Stephens 6/22/05 10:42 AM Page 21
Importance and Implementation
of Baldrige Practices for
Small Businesses
PAUL R. STEPHENS, BRADLEY UNIVERSITY
JAMES R. EVANS AND CHARLES H. MATTHEWS, UNIVERSITY OF CINCINNATI
The purpose of this research is to gain insight into how
small firms perceive, and to what extent they imple-
ment, the high-performance management practices
suggested by the Malcolm Baldrige Criteria for
Performance Excellence. Using an empirical survey, the
authors identify the practices that small firms consider
important and determine how endemic these practices
are throughout the small company population, focusing
on the gap between perceived importance and imple-
mentation. The analysis leads them to identify areas of
the criteria that are well understood and deployed by
small firms, along with areas requiring more attention.
The authors attempt to provide some explanation for
these observations.
Key words: Baldrige Award, high-performance manage-
ment, quality, SME
© 2005, ASQ
INTRODUCTION
The Malcolm Baldrige Criteria for Performance
Excellence (CPE) is an evolutionary business manage-
ment framework designed to increase competitiveness
through assessment and identification of organizational
strengths and opportunities for improvement. The
CPE defines a set of contemporary high-performance
management practices within six key categories:
1) Leadership, 2) Strategic Planning, 3) Customer
and Market Focus, 4) Measurement, Analysis, and
Knowledge Management, 5) Human Resource Focus,
and 6) Process Management. The seventh category of
the criteria, Business Results, focuses on performance.
Case studies and empirical research (see, for example,
Ahire and Golhar 1996; Barclay 1993; DeBaylo 1999;
Hendricks and Singhal 1996; Mendham, Chittenden,
and Poutziouris 1994) have shown that such practices
result in positive impacts on performance and market
competitiveness.
The CPE is managed, evaluated, and improved
annually by the Baldrige National Quality Program,
administered through the National Institute of
Standards and Technology (for additional informa-
tion see http://www.quality.nist.gov). The criteria are
also the basis for the Malcolm Baldrige National
Quality Award (MBNQA), which honors outstanding
U.S. businesses that exemplify the core values of the
criteria: visionary leadership, customer-driven excel-
lence, organizational and personal learning, valuing
employees and partners, agility, managing for inno-
vation, focus on the future, management by fact,
social responsibility, focus on results and creating
value, and a systems perspective.
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Importance and Implementation of Baldrige Practices for Small Businesses
Despite a high level of practitioner attention, theo-
retical and empirical research that focuses on the CPE
is relatively scarce. Much of the past research on quality
management implementation has focused on under-
standing critical success factors (CSFs) to implementa-
tion (Saraph, Benson, and Schroeder 1989; Porter and
Parker 1993; Tamimi and Gershon 1995; Black and
Porter 1996; and Ahire and Golhar 1996). Garvin (1991)
examined the content and purpose of the criteria based
on detailed discussions with award examiners. Ahire,
Landeros, and Golhar (1995) used a version of the
Baldrige framework to classify extant research in
quality management. Ford and Evans (1997) exam-
ined the relationships between the core values and the
managerial processes that are embedded in the criteria,
and Evans (1997) proposed a causal modeling
approach to describe key linkages in the criteria. Ford
and Evans (2000) investigated the theoretical and
conceptual foundations of the Strategic Planning cat-
egory, and Jack and Evans (2003) and Evans (2004)
examined issues related to Baldrige and performance
measurement. Wilson and Collier (2000) used struc-
tural equation modeling to validate an older version
of the criteria.
In this article, the authors focus on small firms.
There are many ways that researchers categorize small
firms. Robinson and Pearce (1984) found that firms
are typically defined as small based on either annual
sales or number of employees. A common employment
breakdown is:
• Very small: fewer than 20 employees
• Small: 20-99 employees
• Medium: 100-499 employees
• Large: more than 500 employees
These size breaks are consistent with standard
business employment, asset, and receipt-size classes
established in 1982 by the Office of Management and
Budget for use by all federal agencies when publish-
ing business data (Hodgetts, Kuratko, and Hornsby
1999). Many government agencies, including the
Department of Commerce, use the 500-employee level
to distinguish between smaller firms and larger firms,
and the authors use this guideline as well.
22 QMJ VOL. 12, NO. 3/© 2005, ASQ
Several papers have studied the general role of total
quality management (TQM) and quality in small firms.
Lee (2004) points out that TQM programs require little
capital investment at the beginning stages of imple-
mentation, which is in stark contrast to other manage-
ment programs that can require significant start-up
capital. This makes TQM more attractive to small firms.
Ahire (1996) found a statistically significant difference
in performance between firms that embrace TQM and
those that do not. Wilkes and Dale (1998) argue that
there is a lot of advice and information on TQM and
continuous improvement, and management can easily
become confused by the different emphases stressed in
each discussion. Yusof and Aspinwall (1999) studied
CSFs for quality management implementation for small
and medium-sized organizations, arguing that past
research “did not incorporate the perceived importance
level for the factors proposed.”
The CPE is designed to apply to all size firms and
sectors; however, early recipients of the Baldrige
Award were mainly large manufacturing firms (service
firms were slow to adapt to total quality initiatives).
Increasingly, small firms—even those with fewer than
100 employees, such as Texas Nameplate and Stoner—
are also being recognized and some have received the
Baldrige Award. One study by Hodgetts, Kuratko, and
Hornsby (1999) suggests that small firms that adopt
Baldrige are superior performers. Jones, Knotts, and
Brown (2005) found that small firms can and do
embrace quality management practices, and those that
do are more likely to be successful in making products
that are desirable to potential customers.
From experiences interacting with small firms and
their top managers, however, the authors observed that
many small firms believe that Baldrige practices are
applicable only to large firms, are too complex, or are
too costly to implement. Some literature supports this
view, as Rodwell and Shadur (1997) observe that many
methods that succeed in large companies are often rec-
ommended for small firms despite the many differences
that may make such practices unworkable. Additionally,
the root cause of small firm unwillingness to consider
Baldrige may lie with the apparently nonrational
behavior and decision making of the entrepreneur
and/or owner/manager who does not obey the “rules”
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Importance and Implementation of Baldrige Practices for Small Businesses
of classical management theory (Jennings and Beaver
1997). This characteristic of “independence” in the face
of proven methods contributes to the owner/manager’s
acceptance of frameworks such as TQM and the CPE.
Other research questions the applicability of a high-
performance management framework that fits both
large and small firms (Ahire 1996). Wilkes and Dale
(1998) suggest that further development of the
European Federation of Quality Management (EFQM)
model, which is similar to Baldrige, is needed to suit
the characteristics of small firms, including simplify-
ing the language, the format of the model, and the
application process. They state that small firms are
aware of the model but do not understand how they
can derive benefits from its criteria.
These conflicting arguments raise the question of
the applicability of the CPE to small firms. Do small
firms perceive the management practices in the CPE as
important to business success? How extensively do they
practice them? Are there areas of the criteria that are
not as relevant to small companies as to large ones?
This article investigates how managers of small firms
perceive the importance of the management practices
in the Baldrige criteria. Familiarity with a particular
theoretical concept or framework and understanding
the underlying principles found in a framework are two
different conditions. The authors’ argument draws
upon observations by McTeer and Dale (1994) and Van
der Wiele and Brown (1998) in the context of TQM:
Small firms that may not be specifically familiar with
Baldrige may practice its principles routinely without
even knowing it. The goal of this research is to better
understand how important the principles of the
Baldrige criteria are to small firms and to what extent
they are practiced, focusing on the gap between per-
ceived importance and the extent of implementation.
Data were collected using an instrument developed
from the “modern” framework for the CPE, which
was revised in 1997. It was revised to better reflect the
logical progression of strategic planning driven by
customer needs and internal leadership that forms the
basis for execution through processes and people, all
leading to superior business results and moderated by
measurement, information, and knowledge manage-
ment. This basic framework continues to the present,
although the criteria have been refined and updated
to reflect contemporary management practices. Some
significant revisions have occurred since 2003, but
these are subsequent to the collection and analysis of
the authors’ data. Hence, their research generally
reflects the CPE from 1997 to 2003.
THE IMPORTANCE-
IMPLEMENTATION GAP
Management staff members of small firms are no less
concerned with quality management than their larger
company counterparts (Van der Wiele and Brown
1998). Kayis (1998) found that 97 percent of the sur-
veyed population had a formal written statement of
quality, while the other 3 percent were in the process
of developing a quality policy, and they emphasized
their commitment to TQM implementation. Gray
(2004) discusses that it has been generally assumed
that small firms are too engrossed with entrepreneur-
