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The Official Baldrige Blog

Study Reveals Business-Changing Journey for Small Businesses


 Many economists have surmised that the health of U.S. small businesses is key to the health of the U.S. economy. In fact, a Forbes article by Ian Shepherdson, “Small Businesses Are The (Missing) Key To A Full Economic Recovery,” cites that small firms account for about half of the nation’s gross domestic product and employ about half the workforce, “so if they are struggling it is very hard for the economy as a whole to grow in line with its long-term trend.”

So how can we help give a foundation to U.S. small businesses so that they don’t need to struggle?

A recent study “Quality management (QM) leads to healthier small businesses,” published in the Journal of Small Business and Enterprise Development, explores how small businesses in the housing industry that have embraced quality management approaches, such as Baldrige, Six Sigma, and EFQM, are seeing improved performance.

Study authors William H. Murphy and Denis Leonard interviewed ten owners of small family-owned businesses who have won the National Housing Quality Award (NHQA), which is based on the Baldrige Excellence Framework and its Criteria. Sponsored by Professional Builder magazine and the National Association of Home Builders Research Center, the NHQA provides housing contractors with the opportunity to submit Baldrige-based award applications to receive an assessment by QM experts on development gaps and to possibly receive an award. (See also the recent blog “Adapting Baldrige to the National Housing Industry.”)

“Once small business owners realize that the QM journey is a sensible, necessary, business-changing journey, change can happen swiftly,” write Murphy and Leonard. “Yet, truly seeing the truth of this claim and following up by changing one’s business toward a QM journey is often a tough step for many small business owners to take. After all, small business owners are often extremely busy, with time-pressing commitments and little wiggle room for figuring out how to engage new platforms such as QM. Yet, as our interviews repeatedly revealed, life gets a lot easier for everyone once QM is part of the business.”

The Baldrige Excellence Framework, with its eligibility category for small businesses (500 or fewer paid employees), is one quality management tool that the study cites.

“Baldrige, once believed too complex for small businesses to pursue, let alone attain, has proven to be a platform providing excellent performance results for small businesses,” write Murphy and Leonard. According to another article—“Don’t count TQM out: evidence shows implementation pays off in a big way” (Quality Progress, Vol. 32, No. 4, pp. 35-42)—Baldrige small business category winners outperform benchmark companies by an average of 63 percent, while large organization winners outperform their benchmarks by only 22 percent.

Indeed, two of the four 2016 Baldrige Award recipients are small businesses: Don Chalmers Ford and Momentum Group. The other two recipients, both in the health care sector, are also small: Kindred Nursing and Rehabilitation Center - Mountain Valley is a 68-bed skilled nursing center and Memorial Hermann Sugar Land is a 149-bed community hospital.

As a whole, the small business owners interviewed in the study were “certain that positive outcomes follow” once a business implements QM; however, the owners did recognize some barriers to engagement. “A key variable precluding business improvement may be the belief that one’s business is doing fine without QM," write the study's authors. "If this is the case, familiarity with QM may be a necessary but not sufficient factor in small businesses adopting QM—until there is an accompanying belief that one’s small business has weaknesses in the absence of QM, embracing QM may not occur.”

Small business owners recommend customizing tools and staying the course once started on QM. “Interviewees strongly feel the barriers are small relative to gains realized through QM,” write the study’s authors.

According to Murphy and Leonard, “The first step toward launching QM is generally the hardest, as most businesses have to stumble along for a while before truly catching on to QM’s logic and potential. And yet, by targeting easy projects and using a few tools from QM toolboxes, change for the better is soon realized. Over time, with a conviction gained by success and the developing belief that QM is a game changer for one’s small business, owners may find themselves pushing their QM platforms in unexpected directions.”

To find the complete article, go to “Quality management (QM) leads to healthier small businesses.”

About the author

Dawn Bailey

Dawn Bailey is a writer/editor for the Baldrige Program and involved in all aspects of communications, from leading the Baldrige Executive Fellows program to managing the direction of case studies...

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I agree with Dr Murphy and Dr. Leonard that taking the first step in launching QM is the hardest for small businesses, especially in the construction industry. This industry is made up of many small businesses. Many of the owners of these businesses started their careers out as a technician of some sort, ie; carpenter, painter, electrician, etc. They have very strong work ethics and were very good at their craft or trade. These individuals had started their business with every intent of providing a quality product and satisfying their customers. Very easily, it can be overwhelming to run a small business. Those who are not trained in business management seek out classes to learn some business functions on the tactical level. Some hire consultants to help guide them in their journey in growth or even survival. The small business owners are trying to learn how balance the books, write an enticing contract proposal, schedule and motivate their work force and answer calls from frustrated customers. The art of firefighting is learned in order to complete daily tasks and address issues that occur on a daily basis. That is how many small businesses operate, feeling that putting out fires is actually productive work and is a sign of well, run business. Professional organizations such as ASQ, National Housing Quality Award and business consultants like Dr. Leonard, promote the QM concepts while sharing QM tools and concepts for any business to learn. Once a business understands that firefighting is not the way to run a business, the business will seek out the professionals to help them. This is a huge and necessary step for a small business. Many businesses will venture into QM thinking that it is a silver bullet to success. While incorporating QM into your business will bring you success, it does not occur over night and it does take effort. I have heard many small construction business owners tell me that they do not have time to incorporate QM. They are too busy trying learn why they have dissatisfied customers. Why they have major quality issues and what they are. Why their trade contractors leave them after working with the business for one or two projects. Why the labor on every project is over projected budget. Why the trades just don’t do the work correctly, after all, they are the trades who know how to perform their own craft. They are just too busy to get better! I do need to state that I have had the great opportunity to be part of the management team that created a quality management system for a three time winning NHQA residential building company. My experience has allowed me to start incorporating QM into several other companies I worked with. In each situation, the owners of the small businesses were ecstatic about implementing QM. The owners where given a timeline on what processes and when they needed to be implemented. Their enthusiasm was still high. As time moved, small successes where occurring. Defects were being identified, processes were being implemented to omit the defects and customers where engaged in the process. Even though the small business owners where educated on the implementation process and timeline, their expectations were that huge results would happen overnight. Impatience of the small business owner won out and the QM was omitted. The biggest learning experience for me on working with small business owners in implementing QM is to ensure the owner are committed, personally, to the QM process and are part of the improvement implementations. They need to see what is occurring and why things have started to improve. This ensures a true understanding of the power of a QM system and what it can do to ensure sustainable success!
As the world is changing at an ever faster pace the criteria drive the culture that ensures success. It's the journey not the destination.

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