A Critical Analysis of Service Quality and Performance

through Malcolm Baldrige National Quality Healthcare

Criteria: Benefits and Research Directions

Abstract

* Sunil D’ Souza
* * A.H. Sequeira

Quality is one of the important competitive strategies for survival of an organization in

the globalized economy. Malcolm Baldrige National Quality Award (MBNQA) was
established in 1987 to encourage organizations to deploy quality as a competitive
strategy. The research review identifies that the MBNQA has taken a paradigm shift
from quality to organizational excellence. This paper focuses on the changing role of
quality in the MBNQA criteria from 1988 to 2009 in approximately 5-year intervals
that is 1988, 1992, 1997, 2003 and 2009. In the recent years there is an increasing
emphasis on corporate culture and globalization and therefore it is necessary for
healthcare organizations to improve their organizational effectiveness, especially in the
area of service quality. The concept of service quality in healthcare organizations is
critically discussed in the context of changing environmental factors. An attempt is
made in this paper to identify the scope of service quality research and it emphasizes
the need for a holistic framework for measuring performance in healthcare
organizations. This issue is significant because of concurrent view amongst various
researchers in service management that there are both hard and soft issues reflecting,
the lack of strategic thinking and goal clarity, necessitating a measurement system that
focuses on application of a comprehensive measurement system in service
organizations especially in healthcare. The paper concludes by highlighting the dearth
in services marketing research regarding focus on service quality and performance
through an integrated perspective.

Key words: Malcolm Baldrige National Quality Award criteria, service quality, and
performance

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* Sunil D’ Souza, Research Scholar, Dept. of Humanities, Social Sciences and
Management NITK, Surathkal.

* * Prof. A.H. Sequeira, Dept. of Humanities, Social Sciences and Management, NITK,
Surathkal.

Electronic copy available at: http://ssrn.com/abstract=2018089

Background:
Services are described as “deeds, process, and performances”( Zeithamal and
Bitner,2000,p.2). A significant effort has gone into defining concept, primarily by
classifying types of services or recognizing the service characteristics that differ from
goods( Lovelock,1980;Kotler;1980;Zeithaml,Parasuraman and Berry,1990; Groonroos,
1990).A service is an activity or series of activities of more or less intangible nature that
normally, but necessarily, take place in interactions between customer and service
employees and /or systems of the service provider, which are provided as solutions to
customer problems( Gronroos,1983,p.27). During the last decade service quality has
become a major attention to practioners , managers and researchers owing to strong
impact on business performance, lowering costs, customer satisfaction, customer loyalty
and profitability(Leonard and Sasser,1982;Cronin and Taylor,1992;Gammie, 1992;
Hallowell,1996; Chang and Chen,1998;Gummesson,1988; Lesser et al.,2000;Silvestro
and Cross,2000;Newman,2001; Sureshchander et al.,2002,Guru,2003etc.).The term
“services”, as it has been defined traditionally employed in marketing (or economic
thought in general) is an outgrowth of Smith’s (1976/1904) treatise on what fosters the
creation of national wealth (Vargo et al.2006).For Smith, the key driver was national
“productivity”, which he defined in terms of activities that create surplus tangible output
that can be exported for trade. Other activities, while useful and essential to both
individual and national well-being were not productive by these tangibility and export
standards. Over time, the productive versus non –productive distinction morphed into
toady’s goods versus services distinction, with services being defined as a particular type
of “product” (i.e., intangible goods). The roots of service quality were born of the post –
World War II emphasis on manufacturing quality .Total quality management (TQM) in
manufacturing emphasis the customer (Deming, 1986). The focus slowly wended its way
through the service sector. Organizations had viewed service as secondary in importance
to manufacturing, but quickly realized that service quality was the greatest key to success
and primary source of competitive advantage.