ial activity and/or survival to take a sustained interest
in management development. Yet, he finds that small
firm managers are very interested in improving the
quality of management. Therefore, the authors
believe that small-firm managers recognize the value
of high-performance management practices and per-
ceive them as important to their firm.
The literature on implementation, however, sug-
gests a different perspective. Goh and Ridgway (1994)
argue that although top management may have a
high level of commitment to many of the underlying
principles of quality management, these ideals are not
well communicated to employees. They observe that
when managers are specifically asked about TQM
implementation, they state that TQM is inappropriate
to their company and is applicable to only larger
firms. Shin, Kalinowski, and El-Enein (1998) observed
that although the principles of quality management
appear obvious, many organizations have found them
difficult to execute. This is reportedly because the
implementation is cumbersome, time consuming, and
frequently lacking in focus.
Ahire and Golhar (1996) discuss that many of the
characteristics of small firms may adversely affect the
implementation of TQM. They argue that:
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Importance and Implementation of Baldrige Practices for Small Businesses
1. The lack of market clout may impact a small firm’s
ability to get suppliers’ involved in these efforts.
2. Small firms may not recognize the importance of
human resource management strategies (Amba-
Rao and Pendse 1985; McEvoy 1984) and, there-
fore, small firms experience lower levels of
employee empowerment, use of employee involve-
ment strategies, and employee quality training
(Kotey and Slade 2005).
3. Lack of professional management expertise
(Siropolis 1994) and the short-term focus of
many small firms (Verser 1987) may be reflected
in inadequate allocation of resources to TQM
efforts in these firms.
4. Quality tracking and improvement techniques such
as benchmarking and statistical process control
(SPC) may also be used less frequently and less
effectively in small firms (Ebrahimpour and
Withers 1992).
5. Through a less effective use of internal quality infor-
mation, the lack of an information infrastructure
can add to the difficulties experienced by small firms
in implementing these techniques (Ashmore 1992).
Van der Wiele and Brown (1998) argue that quality
management implementation in small firms is a func-
tion of organizational change. They point out that
change in a small firm is difficult because of many
obstacles that must be overcome. These obstacles are
not only related to the implementation of a quality phi-
losophy, but are difficulties encountered in any change
the small firm experiences. Other research finds that
the lack of professional management expertise
(Siropolis 1994) and the short-term focus of many
small-firm managers (Verser 1987) should result in a
low level of commitment to quality management from
top leaders that directly leads toward less implementa-
tion. Finally, Yusof and Aspinwall (1999) identify
resources as a critical factor, unique to small firms,
that impacts implementation. If all the practices are
considered important, then limited resources have to
be spread out over all practices.
Thus, the literature suggests an “importance/
implementation gap” for small firms that characterizes
24 QMJ VOL. 12, NO. 3/© 2005, ASQ
the authors’ principal hypothesis: A significant gap
exists between the perceived level of importance and
the extent of implementation of high-performance
management practices in the CPE.
METHODOLOGY
To investigate this hypothesis, the authors needed to
quantify the perceived importance of the criteria to
small firms as well as the extent of implementation.
This was accomplished by asking the following ques-
tions for each of the management practices in the
CPE (see the appendix for a complete list):
1. “How important do you believe the following
management practices are to achieving perform-
ance excellence and improving competitiveness in
your company?”
2. “To what extent does your company practice each
of the following approaches?”
Responses were measured on a 1 to 5 scale, ranging
from “low importance” to “high importance” for the
first question, and from “not at all” to “extensively”
for the second question.
Each section of the survey mirrored a major cate-
gory of the criteria, excluding the demographic infor-
mation that was collected. Respondents were asked to
react to the practices described under each section. The
language for each practice was pulled directly from the
criteria. The survey was comprehensive in that it
addressed every practice described and discussed in
the main categories and items. Sixty-eight distinct
practices were identified.
The authors’ target population was all small firms in
the United States with 50 to 500 employees. Specifically,
they targeted the owners or top managers at these firms.
Top management in such firms acts as the driver of
quality management implementation (Nakajo and
Kono 1989; Chapman, Clarke, and Sloan 1991). The top
management commitment to quality is evident via their
communication of this commitment (Ferdows and
Demeyer 1990; Saraph, Benson, and Schroeder 1989).
As previously discussed, it is typical in research to use
“500 or fewer employees” to define a small firm.
Additionally, the authors also wanted to eliminate the
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Importance and Implementation of Baldrige Practices for Small Businesses
smallest firms from their study (those with fewer than 50
employees). These firms are probably too small and
entrepreneurial to effectively use the Baldrige criteria. No
single database exists that would allow the authors access
to all of these firms. For the purposes of this research, the
authors had access to two separate databases that they
aggregated into a single frame from which a sample was
taken: one from the Greater Cincinnati Chamber of
Commerce and a second from The Ohio Manufacturers
Association (the OMA membership database). Although
this restricted the sample to Ohio businesses and may not
be representative of the small-firm community of the
United States as a whole, Ohio is the home of a broad
range of small businesses. This approach is common in
small-business research. For example, in Reynolds and
Miller’s (1992) research of the gestation period of new
firm startups, which is considered to be the basis of what
is currently known about the nascency process in small
business venturing, the sampling frame consisted of
firms located in Minnesota and Pennsylvania.
The survey was initially distributed to 15 firms
through the Greater Cincinnati Chamber of Commerce
solely for the purpose of evaluating the instrument for
content validity. The purpose of the pilot survey was to
determine if managers would understand how the survey
was intended to be filled out, if they understood the
questions being asked, and whether the language needed
to be adjusted to make the questions more clear to the
respondents. Additionally, the authors needed to know
if the managers thought the questionnaire comprehen-
sively covered all aspects of best management practices.
They knew that the criteria were a comprehensive
framework, but they wanted to make sure that small-
firm managers didn’t find the instrument lacking in
content. If they did, this would have provided the
authors with some evidence that the criteria might
not meet the needs of small firms, which would have
merited further investigation. The pilot respondents
agreed that the breadth of the survey was comprehensive
with no areas left unexplored. Because of this positive
feedback, the authors were convinced that they should
continue with the instrument as developed.
Next, a simple random sample was used for a more
extensive mail survey. Childers and Skinner (1996)
argue that survey recipients can only be expected to
participate in a mail survey if they expect to receive
value for value, or an “equitable exchange.” To
emphasize the intangible opportunity afforded to recip-
ients, researchers have successfully used appeals in
mail surveys, generally incorporated in the cover letter
accompanying the questionnaire. Linsky (1965),
Champion and Sear (1969), and Dillman (1978)
found that stressing the role and importance of the
respondent, emphasizing the benefits of the survey, and
suggesting that intrinsic rewards are obtained by sup-
porting one’s values all generate a significant positive
effect on response rate. The authors make an effort in
this regard. The accompanying cover letters from the
Greater Cincinnati Chamber of Commerce and OMA
both stressed the importance of the research and con-
veyed the message that response is important not only
to the researchers but to the respondents themselves.
Because of the survey’s length, there was an issue of
obtaining a valid response rate. Torbari (1991) notes
that “It is common sense that when one asks for too
much time and effort of people, compliance goes
down.” On the other hand, Heberlein and Baumgartner
(1978) found in their study of 214 mailed question-
naires that there was no significant correlation between
any of the length measures and overall responses.
Length varied from a single page to 22 pages. Miller
(1970) notes, “Based on a large number of studies, one
follow-up nets, on average, 20 percent more responses.
A second and third follow-up, on average, yield about a
12 percent and 10 percent higher return, respectively.”
Therefore, the authors made sure they followed
through with reminder cards in order to help increase
response rates. Surveys were followed up with two
reminder post cards and resulted in a sample of 235
complete surveys, which is a 23 percent response rate.
Finally, a short nonresponse questionnaire was used
in an attempt to reduce nonresponse bias. The authors
pulled 13 questions from the mail survey and were able
to collect data from 35 nonrespondents using a telephone
survey. Three of the questions were regarding demo-
graphic information: 1) type of business, 2) number of
employees, and 3) prior exposure to the Baldrige criteria.
The other 10 were five sets of importance and imple-
mentation responses on: 1) Leadership practice no. 2;
2) Strategic Planning practice no. 3; 3) Customer and
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Importance and Implementation of Baldrige Practices for Small Businesses

