report, but did not succeed. "After that, there was a lot of lobbying effort where Senators would say, 'I support it. I'll write an amendment, blah, blah, blah,' " noted Schamberger. "They said it right to your face. Let's face it. It was an $8-million program. They didn't have the time for it."

The foundation then asked members of Congress to give the director of the National Institute of Standards and Technology the authority to reallocate funding from the agency's budget to keep the program on life support. "They came back with the reason they would not do it is because the President had it in his budget to take money away" from the program, said Schamberger. "And then you go to some agencies and you see $8 million for a whale museum. How much does that help the U.S. economy?"

The Obama administration had requested $9.8 million for the award in fiscal year 2012, down by $2.2 million from 2011, with a proposed reduction of personnel from 52 to 38. In its reduction request, the Obama team said that the program would "evaluate alternative sources of funding, alternative cost models and reforms to the program that would generate efficiencies and reduce program overhead."

The Obama request said that the program has been "highly effective in stimulating interest in performance improvement. . . Thousands of U.S. organizations in every industry use the Baldrige criteria to improve their performance and competitive standing." The budget submission added that the value of the Baldrige program "is recognized worldwide." There are 40 states and 100 countries that have programs modeled after the program.

What is particularly aggravating to Schamberger is that the recently created health care category has resulted in dramatic Medicare cost reductions among hospitals and organizations deploying the criteria. "These are all the things they are trying to do in their drive to reduce Medicare costs and improve patient quality," says Schamberger. "All of these facts point to the fact that the Baldrige criteria as rigorous as they are, help organizations improve. And they want to throw it out the window? It makes no sense."

The recent study on the Baldrige award done by Albert Links at the University of North Carolina and John Scott of Dartmouth College surveyed 273 applicants for the award since 2006. "The benefit-to-cost ratio of 820-to-1 . . . certainly supports the belief that the Baldrige Program creates great value for the U.S. economy," says the study. "The Baldrige Performance Excellence Program, with the imprimatur of national leadership and a prominent national award presented by the President, creates great value that could not be replicated by private sector actions alone." (http://www.nist.gov/director/planning/upload/report11-2.pdf)

The Baldrige award was created in 1987. The authorizing language stated that "our nation's productivity growth has improved less than our competitors over the last two decades." A quality award program would help to "stimulate American companies to improve quality and productivity for the pride of recognition while obtaining a competitive edge through increased profits."

Unfortunately for the Baldrige Award Foundation, the U.S. manufacturing sector did not show up politically to support the program. "Manufactures never came to our defense," says Schamberger. "The problem, and I hate to say this, is that manufacturing is totally against Baldrige because it is too hard. Manufacturing has given up."

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