Electronic copy available at: http://ssrn.com/abstract=2018089

Service organizations are recognized as the largest and fastest-growing segment of the
economy in the world (Sahay, 2005). Johnston and Jones (2004), state that despite the
importance of productivity /performance management in service organizations it is
surprising that there is relatively little empirical research on this topic. Organizations that
deliver service must broaden their examination of performance from the conventional
organization-oriented perspective to a dual organization – customer perspective. This
broadened approach can help reconcile conflicts between service quality and performance
in service organisations. There is a challenge in measurement aspects of services in
services marketing literature. One important aspect of the services is that it involves both
the qualitative and quantitative aspects .Second important aspect of the services is that it
involves tangible and non tangible aspects. Therefore, service measurement requires an
integrated approach to deal with measurement aspect in service organisation .LX
Li(1997), suggested that the future research can be extended interlinking of internal
measure of service quality and external measure of service quality. There is need to
expand the qualitative element to facilitate a more in- depth dynamics involved in
healthcare organisations (Raduan, 2004).The external measure of service quality is
evaluated by SERVQUAL. The SERVQUAL instrument has wide spread applications in
a variety of organizations which include healthcare organizations. The efficacy of
SERVQUAL instrument is seriously criticized by many researches (Buttler, 1996).
Internal quality measures pertain to both the service delivery process adequacy and
service characteristics(Donabedian1982).Process quality includes ,appropriate equipment
,timely treatment ,adequate amount of the services, and staying within norms of industry
acceptable practices(Li,1995).The gap is to integrate external service quality, internal
quality measures and its impact on performance. However to overcome the issues of
healthcare quality measures and organizational performance, there is need to use standard
measure for performance excellence in healthcare organization. Any framework or model
to measure the service quality and performance or performance alone required to be
simple and should have integrated perspective. It should combine financial and non
financial aspects, qualitative and quantitative aspects. The popular frame work suggested
by Venkatraman and Ramanujam(1986),contented that the business performance is the
sum of financial performance and operational performance. Financial performance

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includes sales growth, profitability ( ROI, return on sale, return on equity),and
operational performance includes market share, new product introduction, product
quality, marketing effectiveness, value added services ,measures of technological
efficiency within the domain of business performance. Further, performance framework
contented that organizational performance includes financial performance, business
performance and organizational effectiveness. During the 1980s and 1990s, the literature
shows the researchers criticized the use of performance measure on traditional financial
performance. The literature review shows there is strong emphasis on formulation of
performance frameworks. The limitations of the various performance frameworks to
obtain holistic measure of organizational performance. Some of the popular contributions
for managing the organizational performance are Malcolm Baldridge National Quality
Award (MBNQA), European Foundation for quality management (EFQM) and the
balanced score card (BSC). The Balance score card (BSC), frame work lack basic
guidelines for selecting performance measures and complexity in financial and customer
perspectives. Neely et al. (1995), state that there is a serious flaw is the absence of
competitiveness dimension in this framework, which is also outlined by Fitzgerald et al.
(1991). The balanced scorecard also shows a lack of consideration to the measurement of
human resources, employee satisfaction, supplier performance, product/service quality
and environmental/community perspective (Brown, 1996; Lingle and Schiemann, 1996;
Maisel, 1992). Failure of the balanced scorecard to consider these dimensions limits its
comprehensiveness (Neely, 2002). There is a research gap to investigate the relationship
between quality and performance through integrated approach in service organizations
especially in healthcare organisations.Performance measurement provides hospitals with
‘hard evidence about existing practices, values, beliefs, and assumptions and ‘enables
hospitals to develop a systematic means of identifying shortfalls and enhancing their
future performance’ (Lim & Tang, 2000).The system of performance measurement, if
properly designed and implemented, will focus organizational efforts on to a common
purpose by directing everyone’s attention into a set of key goals and objectives.
Furthermore, it will constitute the basis to encourage the appropriate behaviours, assess
individual and team performance and reward significant contributions towards quality.
Dabholkar et al., (1996) developed retail service quality scale taking into account

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retailing service quality dimensions and developed five dimensions, which are personal
interaction, policy, physical aspects, reliability and problem solving. Sureshchandar et.al.,
(2001),identify twelve dimensions of quality management for service organization which
includes, top management commitment and visionary leadership, human resource
management ,technical system, information and analysis system, benchmarking,
continuous improvement, customer focus, employee satisfaction, union interventions,
social responsibility, service scapes, and service culture. Finally, to measure or assess the
performance and service quality, a comprehensive system is necessary. However, to
fulfill roles successfully, a good system of performance measurement should exhibit the
following characteristics (Kanji & Sa´, 2001):
- Measure performance from a multi- and interrelated perspective,
- be linked to the organization’s values and strategy,
- be based on the critical success factors or performance drivers,
- be valid, reliable and easy to use,
- enable comparisons to be made and progress to be monitored,
- be linked to the rewards’ system and encourage the appropriate behaviours,
- highlight improvement opportunities and suggest some improvement strategies.