Market Focus practice no. 2; 4) Human Resource Table 1 Baldrige categories/items and item codes.
Management practice no. 7; and 5) Business Results
Importance Implementation
practice no. 1. Performing a means comparison between
respondents and nonrespondents on each of these meas- Leadership
ures, the authors found no significant differences
Leadership system L1 L11
between the responses on 12 of the 13 questions (at a
95 percent confidence level). Company responsibility and L2 L22
citizenship

RESULTS Strategic Planning

Strategy development process S1 S11

Table 1 shows each category and item found in the
CPE. Each item is assigned a code to designate impor- Company strategy S2 S22
tance and implementation for the analysis.
Customer and Market Focus
Data were collected in terms of the scalar survey feed-
back, and the respondent reaction to each practice was Customer and market CM1 CM2
knowledge
aggregated to the item level of the criteria. For example,
under the Leadership section of the survey, the first six Customer satisfaction and CM2 CM21
relationship enhancement
practices described were aggregated to the Leadership
item, Leadership System. It is not the purpose of this Measurement, Analysis, and
research to validate that the underlying management Knowledge Management

principles described in the items actually represent such Selection and use of IA1 IA11
latent concepts such as leadership or customer focus. information and data
This work was done by Pannirselvam, Siferd, and Ruch Selection and use of IA2 IA21
(1998). Through confirmatory factor analysis the comparative information
research found that the underlying management prac- and data

tices factor into the items that in turn factor properly Analysis and review of IA3 IA31
into the seven main categories. Thus, not only can one company performance
rationalize the aggregation of responses based on the Human Resource Management
evolutionary design of the framework, but also there is
Work systems HR1 HR11
sound research on which to justify aggregation.
Table 2 shows the mean importance ratings for each Employee education, training, HR2 HR21
item, ranked from largest to smallest. Paired t-tests were and development

conducted on all possible combinations of the means to Employee well-being and HR3 HR31
identify significant differences between the importance satisfaction
scores. The ranking shows the significant differences. Process Management
For example, S1—Strategy Development Process, was
Management of product and PM1 PM11
found to be significantly higher than the others. The
service processes
next item, L1—Leadership System, is significantly dif-
ferent from the remaining items. The next two items, Management of support PM2 PM21
processes
IA1—Section and Use of Information and Data and
PM1—Management of Product and Service Processes, Management of supplier and PM3 PM31
partnering processes
are not significantly different from one another but are
© 2005, ASQ

different from the remaining categories and are Business Results

grouped together. Group four shows that the items in 4b
Business results BR1 BR11
are not significantly different from 4a or 4c, but the

