Total Quality Management and the Malcolm Baldrige National Quality Award: Benefits and Directions for Banking Institutions

Article excerpt

Abstract

Among the philosophies and initiatives for a renaissance in quality across the business and public sectors, Total Quality Management (TQM) and the Malcolm Baldrige National Quality Award have been outstanding in terms of their design and appeal. The objective of this paper is to discuss the concepts of TQM and the Baldrige Award criteria, explicating their applicability and the value of combining the two for the benefit of banks and other financial institutions. We delineate the areas of potential benefit for an institution adopting TQM and seriously pursuing the Baldrige Award, or at least setting into motion a process of change as per the Baldrige guidelines. The benefits to such institutions include economic benefits, improved compliance with legal and ethical guidelines, and improved training and retention of employees and reputational benefits. To demonstrate the value of our thesis, we discuss the case of Los Alamos National Bank, the only bank to have won the Baldrige Award.

Introduction

Over the past thirty years, the role of quality as an all-encompassing organizational value and an important antecedent of organizational performance has been increasingly stressed. With the recognition of serious quality deficits in American organizational performance, especially in comparison with the Japanese, prognostications were made of dire consequences of the neglect of quality for American competitiveness. Thought leaders in industry, academe and government called for nothing short of a renaissance in quality in America. Consequently, the recognition of quality as a vital need led to the rise of quality management (Lee, Zuckweiler and Trim, 2006)

The early 1980s witnessed the emergence of a number of streams of research and writing intended to support, inspire and help direct this renaissance. Prominent among these streams of thought and practice was Total Quality Management (TQM). The idea of TQM has not only survived as a viable approach to improving quality in organizations, but has also spawned a substantial body of research and practice. One especially significant quality initiative that grew out of the TQM movement was the Malcolm Baldrige National Quality Award (MBNQA), instituted and sponsored by the United States Department of Commerce and presently administered by the National Institute for Standards and Technology. The objective of this paper is to identify the applicability and role of TQM in the banking and financial services industry, and to delineate the potential benefits of aspiring for the MBNQA. We begin with a discussion of TQM concepts and MBNQA Award criteria, followed by a discussion of the applicability and value of combining TQM efforts with the MBNQA criteria. To demonstrate the value of our thesis, we discuss the case of Los Alamos National Bank, the only bank to have won the Baldrige Award.

The TQM Approach

The philosophical roots of TQM are generally attributed to Edward De m ing' s 14 points and Carl Juran's 10 steps. Nomenclature and semantics may vary, but TQM can broadly be defined as "a philosophy, a set of tools, and a process whose output yields customer satisfaction and continuous improvement" (Hradesky, 1995). While the roots of TQM are in statistical quality control and conformance to specifications, the adoption of TQM can not only improve conformance but can also positively affect other dimensions of quality (Flynn, Schroeder and Sakakibara, 1995). TQM has been recognized as the preeminent route to quality improvement (Ishikawa, 1985), and it has been found to have a positive link with organizational performance (U.S. General Accounting Office, 1991).

An organization may initiate a TQM program for a variety of reasons, among which may be a desire for continuous improvement, superior use of resources, a desire for organizational change or a goal of improving operational efficiency and decision-making. Implementing the philosophy of TQM and utilizing its tools and process calls for a comprehensive commitment of effort, an understanding of customer requirements, a change in organizational culture, the use of statistical techniques, and wide-ranging coordination and integration among all these efforts. …

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.