Thus, the frameworks proposed by the various researchers direct the advancement of
holistic, comprehensive and relevant approach to performance measurement. This paper
makes an attempt to explore the development of Malcolm Baldridge National Quality
framework as core of the research problem.

Malcolm Baldrige National Quality Framework:

The dimensions of Malcolm Baldrige National Quality Framework includes leadership,

strategic planning, customer focus, measurement, analysis, and knowledge management,
workforce focus, process management, and results. These dimensions are termed as seven
categories and points.

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 Figure: 1 Malcolm Baldrige National Quality Award (MBNQA) Model

Source: US Department of Commerce National Institute of Standards and Technology

Leadership:
As for any management innovation or change, strong and committed leadership is
essential for successful quality programmes (Deming 1986, Flynn et al. 1994).
Leadership provides the energy and motivation for continuous improvement and
innovation (Beer 2003). In MBNQA, leadership is defined as the guidance and visible
participation that senior leaders provide in setting organizational values, directions,
performance expectations and social responsibilities (US Department of Commerce
National Institute of Standards and Technology 2003).

Strategic Planning:
This dimension represents the relationship between an organization’s quality planning
and the overall organizational strategy (Deming 1986, Juran 1993, Lee and
Schniederjans 2002). To achieve quality excellence, quality improvement plans must be

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fully integrated into the corporate competitive strategy (Barclay 1993). Strategic quality
planning should address development and deployment of action plans, along with clear
priorities, and required resources.

Customer and Market Focus:

This dimension examines the effectiveness of an organization’s key processes for
knowledge acquisition concerning current and future customers and markets
(Schonberger and Knod 1997). The organization must have formal processes to research
the ever-changing market conditions, customer requirements and expectations, and new
approaches to improve customer relationships and satisfaction (Steeples 1992, US
Department of Commerce National Institute of Standards and Technology 2003).

Measurement, Analysis and Knowledge Management:

This dimension is the newest dimension among the MBNQA criteria. It evaluates an
organization’s processes to measure its performance in terms of the scope, validity, and
management of relevant data and information. It also measures the effectiveness of the
firm’s processes for information and knowledge management (US Department of
Commerce National Institute of Standards and Technology 2003).

Human Resource Focus:

Achieving and maintaining high levels of quality depend on the effective use of human
talents and abilities (Steeples 1992). Human resource focus addresses key practices that
the organization uses for creating and maintaining a high-performance workplace through
developing, empowering and rewarding employees (US Department of Commerce
National Institute of Standards and Technology 2003).

Process Management:
This dimension evaluates an organization’s systematic approaches to value creation and
quality management processes (US Department of Commerce National Institute of
Standards and Technology 2003). It includes the quality of product/service design,
manufacturing process, and product variance reduction (Gryna 1991).

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Business Results:
This dimension is an overall score for quality management that measures results of
customer focus, products and services, financial and market outcomes, human resources,
organizational effectiveness, and governance and social responsibility (US Department of
Commerce National Institute of Standards and Technology 2003).

The development of MBNQA criteria:

It is observed that the MBNQA criteria are clearly an important set of quality
management dimensions for any organization including healthcare. It is to be noted that
the MBNQA criteria from its inception in 1988 and till today (2008-09) in approximately
5-year intervals has five revisions.

1988 Criteria:
The first criteria for the MBNQA were published in 1988 in the ‘Application Guidelines’
brochure of US Department of Commerce National Institute of Standards and
Technology. This document explained the application process for the MBNQA, listed
eligibility criteria, described the award process, and includes the bulk of its pages to
examination categories, subcategories and points. The original MBNQA criteria had
seven categories and 42 subcategories, with points for each item that totaled 1000. Within
the 1988 criteria, leadership and information and analysis were the drivers of the five
subsequent performance categories. The 1988 MBNQA criteria were, for the most part,
prescriptive in nature. Brown (1997), states that the criteria ‘prescribed certain leadership,
planning, human resource and management practices’. The prescribed methods were
included in the subcategories and examination items. The examination items, which form
the lowest level of evaluation for the award, were included within the subcategories.
There were 62 examination items distributed over the 42 subcategories. The 1988
MBNQA’s focus on data collection and analysis as a means of measuring and controlling
process quality was consistent with the US’s ‘singular need to improve the quality of
products and services’ (Hertz 1997) to compete with foreign manufactured products of

8
higher quality. As US companies improved the quality of their products, they developed a
company-wide emphasis on quality as a driver of business results.

