Contact: Jan Kosko, janice.kosko@nist.gov
FOR IMMEDIATE RELEASE: NIST 97-04
Feb. 10, 1997
Contact: Jan Kosko ONE MORE TIME: LATEST
(301) 975-2767 NIST STOCK STUDY SHOWS
janice.kosko@nist.gov QUALITY PAYS
Although you won't hear it quoted on the nightly business news or
find it listed in the financial section of your newspaper, the "Baldrige
Index" is a winner, outperforming the Standard & Poor's 500 for the
third year in a row, according to a study released today by the Commerce
Department's National Institute of Standards and Technology.
The fictitious index is made up of winners of the Malcolm Baldrige
National Quality Award. The award is given to U.S. companies in
recognition of their achievements in quality and business performance.
"While stock market performance is only one indicator of business
success, this study demonstrates that a quality approach to running a
business can be financially profitable and can lead to increased
productivity, satisfied employees and customers, and a competitive
advantage," said Harry Hertz, director of the NIST Baldrige National
Quality Program.
In the third study of its kind, NIST "invested" a hypothetical
$1,000 in each of the five publicly traded, whole company winners of the
Baldrige Quality Award and a percentage of $1,000 in the parent
companies of nine subsidiary winners (a list of the companies is
attached). The percentage represents the number of employees the
subsidiary has as a percentage of the whole company's employee base. An
equal amount was hypothetically invested in the S&P 500 at the same
time.
The investments were tracked from the first business day in April
of the year the companies won the Baldrige Award (or the date they went
public) to Dec. 2, 1996. Adjustments were made for stock splits. Also,
if a subsidiary was sold to another company or if a company was
divested, the progress of the subunit was followed, not the original
parent company.
NIST found that the group of five whole company winners
outperformed the S&P 500 by 3.5 to 1, achieving a 380 percent return on
investment compared to a 110 percent return for the S&P 500. The group
of 16 publicly traded winners--which includes the five whole company
winners and the parent companies of winning subsidiaries--outperformed
the S&P 500 by about 3 to 1, a 325 percent return on investment compared
to a 112 percent return for the S&P 500. NIST studies in 1994 and 1995
also found that Baldrige Award winning companies outperformed the S&P
500.
NIST also conducted a similar investment study for the 48 publicly
traded companies receiving site visits as part of the Baldrige Award
application process. That group outperformed the S&P 500 by 2 to 1,
achieving a 167 percent return on invest-ment compared to an 83 percent
for the S&P 500. (Names of applicant companies are confidential.)
"While there are no guarantees for success," said Hertz, "year
after year, Baldrige award winning companies have shown that any U.S.
business, large or small, service or manufacturing, in any sector of the
economy, can use the concepts embodied in the Baldrige Award criteria to
improve the way it does business." For example:
* At ADAC Laboratories (1996 manufacturing winner), revenue per
employee has gone from $175,000 per employee to more than $325,000
per employee in the last several years. Its U.S. market share has
increased from 12 percent to 50 percent.
* In the last five years, Federal Express Corp. (1990 service winner)
has increased its operating income by 147 percent while reducing
costs per parcel (its primary indicator of efficiency) by 20
percent.
* Since winning the Baldrige Award in 1988, Globe Metallurgical Inc.
(small business winner) has increased revenues by 204 percent and
profits by 310 percent.
The Malcolm Baldrige National Quality Award was established by
Congress in 1987 to enhance U.S. competitiveness by promoting quality
awareness, recognizing quality achievements of U.S. companies and
publicizing successful performance strategies. The award is not given
for specific products or services. Since 1988, 28 companies have won
the award.
A non-regulatory agency of the Commerce Department's Technology
Administration, NIST promotes U.S. economic growth by working with
industry to develop and apply technology, measurements and standards.
NIST was selected by Congress to design and manage the Baldrige Award
program because of its role in helping U.S. companies compete, its
world-renowned expertise in quality control and assurance, and its
reputation as an impartial third party.
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A copy of the two-page study is available on the Baldrige Quality
Award's World Wide Web site at http://www.quality.nist.gov. Reporters
also can call NIST Public and Business Affairs at (301) 975-2762 to get
a copy. Others should call the NIST Baldrige Award office at (301)
975-2036 or fax a request to (301) 948-3716. News and general
information on NIST is available online at http://www.nist.gov.
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1996 Stock Study
Malcolm Baldrige National Quality Award
Whole Company Winners:
Eastman Chemical Company
Federal Express Corporation
Motorola, Inc.
Solectron Corporation
Zytec Corporation
Subunit Winners: (The sum invested was $1,000 x the % of the
parent company's employee base that the subunit
represented at the time they applied)
* Armstrong World Industries, Inc.-Building Products Operations
* AT&T Consumer Communication Services (now part of the
Consumer & Small Business Division of AT&T)
* AT&T Network Systems, Transmission Systems Business Unit (now
part of Lucent Technologies, Inc., Network Systems)
* AT&T Universal Card Services
* Cadillac Motor Car Company (subunit of General Motors)
* Corning Telecommunications Products Division
* GTE Directories Corporation
* IBM Rochester
* Texas Instruments Incorporated-Defense Systems & Electronics
* Group (now part of the Systems Group of Texas Instruments)
* Westinghouse Electric Corporation-Commercial Nuclear Fuel Division
* Xerox Corporation-Business Products & Systems
February 1997