Dr. Laksiri Fernando
Asian Tribune: The objective of a business excellence framework (BEF) in any country is not only to reward the leading ‘business’ organizations for their best practices annually through suitable Awards, but also to promote quality performances, best practices and social accountability throughout the country and in the economy. ‘Business’ here does not mean only the private sector, but it encompasses to mean all sectors including the public sector in particular.
It is the growing trend worldwide that countries without merely adopting BEF from other countries, try to develop their own frameworks suitable to the national requirements taking the international trends or more advanced frameworks into proper account.
At present Sri Lanka has two main award systems one conducted by the Sri Lanka Standard Institution (SLSI) and the other by the National Chamber of Commerce of Sri Lanka (NCCSL). While the SLSI has almost completely adopted the criteria of the United States’ Malcolm Baldrige National Quality Awards, the NCCSL has developed its own criteria giving priority to ‘business and financial performance’ in its assessment system. In this sense, the NCCSL effort can be considered commendable for its originality. But it is doubtful whether that criteria can be adopted as a generic framework for all sectors. It suits an award system mostly in the private sector.
There are five main reasons why Sri Lanka should have a comprehensive and its own business excellence framework. (1) It is evident from experience that the correlation between a business excellence framework and national economic performance is higher when the former is tailor made to the national requirements. (2) A comprehensive business excellence framework should function not only to make annual awards but also to supply a ‘generic business model’ that could be emulated by all sectors, private and public. (3) The present efforts or mechanisms in Sri Lanka are neither comprehensive nor design as a ‘generic model’ to apply in all possible sectors. (4) It is a global trend to have primarily ‘national frameworks’ nevertheless promoting global competitiveness. (5) In developing a business excellence framework, there are certain cultural traditions (Buddhist-Hindu-Islam) that needs to be taken into account. Otherwise, the ‘business excellence’ will be limited to the westernized urban elite.
Evolution of BEF
The adoption of BEF is a post second world war phenomenon and at the beginning it was not the same nomenclature that was used. The credit first goes to Japan which introduced the Deming Prize in 1951 in honor of Edward Deming, the American statistician who in fact initiated what we now call the ‘total quality management’ (TQM). In its simplest form of his idea, a business process should be in a continuous feedback loop involving at least four stages: Plan, Do, Check and Act. The Deming Prize is awarded by the Union of Japanese Scientists and Engineers (UJSE), a private organization.
The second major initiative came in America in 1987. It was a public initiative. The US Congress established the award system, and in recognition of the services of the former Secretary of Commerce, Malcolm Baldrige, it was named after him. Three major sectors were initially selected for the award: manufacturing, service and small business. Education and Health were added later. Seven characteristics that were considered important in business excellence were (1) leadership (2) strategic planning (3) consumer focus (4) measurement, analysis and knowledge management (5) workforce focus and (7) business results. Thus far Baldrige is the most advanced model suitable particularly for ‘developed’ countries. Not necessarily the mainframe but the details and itemization should be different in a developing country.
In the same year, Australia also launched its own award system. Initially called the Australian Quality Award (AQA), the name was changed in 1998 to the present, Australian Business Excellence Awards. It was based on a broader business framework called the Australian Business Excellence Framework (ABEF) consisting again seven main elements but differed from Baldrige in emphasis and interpretation.
Australia made more emphasis on ‘sustainability’ than ‘business results’ and introduced a new category of ‘people’ instead of mere ‘workforce focus.’ The main difference perhaps was based on business ideology; the former based on ‘neo-liberalism’ and the later ‘social democracy.’ Initially the quality award system was managed by the Australian Quality Council, but in 2002 the task was handed over to the Standard Australia Incorporation (SAI) with a view to marketing the framework widely within the country and outside.
Although formed in 1988, the European Foundation for Quality Management (EFQM) started its award system only in 1991. Nevertheless when it started, it enunciated a commendable model with nine criteria, five are called ‘enablers’ and the other four ‘results.’ Five enablers are the ‘leadership,’ ‘people,’ ‘policy/strategy,’ ‘partnership’ and ‘processes.’ The four targeted results are the ‘people results,’ ‘customer results,’ ‘social results’ and the ‘business results.’ Here again what is apparent is a kind of ‘social democratic’ outlook which emphasizes social results going beyond the mere business objectives. EFQM is a public initiative with private partnership. It has given much emphasis on the public sector with special emphasis on its applicability. One disadvantage of this model perhaps is its too generalized form when it comes to country applicability.
Japan took a new initiative in 1995 through the National Quality Council to institute the Japanese Quality Award (JQA) system coming very much closer to the Malcolm Baldrige model, going beyond the Deming Award. Both awards are operating quite parallel to each other today. One merit of the JQA is the emphasis given to technology in the business process. The National Quality Council, also in partnership with the Japanese Productivity Organization, promotes the application of the award framework both in the private and the public sector alike. In this sense the effort is very much closer to Australia.
The following Table 1 gives a summary comparison of the above four models with respective point allocation when it comes to the selection for awards. These points are indicative of the relative emphases given to the different criteria in their respective models.
There over 80 countries which have adopted business excellence frameworks at present. Many of the countries across regions seem to appreciate the Baldrige model for its theoretical rigor and precision in business applicability. Sri Lanka is the same. India is one leading country which has opted to follow the EFQM. There are countries in the Asia Pacific region which follows the ABEF with appreciation for its application for business solutions or development, going beyond an award system.