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Importance and Implementation of Baldrige Practices for Small Businesses

Table 2 Importance means. Table 3 Implementation means.

Mean Mean
Rank Code Item Importance Rank Code Item Implementation

1 S1 Strategy development 4.42 1 L21 Company responsibility 3.66

process and citizenship

2 L1 Leadership system 4.34 S11 Strategy development 3.63

process
3 IA1 Selection and use of 4.27
information and data 2 L11 Leadership system 3.51

PM1 Management of product 4.19 3 IA11 Selection and use of 3.43

and service processes information and data

4a IA3 Analysis and review of 4.10 PM11 Management of product 3.42

company performance and service processes

HR1 Work systems 4.09 IA31 Analysis and review of 3.26

company performance
L2 Company responsibility 4.06
and citizenship PM31 Management of supplier 3.25
and partnering processes
4b CM2 Customer satisfaction and 4.06
relationship enhancement BR11 Business results 3.22

HR2 Employee education, 4.03 4 CM21 Customer satisfaction and 3.22

training, and development relationship enhancement

S2 Company strategy 4.00 PM21 Management of support 3.21

processes
4c BR1 Business results 3.99
CM11 Customer and market 3.16
CM1 Customer and market 3.99 knowledge
knowledge
HR11 Work systems 3.15
PM3 Management of supplier 3.96
and partnering processes 5 HR31 Employee well-being 3.06
and satisfaction
5 PM2 Management of support 3.87
processes 6 S21 Company strategy 2.97

6 HR3 Employee well-being 3.75 HR21 Employee education, 2.96

and satisfaction training, and development
© 2005, ASQ

© 2005, ASQ

7 IA2 Selection and use of 3.51 7 IA21 Selection and use of 2.54
comparative information comparative information
and data and data

items in 4a are significantly different from those found
in 4c. Finally, the last three items are significantly
different from one another.
As for the ranking of the implementation scores,
paired t-tests were once again conducted on all possible
combinations of the means to identify significant differ-
ences between the implementation scores (see Table 3).
When examining the frequency of responses from
highest to lowest rank, one can see that, at best, less
than a quarter of the responding companies reported
high levels of implementation. In most cases, less than
15 percent of the companies reported high levels of
implementation.
If one examines firms that report very low levels of
implementation, the stratification is clearer (see Table 4).
For example, only 3 percent of the surveyed firms report-
ed low activity with regard to company responsibility and
citizenship. On the other hand, 45 percent of the surveyed

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Importance and Implementation of Baldrige Practices for Small Businesses

Table 4 Implementation scores (% of Responses as….).

Rank Code Item 4.5 or > % of Responses < 3 % of Responses

1 L21 Company responsibility and citizenship 23.53 2.94

S11 Strategy development process 15.55 12.18

2 L11 Leadership system 18.49 8.40

3 IA11 Selection and use of information and data 19.07 12.29

PM11 Management of product and service processes 16.03 11.81

IA31 Analysis and review of company performance 12.71 22.03

PM31 Management of supplier and partnering processes 13.92 23.21

BR11 Business results 12.39 15.81

4 CM21 Customer satisfaction and relationship enhancement 13.08 20.68

PM21 Management of support processes 14.35 30.38

CM11 Customer and market knowledge 10.13 24.89

HR11 Work systems 15.19 23.63

5 HR31 Employee well-being and satisfaction 8.86 28.27

6 S21 Company strategy 6.72 27.31

© 2005, ASQ
HR21 Employee education, training, and development 8.02 30.38

7 IA21 Selection and use of comparative information and data 3.38 44.92

companies reported little implementation of the selection Figure 1 Importance-implementation gaps.

and use of comparative information and data. Overall, a
minority of firms reported implementing practices 4.60
High

4.40
extensively, and a significant portion of firms are imple- 4.20
4.00
menting the practices very little. This seems to be due to 3.80
Medium

3.60
the fact that small-firm management is more likely to 3.40
3.20
rely on informal interpersonal networks for this type of 3.00
2.80
information. McGee and Sawyerr (2003, 398) argue 2.60
Low

2.40
“While the owner/manager could research these issues 2.20
L1
L2
S1
S2
CF1
CF2
IA1
IA2
IA3
HR1
HR2
HR3
P1
P2
P3
BR1

alone, it is often cheaper and more expedient to get

© 2005, ASQ

information and advice from other people. Who you Sub-category

know is often more important than what you know,
because the people known often can compensate for
what is not known. In other words, it is important to
develop a web of personal contacts, since such net-
works can play a vital role in reducing uncertainty by
facilitating the collection and synthesis of information.”
On 42 occasions, respondents reported no imple-
mentation at all. Sixteen of these respondents were
Importance Implementation
referring to IA2 (Selection and Use of Comparative
Information and Data). The remaining were spread
out fairly evenly over the other items. However, HR21
(Employee Education, Training, and Development)
had seven respondents report no implementation and
HR31 (Employee Well-Being and Satisfaction) and

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Importance and Implementation of Baldrige Practices for Small Businesses

Table 5 Paired differences — Importance/implementation gap (sorted lowest to highest).

–
Rank Pair d Std. dev. 95% C.I. Lower Upper t Sig.

