Issue 7, Sunday February 27th, 2000

Sitting through a fascinating boardroom presentation while visiting 1998 Baldrige winner Boeing Airlift and Tanker Programs at Long Beach, California, I heard someone say 'Leadership in this organisation is a contact sport.'

The phrase stuck in my head. I've used it a lot since. I thought I knew what the speaker meant, but recently decided I'd find out. Turns out it was said by John Vinyard, senior partner at Vinyard Management Group and one of A&TP's 'Baldrige' consultants, who tells me that “What I mean by this is that you can stay in your office and push paper and 'manage' an organization, but if you are leading people, you need to be in touch with them. That means go to their work area, and understand their barriers and concerns.”

That's pretty much what I've used the quote to mean, but I also use it to lead into discussions about the difference between heroic leadership (of the Stormin Norman variety) and the distributed, often team-centred, workplace leadership that characterises Baldrige winning organisations. Leadership as a 'contact sport' in those organisations means rubbing shoulders, it means that everyone can be a leader, and that everyone, one way or another, is encouraged to show a bit of leadership.

If you're not familiar with it, Boeing A&TP's leadership system is a model worth serious study (see the exhibit, and the leadership materialfor the detail of the relevant Baldrige criteria, and what they mean) – as Rufus White, A&TP's now retired director of planning and integration said during that same visit to Long Beach ''Leadership System' may be gone from the criteria, but [Baldrige National Quality Program Director] Harry Hertz will put it back in when he sees our Quest presentation!' He hasn't, not yet anyway, but watch the criteria re-write for the year 2001?

“Leadership” is one of our abiding interests here at BaldrigePlus. If you find it interesting, a web search for “leadership” (on Google for example) will yield lots of diverting sites. Here's one of the more interesting.

Quality Function Deployment II
Robert Hunt's paper on QFD got an 'in passing' mention in Newsletter 6, and he's responded to say “thanks for including the reference to my paper.”

“For your information,” he continued, “there are a number of books in the US on various strategic QFD methodologies. Bill Barnard published one called Customer Integrated Decision Making in about 1995, and Anthony Ulwick has just recently published another on CD-MAP (Customer Driven - Mission Achievement Process).

“I included a CD-MAP roadmap in my paper. Both of these books are listed on … you might suggest that your readers have a look at these. Both authors have carried out quite a number of assignments for both large and smaller enterprises.

“Thanks for mentioning the QFD Institute,” Robert said. “There is also an International Council for QFD, and they are running the 6th International QFD Symposium at Novi near Detroit in Michigan in early June. As well as papers there are pre-conference workshops for beginners and people with more advanced experience. The URL of the QDF Institute is

Robert's address and institutional references are: Dr. Robert A. Hunt BE (Chemical Engineering), MEngSc (Operations Research), PhD (Macquarie). Director, Centre for Management Innovation and Technology (CMIT), Macquarie Graduate School of Management, Macquarie University, NSW  2109  Australia. Phone: 61-2-9850 9627, Fax 61-2-9850 9019, email address:, Personal profile: CMIT web site:

Robert finished by saying “Please check for information on the World Innovation and Strategy Conference incorporating the 4th International Symposium on Quality Function Deployment that was held in Sydney from 2 - 5 August 1998.  If you would like a copy of the Conference Proceedings (2 volumes) please send your request to The investment is $150 plus postage.”

Six sigma II
Our introduction to six sigma in Newsletter 6 has stirred a few people into action. Steven Prevette, an ASQ certified quality engineer for ESH Planning and Performance at Fluor Hanford, A Fluor Global Services Company (who's first response was “Gee, you love to find topics that push my buttons”) sums up what seems to be a significant worry. Steve says “The concern I have with six sigma policy is the following:

“The write-ups on six sigma refer to sigma as a defect level. For example, three sigma is 3 in 1000 failure rate, six sigma is 2 parts per billion.” These numbers are from a 'normal' distribution table, says Steve, but in real life not everything fits the normal (bell shaped) curve. 

“Skewed and discontinuous distributions can have much higher 'failure rates' at the same sigma level. It is the Tchebychev Inequality that should be used … which states that no more than one over n-squared of the data will be farther than n standard deviations from the average. Thus, the 'failure rate' at 6 sigma is one over six squared, or 1/36th.

“The six sigma folks throw in a '1.5 sigma shift.'  They claim that a process average can shift by 1.5 sigma without being detected on a control chart,” said Steve, noting that when questioned about this the usual response is ridicule, or something like 'pay thousands of dollars and take our course, and then you will know.' The question is not whether a process will drift or not, but how long it will be until a control chart detects it, he says.

Six sigma uses numerical targets as stretch goals. Steve notes that people who follow Deming's teachings believe that numerical targets are a no-no. That's a clear dilemma – the six sigma folks see their use of targets as a benefit. Stanley Marash said in his presentation at the recent international quality conference in Sydney (see Newsletter 5) “The number represented by six sigma (3.4 defects per million) is so small that it is perceived as 'virtual perfection.' The fact that it is not perfection allows people to buy into six sigma, intellectually. They will probably be willing to strive for three parts per million as a long term goal … because the numbers are finite.” Either Marash has not read any Deming, he hasn't understood it, or he's dismissed it as insignificant.