Sri Lankan System
Sri Lanka National Quality Awards were initiated in 1995 after Sri Lanka joined the Asian Productivity Organization. A public sector initiative, Sri Lanka Standards Institution (SLSI) is the awarding agency assisted by the National Institute for Business Management (NIBM). Formed in 1984 with its predecessor, the Bureau of Ceylon Standards (1964), the main purpose of the SLSI is to maintain standards with the objective of improving the quality of products and services throughout the economy.
For this purpose, the standard formulation, certification of products and systems, inspection activities, calibration and product testing and training are conducted. It is as a part of marketing and promotion of above services that the quality awards are conducted by the SLSI. This may also be the main weakness of the system. There is no specialized branch or section responsible for the award system or criteria.
The National Quality Awards were initiated, like in many other countries, to recognize the quality achievements of business organizations adopting, however, completely the Baldrige criteria. First confined purely to Manufacturing and Services, the SLSI recognized Education in 2004 and Health in 2006 as main sectors for awards. The non-profit sector is still not explicitly recognized. Three categories of organizations are recognized for awards as Large, Medium and Small, depending on the size. Thus the SLSI boasts covering 12 eligible sectors. The SLSI also offers three types of awards: the National Awards, Merit Awards and Commendation Certificates. This is commendable in promoting excellence among a large group of organizations. However throughout years, suitable candidates were hard to find for all of these sectors or awards.
Both the marking scheme and the award examination are conducted following more or less the Baldrige system. While there is no particular wrong in emulating Balridge as a role model, what is lacking is the development of local expertise or specialization in customization of the system into local conditions. It is also necessary to keep in mind that the Baldrige is an evolving system and each year they make changes and improvements which are apparently absent in the case of Sri Lanka.
Since 2004, the National Chamber of Commerce in Sri Lanka (NCCSL) has been awarding the National Business Excellence Awards as an “annual benchmark competition recognizing the business companies of their contribution to socio-economic development of the country whilst following exemplary business practices.” The criteria adopted by the NCCSL are different to Baldrige or the SLSI. In this sense the effort is commendable as it has developed its own criteria and priorities. For example, the NCCSL gives priority to ‘global reach’ after ‘business and financial performance.’ It has also recognized the ‘knowledge integration’ as priority.
The NCCSL also awards three main types of awards: the Gold, Silver and Bronze and many others certificates for runner-ups. Several scales of organizations are recognized even including what is called ‘extra-large.’ A large number of diverse sectors are also recognized for awards as ‘banking and finance,’ ‘construction,’ ‘gem and jewelry,’ ‘healthcare,’ ‘livestock and fisheries’ etc. What is apparent is an effort to satisfy all and sundry; for example 81 organizations are supposed to receive awards for 2011.
It is appropriate to have a comparative glance at the two systems to appreciate their strengths and weaknesses based on their different criteria and the marking systems given in the following Table 2.
A quick glance at the two systems reveals similarities and differences. It should be said that the 7 categories of the SLSI are subdivided into 19 items following Baldrige and in that sense it is comprehensive as a potential Business Excellence Framework (BEF). This is not the case in NCCSL. A major obvious weakness of the SLSI system however is its complete imitation of the Baldrige.
NCCSL on the other hand is creative and more precise in assessing the merits of business organizations also recognizing some of the requirements of economic development in the country at the present stage. A major weakness however is the overlook of some of the obvious components of business excellence such as the ‘leadership’ and ‘strategic planning.’ In this sense it is not comprehensive enough to be a potential business excellence framework in itself. Nevertheless some of the components could consist part of a useful national business excellence framework.
There is a difference between an Award System (AS) and a Business Excellence Framework (BEF). This is the main argument or proposition of this article. An award system may promote business excellence indirectly by example or through feed back. All award systems aim at this objective. However the impact is limited and reactive. The main aim of an award system as revealed by both SLSI and NCCSL is to recognize the ‘best,’ and not necessarily to promote the ‘average’ or the ‘poor.’
Sri Lanka needs a more proactive system to promote ‘business excellence’ throughout the country. Throughout the country means not only the provinces but also the different sectors. This is a requirement of development and increasing productivity. Otherwise the target of doubling the per capita income by 2016 might not be achieved. The absence of a strong and a specialized National Productivity Organization is also a weakness in Sri Lanka.
A business excellence framework should apply not only in the private sector but also in the public sector. This is one aspect of the new public management (NPM) conception. In formulating and promoting a business excellence framework both the public sector and the private sector should participate. This should be in line with the public-private partnership (PPP).
The Baldrige model emulated by the SLSI, and the NCCSL criteria for excellence awards, may supply a starting point for a new business excellence framework for Sri Lanka, but it should go beyond. There are some rich experiences in the contemporary Sri Lankan reality. One is the success of the military. Four key factors that ensured the success perhaps were the leadership, strategy, technology and ‘people.’
A business excellence framework also should take its values from its own cultural setting. This in particular means deriving business values particularly from Buddhism, Hinduism, Islam and Christianity without a particular bias to any. This is the only way to penetrate into the grassroots level and resurrect the much needed agricultural sector and the ‘businesses’ in rural areas.
A business excellence framework should be a guide to every economic effort in the community; large or small, private or public, urban or rural, profit making or social service. It should not be prescriptive or determinist however; but a guide or generic framework to business excellence with flexibility of application suitable to concrete situations or organizations.
Dr. Laksiri Fernando currently is a Visiting Scholar at the University of Sydney and wishes to thank Ravi Fernando (Standard Australia Incorporation) for highlighting the difference between an award system and a broader business excellence framework.