'Quality Progress' Introduces the Q-100; Links Quality to Financial Performance
From a financial standpoint, the effects of quality can be measured in a variety of ways, such as lower costs and higher margins. But it is harder to draw a link between quality management and its impact on the price of a company's stock.
This disconnect is a particular problem for quality professionals in today's business environment, since so much of top management has its compensation tied to Wall Street performance and since the long bull market has focused the popular imagination on investment returns.
With this issue, Quality Progress introduces a new measure of the impact of quality management on financial performance: the Q-100. This index consists of 100 of the Standard & Poor's (S&P) 500 companies selected primarily for the quality of their management systems. The index is capitalization weighted with a 5% maximum for any one company and is diversified in order to align with S&P sectors.
Robinson Capital Management, a Minnesota based money management firm, developed the Q-100 as a systematic way to evaluate management. The company uses public information to assess performance in the components of a management system identified by the Malcolm Baldrige National Quality Award model.
"We're looking for a quality management system, and we don't care what a company calls it," said Craig Robinson, president of Robinson Capital and co-chair of the Minnesota Council for Quality. "Since it's very hard to evaluate a quality management system in its entirety, we have to evaluate the pieces."
The approach, including the types of public information used to create the Q-100, is explained in a new book, Invest in the Best: How To Profit From Well-Managed Companies, by Stephen George (New York: John Wiley & Sons Inc., 2000).
For comparison purposes, the Q-100 was indexed to 100 as of Jan. 1, 2000, and stood at 101.26 as of June 30. Through the first two quarters of this year, it had gained 1.26%, compared to a drop in the S&P 500 of about 0.5% over the same period.
In other words, an investment of $10,000 in the Q-100 at the beginning of this year would have been worth $10,126 as of June 30. A similar investment in the S&P 500 would have been worth $9,957. The Q-100 strongly outperformed the S&P 500 in the first quarter but suffered a sharper drop than the S&P index in the second quarter.
QP will report performance results of the Q-100 on a quarterly basis. In addition, it will report whenever Robinson Capital adjusts the composition of the Q-100 portfolio.
Researchers Say Medical Mistakes Data Flawed
Scientists at the Indiana University School of Medicine say the 1999 Institute of Medicine (IOM) report stating that medical mistakes kill up to 98,000 hospitalized Americans each year used flawed methodology and is greatly exaggerated.
Writing in the July 5 issue of the Journal of the American Medical Association (JAMA), the researchers say the report never established that medical errors caused the deaths and failed to eliminate other risks for sick patients before drawing conclusions.
But Lucian L. Leape, M.D., of the Harvard School of Public Health, co-author of the IOM report, argues that the report not only is accurate but may actually have underestimated the extent of the problem because many errors are never record ed in the medical record and the study did not examine injuries outside of hospital settings.
Leape defended the report's research methodology, saying screening criteria eliminated extremely ill patients or those with complicated conditions.
Despite their disagreement with the IOM report, the Indiana researchers agreed with its call to understand the cause of medical errors and to develop processes to reduce error rates.
A complete copy of the JAMA article can be read at http://jama.ama-assn.org/issues/v284n1/full/jcv00006.html.
49 Organizations Apply for 2000 Baldrige Awards
A total of 49 U.S. organizations, including 14 large manufacturers, five service organizations, 11 small businesses, 11 educational and eight health care organizations submitted applications for the 2000 Malcolm Baldrige National Quality Awards. There were 52 applications in 1999.
Each of the 49 applicants received a minimum of 300 hours of review by the award's mostly private sector examiners. Organizations that passed an initial screening this summer will be visited by a team of examiners in the fall to verify application information and to clarify issues and questions. Every applicant receives an extensive feedback report highlighting strengths and opportunities for improvement.
Winners of the 2000 Baldrige Award are expected to be announced in November by President Bill Clinton. The U.S. Department of Commerce's National Institute of Standards and Technology manages the award, and ASQ provides administrative support.
For more information on the Baldrige Award, visit www.quality.nist.gov.
Best Practices Study Covers Supply Chain Relationships
A new study by Best Practices LLC highlights the practices employed by leading companies to effectively manage their supply chain relationships.
Best Practices in Supply Chain Partnership and Certification draws on secondary research and primary interviews with more than 150 companies, including Dell, Lucent and General Electric.
Among the practices highlighted are:
- Using Pareto analysis to focus attention on the top 3% of a firm's thousands of suppliers, making the most of cost cutting efforts.
- Transferring many functions, such as identification, selection, orders, invoicing and payments, to suppliers so purchasing executives can spend 80% of their time building stronger relationships with partners.
- Maintaining several levels of certification, each with increasingly stringent quality measures, and allowing certified suppliers to benefit from reduced inspections and preferred procurement status.
For more information on the Best Practices report, call 919-403-0251, ext. 230, or e-mail email@example.com.
