U.S.
Commerce Secretary Don Evans today announced the "Baldrige
Index" has once again outperformed the Standard &
Poor's 500. The announcement was made at a Presidential
ceremony honoring the recipients of the 2001 Malcolm Baldrige
National Quality Award--the nation's highest honor in quality
and performance excellence.
The
Baldrige Index is a fictitious stock fund made up of publicly
traded US companies that received the Malcolm Baldrige National
Quality Award between 1991 and 2000. "Even after a
tough year for the stock market, especially for technology
stocks, the Baldrige Index continues to make a terrific
showing, outperforming the Standard & Poor's 500 for
the eighth year. While performance in the stock market is
only one indicator of success, this study and others show
that businesses that seek excellence in everything they
do can achieve success in many areas, including the bottom
line," said Commerce Secretary Evans.
The
National Institute of Standards and Technology (NIST), the
Commerce Department agency that manages the Baldrige National
Quality Program, "invested" a hypothetical $1,000
in each of the whole company winners--Eastman Chemical Company
(1993 winner) and Solectron Corp. (a winner in 1991 and
1997)--and the parent companies of 18 subsidiary winners.
Another hypothetical $1,000 was invested in the S&P
500 for the same time period. The two whole company winners
outperformed the S&P 500 by almost 4.5 to 1, a 512 percent
return on investment. The group of whole company winners
plus the parent companies of subsidiary winners outperformed
the S&P 500 by about 3 to 1, achieving a 323 percent
return on investment, compared to a 110 percent return for
the S&P 500.
All
of the investments were tracked from the first business
day of the month following the announcement of award recipients
through Dec. 3, 2001. Adjustments were made for stock splits.
While
receiving a Baldrige Award or any other award is not a guarantee
of success, to win the award organizations must show continuous
and major improvements. For example, when Solectron Corp.
won the Baldrige Award in 1991, revenue was $265 million
with 1,500 employees. When they won again in 1997, revenue
was $4 billion with 18,215 employees. In 2001, Solectron's
revenue was $18 billion with 60,000 employees. In another
case, Federal Express Corp. won a Baldrige Award In 1990,
and that year the company had revenues of $7 billion, 90,000
employees, and 1.5 million shipments a day. In 2001, Federal
Express had revenues of $19.6 billion, 215,000 employees,
and 5 million shipments a day.
Other
studies also have found that organizations receiving quality
awards show long-lasting improvements. For example, Vinod
Singhal of the Georgia Institute of Technology and Kevin
Hendricks of the University of Western Ontario studied 600
publicly traded firms that have won quality awards, including
the Baldrige. The five-year study showed these firms improved
in many areas including stock price return, operating income
and sales.
The
Baldrige National Quality Program is a public-private partnership.
It was established in 1987 to improve performance in US
organizations. Awards are made to organizations that have
substantially benefited the economic or social well-being
of the United States through improvements in performance
excellence. Awards can be given in five categories: manufacturing,
service, small business, education and health care.
As a
non-regulatory agency of the US Department of Commerce's
Technology Administration, NIST develops and promotes measurements,
standards, and technology to enhance productivity, facilitate
trade, and improve the quality of life.
NOTE:
For a copy of the Baldrige Index stock study, go to www.nist.gov/public_affairs/factsheet/stockstudy.htm
or fax a request to (301) 926-1630.