1 L2 – L21 0.3992 0.5545 0.3284 0.47 11.106 0

PM2 – PM21 0.6646 0.8832 0.5515 0.7776 11.584 0

2 HR3 – HR31 0.6878 0.8308 0.5814 0.7941 12.744 0

PM3 – PM31 0.7075 0.8289 0.6014 0.8135 13.139 0

BR1– BR11 0.7704 0.6501 0.6867 0.8542 18.128 0

PM1– PM11 0.7764 0.6523 0.6929 0.8598 18.322 0

S1– S11 0.7941 0.7531 0.698 0.8903 16.268 0

3 L1– L11 0.827 0.5924 0.7514 0.9027 21.536 0

CM1– CM11 0.8284 0.7552 0.7318 0.9251 16.888 0

CM2 – CM21 0.8362 0.6478 0.7533 0.9191 19.873 0

IA3 – IA31 0.839 0.7579 0.7418 0.9362 17.005 0

IA1– IA11 0.8404 0.7415 0.7453 0.9355 17.411 0

HR1– HR11 0.9388 0.8323 0.8323 1.0453 17.365 0

4 IA2 – IA21 0.964 0.8576 0.854 1.074 17.268 0

© 2005, ASQ
S2 – S21 1.0292 0.8146 0.9252 1.1332 19.491 0

HR2 – HR21 1.0707 0.856 0.9611 1.1802 19.256 0

PM21 (Management of Support Processes) had five
respondents report no implementation. The authors’
analysis and the results illustrated in Table 3 clearly
demonstrate that there are statistically significant dif-
ferences between the top and bottom rankings in
terms of implementation. This reflects the authors’
assertion that small-firm management has to make
choices about how to use their limited resources and
that the rankings the authors have developed show
how those resources are typically deployed.
Figure 1 shows clearly that implementation lags
importance and that generally higher levels of impor-
tance are mirrored by higher levels of implementation.
This is reasonable, as firms that perceive practices to be
more important would logically place more emphasis
on implementation. However, the authors did find
some statistically significant differences in these gaps.
To do this, the authors analyzed whether the varia-
tion between importance and implementation was
greater than the variation within each group using
paired t-tests. The t-test assumes a normal distribution of
the differences and they used the Kolmogorov-Smirnov
statistic (Lilliefors 1967) to test this assumption. For
the K-S Lilliefors test, if the significance level was
greater than 0.5, then normality was assumed (Norusis
1995; Coake and Steed 1996). In all cases the Lilliefors
significance level for testing normality confirmed the
underlying assumption. The normality assumption of
the response data was also tested by examining the
normal probability plot. In the normal probability
plot, if the sample is from a normal distribution the
cases fall more or less in a straight line. This test also
confirmed the underlying assumption.
The t-test proves to be a more sensitive test than
ANOVA under these conditions. The reason a paired t-test
provides a better measure of significance than ANOVA for
two measures from the same respondents can be under-
stood intuitively. ANOVA ignores the fact that some people

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Stephens 6/22/05 10:42 AM Page 30

Importance and Implementation of Baldrige Practices for Small Businesses

tend to rate both measures Figure 2 Importance vs. implementation (normalized).

relatively high or relatively
low. By contrast, paired Below avg. importance/ Above avg. importance/
above avg. implementation 3.7 above avg. implementation
t-tests focus on the differ-
ence between each pair of L2
3.6 S1
the scores. In effect, this
3.5
controls for the variance in L1

both measures from one 3.4 PM1 IA1

respondent to the next. Importance PM3 3.3
Therefore, if one wants to PM2 BR1 CM2 IA3
test if a significant differ- 3.5 3.6 3.7 3.8 3.9 CM1 4.1 4.2 4.3 4.4 4.5
ence exists between how 3.1 HR1
small-firm managers view HR3
3
the importance of employ- S2 HR2
ee education and training 2.9
versus the extent to which 2.8
they actually implement
Below avg. importance/ 2.7 Above avg. importance/
employee education and below avg. implementation below avg. implementation
training, he or she simply 2.6

runs a paired comparison IA2
of the responses to each
question that deals with
employee education and
training. Then he or she can determine if there is a
significant difference between their means.
Table 5 shows the results. The gap is significant for
each item. In every case, small-firm managers rated the
importance of the item significantly higher than the
level at which they are implementing such practices.
One can logically argue that implementation might
equal importance, but will rarely, if ever, exceed impor-
tance. The reason for this becomes apparent when
examining how managers rank the importance of the
criteria. The lowest mean importance score was 3.51,
ranging to a high of 4.42. This means that every item is
considered, at the very least, moderately important, with
many items being considered highly important. Given
the limited resources of small firms, managers at these
firms have to compromise on the allocation of time and
money. Therefore, small firms implement such prac-
tices as best they can given their limited resources. To
determine whether these gaps are the same for all items,
one can sort them from highest to lowest and test for
significant differences. This resulted in four distinct
groupings of the gaps, as noted in Table 5.
© 2005, ASQ
2.5
Implementation
If one normalizes the scales and plots the aggregated
responses using the median response as the point
where the two scales cross, one can examine the rela-
tive ranking of each item (see Figure 2). By doing
this, one finds a somewhat linear relationship where
items that are ranked high in terms of importance
are also ranked high in terms of implementation.
In most cases, items fall in the two categories
of extremes (high-high or low-low). In a few cases,
this means crossover into contradiction (high-low)
and these cases (PM3—Management of Supplier and
Partnering Processes, HR1— Work Systems, and
CM2 — Customer Satisfaction and Relationship
Enhancement) are borderline. Figure 2 indicates that
there are some areas (IA2 — Selection and Use of
Comparative Information and Data, HR3—Employee
Well-Being and Satisfaction, and, to a lesser extent,
S2—Company Strategy) that are perceived to be less
important, and thus little effort is put into implemen-
tation. An interesting note is that the emphasis on the
use of benchmarking and comparative data has been
reduced in subsequent revisions of the Baldrige criteria.

