🚀 go-pugleaf

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FYI:

The 10/93 article in BusinessWeek was based on analysis done by the
Juran Institute.  It is my opinion that the pub.'d results from this
source is suspect for two reasons: they are a quality institute
supportive of the quality movement and they do consulting work
inthe field; secondly, they are quality consultants and not
recognized as experts in analyzing financial or firm performance.

This is not meant to slam the Juran Institute.  I believe they do
fine work.  I even beleive their study.  However, I question their
methodolgy on another plane.  The study was compared against the Dow
Jones Industrial average and the S & P 500 indices.  I ask those of
you who are familiar with statitistical studies can you tell me how
these two comparisons offer a rational sampling group?  And, why
would their comparison (of the two groups) be valid?

My interpretation of the results:

Essentially, the it shows that MBNQA winners will outperform
broad based industry bundles of stock on stock prices only.  Given
the small number of MBNQA award winners I don't beleive the analysis
is particularly valid.  Also, given that typically, small firms
outperform large firms in stock price, and given that MBNQA winners
have a large composition of small firms relative to large firms
relative to the DJIA or S&P 500 this is not a valid comparison based
on sampling bias--INMYOPINION.

My suspicions arise because it is well known that firms that apply
for the MBNQA or the Deming award in Jpan often go to great lengths
to win the awards at the expense of their custoemrs and shareholders.
 There have been several executives fired here and in Japan after
winning these awards.  If the pursuit of the awards were truly
valuable these 'winners' would be lauded not hung out to dry.

The other source cited, the GAO study is even more affected by bias.
They chose firms that scored 700 or higher on the MBNQA, not winners,
and measured them on things like ROA and,.... perceptions of employee
satisfaction, customer satisfaction etc--by executives associated
with the award process.  The GAO study, while convincing and suitable
for whitewashing unsuspecting beleivers, is dangerous (if your
reputation is on the line) when used in the presence of non-believers
who are statistically enhanced.  I can't find my copy right now, but
I stopped using when I discovered its errors (after the second time).

All of this aside, you have the problem of comparing firm performance
across industries.  Which industry you are in, and the forces that
drive the industry have significantly more impact than whether or not
a quality program is intact.

One other study, which is no longer often cited that sounds more
intriguing is the PIMS study from the early eighties which went
something like:  if you had the highest perceived quality in the
industry despite market share, you earned higher profits than
competitors.  Earlier studies showed that high market share was
directly correlated with higher profits.

Anyway, so much for the bubble.  There is still an opportunity for
doing a study which compares the performacne of the firm to others
within its industry--and excludes the bias that is the principle
weakness of these other studies.










Charles Barclay                         2404 Maile Way
Dept. of MIR                            Honolulu, HI 96822
U. of Hawaii                            Fax:  808 956-2774
                                        Phone:  808 956-8545
E-mail:    barclay@busadm1.cba.hawaii.edu

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