This may be getting into ASQ politics, but Steve also notes that “The partnership of American Society for Quality and Mikel Harry's Six Sigma efforts has been controversial within ASQ membership. In my opinion … the current ASQ 'partnership' … is in conflict with Policy G-41 … 'ASQ does not endorse nor approve products, events, or services of others. No such representations should be made at any time either in promotional literature, correspondence, and/or conversation'. The six sigma ad on page 9 of the October 1999 Quality Progress appears to me to violate this clause. 'The Six Sigma Academy/ASQ Alliance – Proven Breakthrough Results' sure sounds like an endorsement to me,” says Steve.

Maybe there's more to come on this subject. It may seem a bit obscure to some readers, but if six sigma is 'the next big thing' in the quality world, then we all need to be up with the play, right? Oh, and by the way, if you were wondering where this fits into the Baldrige criteria, look at category 6, Product and Service Processes. Worth 55 points out of 1,000. Kind of puts it in perspective, eh?

The stockholder value of quality awards
It's an article of faith in the performance excellence/quality award community that 'Baldrige' companies outperform the rest of the market – that quality pays. We lead on our welcome page with a statement to that effect. But is it true? The most compelling evidence so far has come from work done by KB Hendricks and VR Singhal at the Georgia Institute of Technology, and now Adams, McQueen and Seawright (Revisiting the stock price impact of quality awards, in the International Journal of Management Science, v27, 1999) have examined the question from another perspective.

Their findings? Looking at what happens to stock prices on the day that awards are announced, it's just about possible to detect a positive response (but it's rarely statistically significant – in fact only for GM and FedEx in 1990, Armstrong World Industries in 1995 and ADAC in 1996). There's no detectable effect for US State Award winners (nearly every state has a Baldrige-derived award of some sort – the Hendricks and Singhal work looked at them as well). And what effect there is has diminished with time – these days, it's insignificant.

Does that shoot holes in the 'Baldrige quality pays' argument? Well no, and Adams et al offer several reasons why not. First, the award may not be news. The market is likely to know all about the firm's Baldrige ambitions, and about the TQM philosophy that underpins it, and have already factored that into the market cap. Maybe not so much in the early days (of GM and FedEx) but certainly now, with the internet, day traders, and much better information about what underlies market value.

Second, as far as the market is concerned, the award may not matter – or worse. 'Boots and all' Baldrige may well cripple the bottom line in the short term. What's more, a purist might argue that the criteria were never intended to reward just financial success. Bringing an organisation in crisis back from the brink – using the Baldrige approach, as many eventual winners have done – may require the nerve to ride out lots of red ink, while the fundamentals are sorted out. In the 'value' market, where Baldrige winners tend to reside, that's not a good look.

Third, quality is not the differentiator it once was. Now, quality is essential, but not sufficient, for success, and for sex appeal in the market. Ho Hum, a Baldrige eh, the market presumably says, now show us what you can really do.

And as an afterthought, here's something for the stats fans - Adams et al note that one reason why an increase in value may not be detected is that the data are noisy – their model's standard deviation for 'abnormal returns' is 0.41%, meaning that the announcement of a 'Baldrige win' would need to generate a response greater than about 1% in the price of the stock to be detected statistically. Or in plain English, the day to day variation in stock prices is so great, only real big bangs stand out, and in a well-informed market place, actually making the announcement of an already anticipated win is not a big bang.

What do Adams et al conclude? Quality matters, but it will be factored into a firm's market cap, so don't expect to retire on the day your firm's Baldrige win is announced. Oh, and their approach is not a very good way to account for all that!

This newsletter goes to a pretty diverse group, many of whom are only on the list because my 'first issue' newsletter went to everyone in my email address book. It's not spam, I counseled myself, because those who'd rather can opt out. Quite a few original subscribers weren't 'quality' people at all (no offense, folks, you know what I mean), and some have clearly been a bit bemused by the experience. Most, though, have stuck with me (and lots more have since joined). One such is a neighbor who lists growing trees in marginal climates, sunspots, and global warming among a long list of retirement interests. Responding to Newsletter 6, Jolyon Manning commented:

“I am reminded of the final comment published in 'The Empty Raincoat – making sense of the future,' by Charles Handy (1994) :  'Change comes from small initiatives which work,  initiatives which, initiated,  become the fashion.  We cannot wait for great visions from great people,  for they are in short supply at the end of history. It is up to us to light our own small fires in the darkness.'

”And another quote worth quiet reflection: 'How can we recognise the shackles that tradition has laid upon us, for when we recognise them we are also able to break them'  (Franz Boas,  leading 19th century American anthropologist,  quoted by Joseph Campbell in 'The Power of Myth.'”

Jolyon is sure paying attention, isn't he! And don't those two quotes very nicely close the loop back to leadership!?