1992 Criteria:
The 1992 MBNQA criteria also consisted of seven categories totaling 1000 points;
however, the number of subcategories was reduced from 42 in 1988 to 28. Within the 28
subcategories, there were 89 areas to address, which were roughly analogous to 1988’s
examination items. Thus, while the number of subcategories was reduced, the number of
areas to address increased from 62 examination items in 1988 to 89 areas to address in
1992. Additionally, the language used in the 1992 MBNQA criteria changed from the
prescriptive ‘scoring criteria’ used in 1988 to the less rigid, more descriptive ‘areas to
address.’ The framework for the 1992 MBNQA criteria identified four basic elements.
Leadership served as the driving force behind creation of values, goals and systems. The
next four categories: Information and Analysis, Strategic Quality Planning, Human
Resource Development and Management, and Management of Process Quality,
comprised the system that includes the set of well-defined processes for meeting quality
and performance requirements. The Quality and Operational Results category measured
the progress toward improving quality and company performance. All of these categories
worked toward achieving Customer Focus and Satisfaction. Despite the somewhat linear
description of quality improvement in the 1992 MBNQA framework, all categories were
assumed to be interrelated and non-directional. The 1992 MBNQA criteria focused on
strengthening the ‘relationship between quality and other business management
considerations: business planning, financial results, overall company effectiveness,
innovation, and future orientation’ (US Department of Commerce National Institute of
Standards and Technology 1992, Award Criteria, p. 10). Some believe that the 1992
MBNQA model was the best in terms of clarity of the relationships between quality
programmes and organizational performance (Collier et al. 2002).

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1997 Criteria:
When the MBNQA was formulated, provisions were included for annual review and
improvement of the criteria and award processes to ensure that they remain relevant and
reflect current thinking. The changes made for the 1997 MBNQA criteria represented the
most extensive revision of the criteria (Brown 1997). According to Brown, one major
change in the 1997 criteria was the shift in defining the important accomplishments of an
organization. No longer was the focus primarily on customer satisfaction, but also
emphasized financial results, productivity, and safety and employee morale as critical
outcomes of the firm’s processes. In addition to revising the content of the criteria, the
MBNQA categories were reordered and the number of subcategories substantially
reduced. The 1997 criteria were grouped into two triads: Leadership (leadership, strategic
planning, and customer and market focus); and Results (human resource focus, process
management, and business results), plus the Information and Analysis category (US
Department of Commerce National Institute of Standards and Technology 1997). The
reduction in subcategories (from 42 in 1988 to 28 in 1992 to 20 in 1997) was a result of
consolidation (Hertz 1997), rather than elimination of entire concepts. According to
Harry S. Hertz, Director of the National Quality Program of the National Institute of
Standards and Technology, the revisions in the 1997 criteria highlight shifts in the
MBNQA concepts of quality (Hertz 1997).The changes emphasis from quality assurance
of products and services to the current focus on process management and business results.
In service context the functional quality needs to be emphasized more than the technical
quality. The focus on strategic quality planning has given way to overall strategic
planning. The early focus on customers has matured to a focus on customers and markets,
with a need to understand not only today’s customers, but also for a long term customer
relationship and changing competitive market and technological environment. Human
resource utilization, with a component of employee quality training, has evolved into
human resource development and management. A focus on supplier quality has given
way to a focus on supplier and partnering arrangements and how these opportunities can
improve the performance and capabilities of both parties. The emphasis on individual
quality improvement activities evolved into a focus on cycles of evaluation and
improvement in all key areas of an organization’s operations.

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2003 Criteria:
The 2003 criteria, like all other MBNQA criteria, have seven categories and a total of
1000 points. The categories are nearly identical to the 1997 categories, with only
Category 4 changing its title from Information and Analysis (1997) to Measurement,
Analysis and Knowledge Management (2003), and Category 5 changing its title from
Human Resource Development and Management (1997) to Human Resource Focus
(2003). The subcategories are subtly different, reduced to 19 from 1997’s 20. The most
noticeable change among the subcategories is the elimination of subcategories
specifically related to supplier and partnering processes and results. Taking an enterprise
approach to quality improvement means incorporating a firm’s suppliers into its
operations and accounting for supplier and partner quality in the overall results of the
firm. This is a clear change from the original 1988 criteria, and is explained by ‘the focus
on results, not on procedures, tools, or organizational structures. No prescriptive
requirements are intended to foster incremental and major (‘breakthrough’)
improvements, as well as basic change’ (US Department of Commerce National Institute
of Standards and Technology 2003, p. 6).

