A recent study by Dr. Vinod Singhal of the Georgia Institute of Technology and Dr. Kevin Hendricks of the College of William and Mary provides hard evidence that effective implementation of quality principles impacts bottom-line business results. The five-year study of more than 600 quality award winners shows that, as a whole, they experienced significant improvement in the value of their common stock, operating income, sales, return on sales, employment and asset growth.
Drs. Singhal and Hendricks compared the financial performance of nearly 600 quality award-winning firms against a control sample of firms similar in size and operating in the same industries. Both groups were tracked over a five-year period starting one year before to four years after the award winners won their first award. The award-winners averaged significantly larger increases in several measures of financial performance than the control group (Figure 1). Award winners experienced a 44 percent higher stock price return, a 48 percent higher growth in operating income and 37 percent higher growth in sales compared to the control group. Award winners also outperformed the controls on return on sales, growth in employees and growth in assets.
One interesting finding was that firms who win state awards (such as the Oklahoma Quality Award) or other independent quality awards, experienced better results than those winning supplier awards only (Figure 2). After adjusting for the performance of the controls, the independent award winners averaged a 61 percent increase in stock returns, 73 percent increase in operating income, 33 percent increase in sales, 21 percent increase in return on sales, 25 percent increase in employment and 49 percent increase in assets. All of these exceed the increases experienced by firms winning supplier awards only. This evidence provides a compelling case for why firms should use criteria such as the Oklahoma Quality Award for planning, training and assessment, and why various state and federal agencies should support such award initiatives.
There is a common perception among smaller firms that performance excellence criteria are more applicable to larger firms. The findings indicate that this perception may not be true. After adjusting for the performance of the controls, smaller award-winning firms averaged a 63 percent increase in operating income, 39 percent increase in sales, 17 percent increase in return on sales, 21 percent increase in employment, and 42 percent increase in assets. All exceed the increases experienced by the larger award-winning firms (Figure 3).
Similarly, the findings indicate that lower capital-intensive award winners do significantly better than higher capital-intensive award winners (Figure 4).
In summary, the results of this study indicate that effective adoption of performance excellence principles embedded in various quality award criteria do make good economic sense. To obtain a copy of this study, contact Dr. Vinod Singhal at (404) 894-4908, email:vinod.singhal@mgt.gatech.edu. To obtain a copy of the Oklahoma Quality Award Criteria and/or more information about the award itself, please contact the Oklahoma Quality Award office at (405) 815-5295.
RECIPIENTS OF THE 2010
OKLAHOMA QUALITY AWARDS
Oklahoma Quality Award for Excellence
Metro Technology Centers, Oklahoma City
SSM Health Care of Oklahoma, Oklahoma City
Oklahoma Quality Award for Achievement
OK Deptartment of Human Services, Oklahoma City
Unity Health Center, Shawnee
Oklahoma Quality Award for Committment
Southern Technology Center, Ardmore