30 QMJ VOL. 12, NO. 3/© 2005, ASQ

Stephens 6/22/05 10:42 AM Page 31
Importance and Implementation of Baldrige Practices for Small Businesses
As noted, items that ranked higher in importance
generally receive higher rankings in implementation; for
example, S1—Strategy Development Process, ranks first
in importance and also in implementation, and so on.
L2—Company Responsibility and Citizenship is the lone
exception in the higher-ranking items. However, there
tends to be more deviation from the mean for lower-
ranked items. One might expect that as an item ranks
lower in importance, proportionately fewer resources are
put into implementation and the gap should become
significantly larger. This is evident in Table 5.
The information provided in Figure 2 leads to ques-
tions as to why particular items fall where they do and
whether previous research that focused on the charac-
teristics of small firms supports these positions. The
authors believe there is a significant opportunity to
extend this research to explore these questions. As an
example, when they examine the relative literature on
various items, sometimes conflicts appear between their
results and what researchers who examine small-firm
managers have to say about a particular item. In the
authors’ study, small-firm managers reported both a
relatively high level importance and implementation
with the strategy development process (S1). The rele-
vant literature in this area focuses on the execution of
the strategy development. For example, Ahire (1996)
explains that small firms are characterized by a myopic
view of management, which focuses on meeting day-to-
day survival challenges, partly due to a lack of resources
and partly due to the inability of the owner/manager to
exhibit understanding of the strategic aspects of busi-
ness. Robinson and Pearce (1984) suggest that small
firms lack the necessary staff and time to engage in
strategic planning, and they conclude that small firms
generally do not plan. Gisbon and Cassar (2002) found
in their study that only 35 percent of the small firms
planned and only half of these firms consistently
planned. They suggest that small firms use planning
only for specific purposes, such as when the manager
foresees a particular competitive threat that needs to be
addressed. Small firms are generally considered more
vulnerable to competitive challenges in part because
they spend more time adjusting rather than predicting
and controlling the business environment (D’Amboise
and Muldowney 1988).
Scully and Fawcett (1994) reiterate that change (in
the small firm) is often incremental without a customer-
focused strategic assessment and, moreover, small firms
often fail to develop true strategic initiatives. Matthews
and Scott (1995) point out “While large firms have
been reported to increase planning in the face of turbu-
lent environments (Lindsay and Rue 1980), small
firms, constrained by their resources and their range of
strategic options (Dandridge 1979; Robinson and
Pearce 1984), may be less likely to do so.”
The authors’ study indicates that small firms are
addressing the strategy development process, giving it
priority over other items. They believe the explanation
for this is that small-firms management tends to
eschew formal strategy development processes for more
personal and informal methods. Deeper research, per-
haps through detailed case analysis, may reveal that
small-firm managers actually spend a significant
portion of their time (both while at work and away)
thinking about, researching, and developing strategic
initiatives. Because this process is very personal and
informal, it doesn’t appear to be happening when one
just passively observes the activities of the firm. Also,
most research doesn’t capture the consistency in plan-
ning. The manager may consider planning important,
but the company will make planning a priority only
when significant changes are being contemplated
(Gibson and Casson 2002).
Another interesting aspect of Figure 2 is that L2—
Company Responsibility and Citizenship is the exception
in the higher-ranking items, with a disproportionate
amount of implementation with respect to importance. If
one considers why small firms tend to implement this
item more than one might expect, the literature provides
some insight. This item deals with the legal, ethical, and
risk requirements of its products, services, facilities, and
operations on society. This area has a significant impact
on the operation of the business, and the small-firm
manager considers it important. The small business must
consider these issues when making decisions because
the impact could seriously threaten the existence of the
business (Reiland 1999). Small firms that ignore such
issues usually do not survive.
Although it is beyond the scope of this research to
fully explore the myriad questions that arise from the
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Stephens 6/22/05 10:42 AM Page 32
Importance and Implementation of Baldrige Practices for Small Businesses
results, the authors encourage others to verify and
extend these findings in order to answer such questions.
Limitations
This research is exploratory and several limitations are
evident. One is the possibility of self-reporting bias.
Ahire and Golhar (1996) point out that “When one
collects data from managers about their own organi-
zations, and specifically about managerial issues with
which they are closely associated, there is a potential
for self-reporting bias.” Ideally, research should seek
multiple responses from each firm to reduce this bias.
However, identification of respondents with appropriate
functional background and management level was
difficult to do in this study.
Because of the complex nature of the CPE questions
and the need to maintain a survey of reasonable length,
some survey questions contained multiple ideas. Alreck
and Settle (1995) describe these as “double-barreled”
questions. Therefore, the authors had to make some
judgmental tradeoffs. Note that their goal was not to
draw any inferences about a specific response. Each
question is a smaller part of an overall factor that was
aggregated in the analysis. This mitigates the potential
weakness inherent in multiple constructs.
In the authors’ study, respondents may tend to rate
implementation in relation to how they rated impor-
tance. The importance rating will be looked at as the
benchmark, and the implementation will be how well
they measure up to that benchmark, leading to a
potential problem of “social desirability.” Alreck and
Settle (1995) note that “When personal preferences,
opinions, or behavior deviate from what’s socially pre-
scribed, respondents are very prone to report what’s
socially acceptable, rather than the true answers.” The
authors tried to clarify this in the survey instructions to
reduce this bias:
“Rating a practice as ‘low’ in importance or
‘not practiced in your company’ does not in any
way suggest poor management. Your answers
may reflect unique business factors or resource
constraints in your company. If fact, there is
no company, large or small, that extensively
implements all of the practices.”
32 QMJ VOL. 12, NO. 3/© 2005, ASQ
Although these limitations can weaken the strength
of the conclusions, they should not detract from the
research effort.
CONCLUSIONS AND
RECOMMENDATIONS
This research is exploratory in nature and focuses
on better understanding small firm perceptions of
the importance and implementation of the high-
performance management practices found in the CPE.
Although the literature sometimes suggests that
there are certain practices that small firms might find
unimportant, not implementing a practice is not an
indication of nonimportance. The authors’ results
found that small-business leaders rate the practices at
least moderately important, and many practices as
highly important. This validates the usefulness of the
criteria as a small organization management guide, one
that will allow firms to improve their competitiveness.
The authors discovered that small-business leaders rank
the strategy development process and leadership systems
as most important to the success of their business.
Because small-firm leaders tend to spend more time
dealing with day-to-day operational concerns, they also