IIA Recognizes Quality In Eight Organizations
The Institute of Internal Auditors (IIA) recognized the work of eight internal auditing departments with its Commitment to Quality Improvement Award. The award is based on professional excellence, quality of service and professional outreach.
Those honored are: * Asea Brown Boveri Inc. * Bon Secours Health System. * Caterpillar Inc. * City of Austin, TX. * General Motors Audit Services. * The New York Times Co. * TXU Business Services. * USEC Inc.
GE Uses Six Sigma Process To Develop Education Services
GE Managed Service Solutions, a business unit of GE Capital IT Solutions (GECITS) used General Electric's Six Sigma approach to create its new education services training for information technology (IT) professionals.
GECITS also underwent an extensive Six Sigma process to select its vendor partner training providers. The education services will include both business to business services and a direct to consumer e-commerce connection.
GE was among the 12 companies recently profiled by Forbes magazine for leading the Internet revolution. Others featured in the July 24 issue included Cisco Systems, Hewlett-Packard and General Motors. Forbes also named GE CEO Jack Welch as one of 12 industry leaders who are transforming the e-business world.
But Forbes isn't the only major business magazine to have featured GE recently. In its June 26 issue, Business Week cited GE and its use of Six Sigma as an example of the altered and improved business practices that have resulted from the U.S. quality movement.
In "The Web of Quality," (June 26, p. 172B), Business Week said, "... many American companies have matched Japan's vaunted quality benchmarks." Quality consultant Joseph A. DeFeo, CEO of the Juran Institute Inc., was quoted as saying, "Concerns about quality have by no means disappeared. Rather, at most successful companies, quality has become internalized."
IPEP and RAB Create Environmental Certification Alliance Program
The Institute of Professional Environmental Practice (IPEP) and the Registrar Accreditation Board (RAB) established a new strategic alliance between their environmental certification programs.
IPEP offers two credentials: qualified environmental professional (QEP) and environmental professional intern (EPI). RAB operates a certification program for ISO 14001 environmental management systems (EMS) auditors.
Under the RAB program, candidates may qualify for one of four certification grades: EMS lead auditor, EMS auditor, environmental auditor or environmental provisional auditor.
Under the alliance, RAB certified auditors receive a 50% discount on the QEP application and exam fees until September 1, 2001. Conversely, individuals who have earned the QEP certification are eligible for a 20% discount on the initial application fee for RAB certification. In addition, QEP members will automatically receive credit for the work experience and education elements required for initial RAB auditor certification.
The IPEP program is supported by seven participating organizations: the Air & Waste Management Association, American Academy of Environmental Engineers, American Industrial Hygiene Association, National Association for Environmental Management, National Association of Environmental Professionals, Solid Waste Association of North America and Water Environment Federation.
Clarion Technologies Inc. received the first North American certification to ISO/TS 16949 for its plant in Greenville, MI. ISO/TS 16949, developed by the International Automotive Task Force (IATF), is a pilot program of international quality standards for automotive suppliers.
Quality Measurement Control Inc. (QMC) of Auburn Hills, MI, received the 2000 Small Business Technology Product Innovation of the Year Award from the Small Business Association of Michigan. QMC's CM4D Data Management and Analysis Software, currently used as an enterprise-wide application by automotive, heavy truck and aerospace original equipment manufacturers and Tier 1 and 2 suppliers, was cited.
DaimlerChrysler Corp. has taken an equity position in Powerway Inc., an Indiana-polis based software company specializing in Web enabled quality planning software technology. The automaker says it will work closely with Powerway to create software to automate and integrate a Web enabled advanced product quality planning process while streamlining the production part approval process online.
Spartan Motors announced development and institution of a quality audit to improve the motor home body-to-chassis interface process. Spartan Quality 2000, or SQ2000, focuses on helping original equipment manufacturers improve quality through monthly audits.
WallStreetOffshore.com, a securities brokerage firm, says it's the first North American company to receive Clicksure's certification for online quality. Clicksure's quality assurance certification program for e-commerce was developed to comply with ISO (International Organization for Standardization)/IEC (International Electrotech nical Commission) Guide 62.
The National Institute of Standards and Technology (NIST) has a new noise temperature calibration system for manufacturers of electronic components and systems used in the 4 to 12 gigahertz range, such as telecommunications gear, satellite receivers and amplifiers, cellular phones and radar equipment. For a description of the new system, e-mail firstname.lastname@example.org, mentioning Technical Note 1518.
NIST also says Congress included a $500,000 grant to the American National Standards Institute (ANSI) in NIST's budget for the current fiscal year. ANSI coordinates the U.S. voluntary consensus standards system, advances U.S. interests in international standardization and conformity assessment technical areas, and is an official U.S. member of the International Organization for Standardization, known as ISO.