Central Mindanao University

Musuan, Maramag, Bukidnon

College of Commerce and Accountancy

In partial fulfillment of the requirements in Fin 4: Managerial Finance 2

Submitted to:

Sir Gino B. Gaco

Submitted by:

Anna Mae L. Cortez

June 20, 2012

 In the article entitled “The role of business excellence model in operational

and strategic decision making” underlies some issues with regards to this model.

 Guaranteeing success using Business excellence is apparent.

 There is a lack of work on the EFQM Excellence Model (as opposed to

the American Malcolm Baldrige National Quality Award).

 There is a question mark over how Business Excellence can increase

benefit to organizations.

 How Business excellence model is used within organizations.

Organizations and enterprises find many ways and opportunities to

improve wherein to maximize strong and to minimize parts of their activity.

Managers seek tools to achieve and maintain competitive advantage to the

company. That is why a framework is needed to help secure strategy

implementation and target fulfillment. This is where some companies choose the

excellence approach. By implementing the framework and thought processes of

quality systems like the EFQM Business Excellence Model in Europe, the Mal-

colm Baldrige National Quality Award in USA or the Deming Prize in Japan. The

quality frameworks focus on achieving excellence through quality and process

management. Giving senior management a “mirror” where they can visualize the

organizations performance.

In regard to using quality models as the basis of a business or as a

strategic model, there has it shortcomings. As shown in the article, the critique of
the BEM model wherein one argues that the model lacks key determinants of

success like innovation, strategic positioning, marketing penchant, and R&D.

Despite of some flaws to this model, it provides benefits to leaders,

management and employees. To leaders, it helps deliver the strategy,

understand what is important to do as a leader and develop a unique culture

where excellence is the norm. To management, it sees the link between strategy

and operations, engage employees in charge, lead improvements. To the

employees, provide their input to build a common direction, understand the

impact of their action and contribute to progress.

As Jay Barney proposed that organisations would out-perform their

competitors if they possessed resources that were ‘Valuable, Imperfectly imitable

or difficult to copy, Rare, and were put to good use by the Organisation’. This is

known as the ‘VIRO’ framework. Jay noted that Business Excellence ‘‘can further

the development of a series of routines and of a form of behaviour in the

organisation, which result from a process of learning and experience within the

company itself’’ and in making this statement he was referring to the

‘Organisation’ in his framework. Thus it implies that Business Excellence may

generate organisational advantage.

The business excellence model also known as European Foundation for

Quality Management (EFQM), a tool in business management that use measures

of an organization’s performance to drive organizational improvement generally

by highlighting current shortfalls in performance to management team. It is used

as a framework designed to assist organizations achieve business excellence

through continuous improvement in the management and deployment of

processes to engender wider use of best practice activities. It was originated by

the European Foundation for Quality Management (EFQM) which aims to “assist

management in adopting and applying the principles of Total Quality

Management and to improve the Competitiveness of European industry”. This

model is an advanced tool for improvement of organization is based on the

principles of the Total Quality Management (TQM).

Total Quality Management has many definitions. Gurus of the total quality

management discipline like Deming, Juran, Crosby, Ishikawa and Feigenbaum

defined the concept in different ways but still the essence and spirit remained the

same. According to Deming, quality is a continuous quality improvement process

towards predictable degree of uniformity and dependability. Deming also

identified 14 principles of quality management to improve productivity and

performance of the organization. Juran defined quality as “fitness for use.”

According to him, every person in the organization must be involved in the effort

to make products or services that are fit for use. Crosby defines quality as

conformance to requirements. His focus has been on zero defects and doing it

right the first time. Ishikawa also emphasized importance of total quality control to

improve organizational performance. According to him quality does not only

mean the quality of product, but also of after sales service, quality of

management, the company itself and the human life. Feigenbaum defined total
quality as a continuous work processes, starting with customer requirements and

ending with customer’s satisfaction.

The BEM is a widely used framework that helps companies to review their

performance and practices in a number of areas and identify targets and actions

for improvement. It is a benchmarking and audit framework originally developed

in the European Foundation for Quality Management (EFQM). How is this model

used within organization?

The EFQM Excellence Model consists of nine criteria and these are

grouped into two broad areas: enablers - how we do things or which are

measurable indicators of practices inside the organization that can lead to

business success, and results – outcomes which we target measure and achieve

or which are measurable indicators of business success. The results are not

measured simply on financial criteria (a theme shared with the balanced

scorecard, another widely used organizational audit and development tool) but

include things like employee and customer satisfaction.

 As shown above diagram emphasize the dynamic nature of business and

illustrate that innovation and learning helps leaders to improve the enablers

which produce better results. It does this using five “enabling” criteria

(Leadership; People; Policy & Strategy; Partnerships & Resources; Processes)

and four “results” criteria (Performance; Customers; People; Society). Current

performance is evaluated as a score across the nine criteria by checking the

organisation’s alignment against a total of 32 standard statements (e.g.:

“Processes are systematically designed and managed”). Scores are attached to

the answers to these questions either on the basis of internal “Self Assessment”

or with the assistance of outside assessors. Scoring uses a universal scoring and

weighting system that treats all types of organizations alike (no adjustments are

made for size or industry).

The scoring system has been designed to allow an organisation to

benchmark its score against those other firms, or against scores from prior

assessments. Also a weighted “total” of these scores is usually calculated. Wider

introduction of quality management systems by an organisation tends to improve

scores – but in general the Excellence Model does not itself provide information

on how low scores can be improved. Results are generally produced in “report”

format and circulated, usually on an annual basis (EFQM, 1999). So that’s how

business excellence model works.

Number of conclusions can be drawn in relation to existing management

experience of using the BEM. As stated in the article, that BEM is used as a

standard framework by some management. In which this framework is well-

established and widely used, and is supported by a detailed assessment

template which allows trained assessors to allocate a score in each area. The

theoretical top score has never been reached but each year there is a

competition which some (mostly large) firms enter and which makes a series of

awards for high scorers. In this way an emergent model of ‘best practice’ has

become established and this provides a target towards which others can move.

The documentation of what the winners achieve and how they do so is an

important part of the learning aspect of the approach.

Many firms choose not to enter the competition but instead to use the

assessment either with the help of trained assessors or as a simple self-

assessment as a guide for organizational development.

To define self-assessment, there are many definitions of it provided by

writers such as Conti and Hillman but an all-embracing definition is provided the

EFQM. Self-assessment is a comprehensive, systematic and regular review of

an organisation's activities and results against a model of business excellence.

The self-assessment process allows the organization to discern clearly its

strengths and areas in which improvements can be made and culminates in

planned improvement actions which are monitored for progress.

Thus, stated in the article, BEM was also considered to be useful in self-

assessment for it helps management identify strengths and opportunities for

improvement which everyone in the organization can address to achieve realistic

goals. All businesses including companies, public bodies and voluntary

organizations can use the EFQM Excellence Model to achieve improved

performance.

When used as a basis for an organization's improvement culture, the

business excellence criteria within the models broadly channel and encourage

the use of best practices into areas where their effect will be most beneficial to

performance. When used simply for self-assessment, the criteria can clearly

identify strong and weak areas of management practice so that tools such as

benchmarking can be used to identify best-practice to enable the gaps to be

closed. These critical links between business excellence models, best practice,

and benchmarking are fundamental to the success of the models as tools of

continuous improvement.
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