find operational practices to be critical.
Customer-related items and human resource issues,
however, were identified as being less important. Small-
firm leaders have less control over such issues. They
can develop good relationships with their customers
and work hard to meet customer requirements, but
they tend to be subservient to their customers because
of their size (Raymond and St. Pierre 2004). Kotey and
Slade (2005) found that the use of formal human
resource management (HRM) practices is related to the
size of the firm. In small firms, the adoption of formal
HRM practices at the managerial level lags behind that
at the operational level. The development of managers
in terms of HRM practices is more likely with larger
firms, and small firms are less likely to have standard-
ized and documented HRM practices. Additionally,
small firms have many difficulties with employee
retention, finding qualified workers, and providing
competitive pay and benefits.
Stephens 6/22/05 10:42 AM Page 33
Importance and Implementation of Baldrige Practices for Small Businesses
Small-firm managers rank items such as supplier
and partnering processes, employee well-being and
satisfaction, and the collection and analysis of com-
parative data as the least important. Small firms tend
to have less leverage with large suppliers and other
business partners because they don’t normally represent
a major part of their suppliers’ business. Yet, many
small firms develop close, trusting, and cooperative
relationships with suppliers (Overby and Servais 2005).
Perhaps small firms rely more on informal methods
such as “word of mouth” recommendations to find and
develop supplier relationships. Small firms also have
less opportunity and resources to provide advanced
training, reimbursement of educational expenses, and
other employee benefits, or to use benchmarking to the
extent that larger firms can. Small firms tend to have
more competition in the form of small, privately held
firms such as themselves, and access to comparative
data is generally limited or too costly.
The authors found that most small firms implement
all practices to some extent but none of the practices are
implemented to their full extent. The CSF literature pro-
vided much insight into why small firms have difficulty
implementing quality management practices. The
authors believe that the overriding factor is a matter of
resources. Since small-firm leaders characterize all the
practices as at least moderately important, they are
forced to spread limited resources in the implementation
process. The hierarchy of implementation closely mir-
rors that of importance, as it should. While it was not a
goal of this article to predict the rankings, there is
clearly opportunity for extension of this research to
further explain and verify the rankings.
The literature suggested that the authors would find
that implementation lags the importance hierarchy,
and this study provided validation of this premise. The
“importance-implementation gap,” as the authors call
it, indicates that small firms do not appear to imple-
ment a practice to the extent that the level of impor-
tance would indicate. The authors, however, observed
that most firms implement the practices at levels in line
with their perceived level of importance. An extension of
this research might be to explore this further through
targeted case studies. Additionally, one should look for
factors that differentiate these firms from others. One
might begin by exploring demographic differences to
see if they act as control variables. Since resource paucity
is a key issue, one might try to identify what specific
factors impact resources.
The authors’ purpose was to explore the character-
istics of small firms, using the literature to build a case
for the uniqueness of small firms. Yet, they recognize
that a review of the literature contrasting the character-
istics of small firms to large firms would be helpful in
motivating additional work in this area. An interesting
extension of this research would be an empirical study
that replicates this work for large firms. This would
provide an opportunity to contrast large and small
firms and provide significant insight to the questions
raised in this article.
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BIOGRAPHIES
Paul R. Stephens earned his bachelor’s and master’s degrees in
engineering and business from Illinois State University and
Bradley University. He earned his doctorate in operations man-
agement from the University of Cincinnati. Prior to entering an
academic career, Stephens was employed as a manufacturing
engineer and production manager at small firms that competed
in the customized electronics and mining equipment industries.
He started his own consulting business and provided custom cost
estimation and quotation software solutions for small business.
Stephens has published in a variety of outlets that serve a diverse
group of stakeholders, including operations management, quality
management, information systems, and entrepreneurship. He can
be reached by e-mail at prs@bradley.edu.
James R. Evans holds bachelor’s and master’s degrees in indus-
trial engineering from Purdue, and a doctorate in industrial and
systems engineering from Georgia Tech. Evans is the lead author of
two of the leading quality management textbooks used in business
schools worldwide: The Management and Control of Quality, 5th
Edition, and Total Quality: Management, Organization, and
Strategy, 3rd Edition, and has also written books on statistical
process control, management science, operations management,
simulation and risk analysis, statistics and data analysis, and
creative thinking. Evans served as an examiner for the Malcolm
Baldrige National Quality Award from 1994-1996, senior exam-
iner from 1997-1999, and alumni examiner from 2000-2001. He
has been a senior examiner with the Ohio Award for Excellence
since 1999, and a member of the Examiner Training Committee.
He has also been involved in the design of the Greater Cincinnati
Chamber of Commerce Small Business of the Year Award
Program and serves as a judge for the award, and was selected
as a judge for the 2002 U.S. Army Communities of Excellence
ACOE Award Program.
Charles H. Matthews is an internationally recognized scholar
and innovative teacher in the field of entrepreneurship. His
teaching and research interests include: strategic management;
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Importance and Implementation of Baldrige Practices for Small Businesses
small, entrepreneurial, and family-owned ventures; and leader-
ship succession in family/privately held firms. His research has
been published in the Journal of Small Business Management; the
Journal of Small Business Strategy; Entrepreneurship & Regional
Development; Frontiers of Entrepreneurship Research; Family
Business Review; and The Center for the Quality of Management
Journal. Matthews has facilitated more than 400 faculty-guided,
student-based field case studies and has served as a consultant
to numerous organizations including many family businesses. In
addition to his consulting practice, Matthews has entrepreneurial
and family business experience in the photographic, automotive,
and real estate industries. An educational entrepreneur as well,
he is the founder of the UC Center for Entrepreneurship
Education & Research in 1997, which was named one of the top
50 entrepreneurship programs in the United States in 2001
(Success magazine).
APPENDIX
Baldrige Categories, Items,
and Practices
Leadership
Leadership System
• Leaders evaluate the needs of all stakeholders when
setting company direction.
• The company uses formal and informal methods for
selecting managers and developing leadership skills.
• The leadership system is designed to sustain indi-
vidual development, initiative, and organizational
learning.
• Leaders demonstrate their expectations in their
behaviors. Leaders communicate expectations
throughout the entire work force.
• Leaders review overall firm performance and use this
process to build consistency in goals.
• The leadership system is periodically evaluated and
improved.
Company Responsibility and Citizenship
• The company considers the legal and ethical ramifi-
cations of their actions and when making decisions.