2008 Criteria:
The 2008 criteria, like all other MBNQA criteria, have seven categories as listed in 2003
a total of 1000 points. The MBNQA developed as organisational excellence standard,
measured along the lines of leadership, strategic planning, customer focus, measurement,
analysis, and knowledge management, workforce focus, process management, and
results. Leadership which examines how senior executives guide the organization and
how the organization deals with its responsibilities to the public and practices good
citizenship; Strategic planning which examines how the organization sets strategic
directions and how it determines key action plans; Customer and market focus which
examines how the organization determines the requirements and expectations of
customers and markets; builds relationship with customers; and acquires, satisfies and
retains customers; Measurement, analysis, and knowledge management (Information and
analysis) is how the organization selects, gathers, analyzes, manages, and improves its

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data, information, and knowledge assets and how it manages its information technology;
Workforce focus is how the organization engages, manages and develops workforce
;Process management is how the organization designs its work systems to deliver value to
patients and stakeholders and results include healthcare outcomes, customer -focused
outcomes, financial and market outcomes, workforce –focused outcomes, process
effectiveness outcomes, and leadership outcomes.

MBNQA Criteria as a Concept of Quality Towards Overall Excellence:

The growth of the MBNQA criteria reflects evolving concepts of quality in changing
business environment. The greatest shift in focus occurred between the 1992 and 1997
criteria. This shift can be summarized as going from quality assurance to management of
the firm’s performance. In this way, the criteria have come to embody all aspects of total
quality management. However, Schonberger (2001) criticizes MBNQA for steadily
moving away from the ideals of quality management to general management. With
respect to TQM, Evans and Lindsay (2005) state that the scope of TQM includes
infrastructure, practices and tools and techniques. According to them, infrastructure
includes leadership, strategic planning, human resources management, process
management and data and information management. Hanna and Newman (2001) state
that TQM has forced a shift from traditional analytic thinking, characterized by
functional management and local performance measures, to holistic thinking,
characterized by process management and global performance measures. Hanna and
Newman (2001, p. 185) state, ‘To fully understand their processes, firms that implement
TQM must take advantage of both analytical and holistic approaches. For many
companies, that means de-emphasizing functional management and local performance
measures (such as departmental reject rates) in favour of process management and global
performance measures (such as customer satisfaction)’. Evans and Lindsay (2005, p. 120)
put it most straightly that the word quality was judiciously dropped from the MBNQA
criteria in the mid-1990s. For example, before 1994, the Strategic Planning category was
titled ‘Strategic Quality Planning. The change to ‘Strategic Planning’ signifies that
quality should be a part of business planning, not a separate issue. Throughout the
document, the term performance has been substituted for quality as a conscious attempt

12
to recognize that the principles of total quality are the foundation for a company’s entire
management system, not just the quality system. To this end, the most significant changes
in the criteria reflect the maturity of business practices and total quality approaches. The
criteria evolved from a primary emphasis on product and service quality assurance in the
late 1980s, to a broad focus on performance excellence in a global marketplace by the
late 1990s. While Schonberger clearly believes that the MBNQA has lost a significant
portion of its quality focus, the award is a mirror of the changing business environment
and reflects a contemporary understanding of competitive strategies. Today, cost and
quality have become the market entry requirements in the global economy. They are
necessary conditions but not sufficient conditions. Today, business firms must also
pursue speed and customization as competitive strategies (Lee and Lee 2002). The
evolving nature of the MBNQA criteria reflects the Modernization of the Malcolm
Baldrige National Quality Award framework in changing business environment.

Conclusion:
The core of MBNQA is about quality. The appearance of MBNQA criteria has changed
since inception from quality concept to organizational excellence. The changes appeared
in the framework to satisfy the dimensionality issues quality in the changing business
environment. Quality is no longer just quality assurance of products and services but it is
the overall quality, including customer relationship management, corporate social
responsibility, knowledge management, well-being of employees, and overall financial
results. The new concept of quality is broad and all encompassing. The evolution of
MBNQA shows there is scope for broadening the concept of quality. The MBNQA award
criteria are all about quality, perhaps it is holistic and comprehensive.

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