• The company meets all regulatory requirements and
treats these as areas for improvement.
• Senior leaders support employee involvement in
their communities.
36 QMJ VOL. 12, NO. 3/© 2005, ASQ
Strategic Planning
Strategy Development Process
• The strategy development process considers customer
expectations, the competitive environment, and all
risks.
• The strategy development process assesses the markets
in which to compete, taking into consideration the
firm’s operational capabilities, human resources, and
supplier relationships.
Company Strategy
• Strategy is translated into action plans.
• Progress toward meeting action plans is tracked.
• Action plans are clearly defined including measures
of effectiveness and resources needed for implemen-
tation.
• Human resource plans are derived from overall
company strategy.
• Two- to five-year projections are made for key areas
and compared with projected competitor performance.
Customer and Market Focus
Customer and Market Knowledge
• Customer groups and/or market segments are clearly
defined.
• Approaches for listening and learning from customers
are established.
• The firm uses what it learns from listening to
customers.
• The company evaluates and improves its methods
of listening and learning from customers.
Customer Satisfaction and Relationship
Enhancement
• The company provides easy access for customers
when they are seeking assistance and/or they wish to
complain.
• Performance requirements for employees who
interact directly with customers are well defined,
understood, and applied.
• Performance requirements for employees who
interact directly with customers are periodically
evaluated and improved.
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Importance and Implementation of Baldrige Practices for Small Businesses
• A complaint management process exists that ensures
complaints are resolved effectively and promptly.
• Complaints received by all company units are
aggregated and analyzed for use throughout the
company.
• The company continuously follows up with cus-
tomers to receive actionable feedback and improve
processes.
• The company gathers information about customer
satisfaction and captures information that reflects
customers’ repurchase, new business, and positive
referral.
• Objective and reliable information on customer
satisfaction relative to competitors is obtained
from comparative studies.
• Customer satisfaction measures are used to drive
improvement and better understand the factors that
drive markets.
Information and Analysis
Selection & Use of Information and Data
• Data needs are linked to company processes and
goals, and are gathered. This information is used to
track and improve the company’s performance at all
levels.
• Stakeholders who need data to effectively perform
their work have convenient access to all necessary
information.
• The types of data the company collects, as well as its
usage and effectiveness, are periodically evaluated,
improved, and kept current.
Selection & Use of Comparative Information
& Data
• The company evaluates its needs for comparative
information (including both competitive compar-
isons and best practices outside of your industry).
The firm has established criteria for seeking sources
of such data.
• Comparative information is used to set goals and to
encourage performance breakthroughs.
• How comparative information is gathered and
used is periodically evaluated, improved, and kept
current.
Analysis & Review of Company Performance
• Performance data from all parts of the company are
integrated and analyzed to assess overall company
performance. This information is used to under-
stand cause/effect connections among processes and
between processes and business results.
• Company performance and capabilities are reviewed
to assess progress relative to goals, plans, and
changing business needs.
• Performance reviews are used to determine improve-
ment priorities. These reviews are translated into
improvement actions throughout the company, to
the company’s suppliers and business partners.
Human Resource Management
Work Systems
• Jobs are designed and managed to provide opportu-
nities for individual initiative and self-directed
responsibility. The designs ensure high performance
and flexibility in response to changes in the market-
place.
• Jobs are designed to ensure effective communica-
tions and skill sharing across the firm.
• Compensation and recognition programs reinforce
performance, teamwork, and learning objectives.
Employee Education, Training, and
Development
• Education and training activities are structured to
address the knowledge and skills employees need to
meet their work and personal development objectives.
• Employees and their managers have important
input in designing education and training activities.
• The delivery of education and training activities are
designed to best support the achievement of the
company objectives.
• Knowledge and skills acquired through training are
reinforced on the job.
• Education and training activities are evaluated and
improved.
Employee Well-Being and Satisfaction
• The company sets goals for health, safety, and
ergonomics.
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Importance and Implementation of Baldrige Practices for Small Businesses
• A variety of employee well-being and motivation
services are available, and are periodically evaluated
and improved.
• Both formal and informal methods are used to
determine employee well-being, satisfaction, and
motivation.
• Results related to employee well-being, satisfaction,
and motivation are evaluated relative to business
objectives.
Process Management
Management of Product and Service
Processes
• The designs of product and service processes are
addressed systematically, incorporating all stakehold-
ers and accounting for the changing environment.
• The design of production/delivery processes incor-
porates quality and operational performance
requirements.
• Design and service processes are coordinated among
individuals to ensure trouble-free introduction and
delivery of products and services.
• Product and service processes are clearly defined,
in-process measurements are taken, and a correc-
tive action approach is established to ensure that
products and services meet requirements.
• Product and service processes are evaluated and
improved to achieve better performance.
• Results from the evaluation of product and service
processes are shared throughout the company.
Management of Support Processes
• Support processes are clearly defined, incorporating
important internal customer requirements. Support
processes are measured and managed to ensure that
products and services meet requirements.
38 QMJ VOL. 12, NO. 3/© 2005, ASQ
• Key support processes are systematically evaluated
and improved to achieve better performance.
Management of Supplier & Partnering
Processes
• Important performance requirements are carefully
defined and used to select suppliers and partners.
• The company ensures that supplier and partner
requirements are met by requiring feedback to
inform suppliers and partners of their performance.
• Supplier and partnering processes are periodically
evaluated and improved.
Business Results
• The company captures, trends, and analyzes key
measures of customer satisfaction.
• The company captures, trends, and analyzes key
measures of financial and market performance.
• The firm captures, trends, and analyzes key measures
of employee well-being, satisfaction, development,
work improvement, and effectiveness. Results are
compared against benchmarks.
• The company captures, trends, and analyzes key
measures of supplier and partner performance.
• The company captures, trends, and analyzes
important measures of product quality, service per-
formance, and productivity. Results are compared
against industry or best-in-class benchmarks.
• The company captures, trends, and analyzes impor-
tant measures of regulatory compliance and environ-
mental improvements. These results are compared
against industry or best-in-class benchmarks.
• The company captures, trends, and analyzes key
measures of other unique measures such as innova-
tion rates and order accuracy. Results are compared
against industry or best-in-class benchmarks.