The EFQM Excellence Model

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The EFQM Excellence Model
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The EFQM Excellence Model

• 1. Leadership
• 1a Leaders develop the mission, vision and values
  and are role models of a culture of Excellence
• 1b Leaders are personally involved in ensuring
  the organisations management system is
  developed, implemented and continuously improved
• 1c Leaders are involved with customers, partners
  and representatives of society
• 1d Leaders motivate, support and recognise the
  organisations people

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The EFQM Excellence Model

• 2. Policy Strategy
• 2a Policy and Strategy are based on the present
  and future needs of stakeholders
• 2b Policy and Strategy are based on information
  from performance measurement, research, learning
  and creativity related activities
• 2c Policy and Strategy are developed, reviewed
  and updated
• 2d Policy and Strategy are deployed through a
  framework of key processes
• 2e Policy and Strategy are communicated and
  implemented

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The EFQM Excellence Model

• 3. People
• 3a People resources are planned, managed and
  improved
• 3b Peoples knowledge and competencies are
  identified, developed and sustained
• 3c People are involved and empowered
• 3d People and the organisation have a dialogue
• 3e People are rewarded, recognised and cared for
• 4. Partnerships Resources
• 4a External partnerships are managed
• 4b Finances are managed
• 4c Buildings, equipment and materials are managed
• 4d Technology is managed
• 4e Information and knowledge are managed

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The EFQM Excellence Model

• 5. Processes
• 5a Processes are systematically designed and
  managed
• 5b Processes are improved, as needed, using
  innovation in order to fully satisfy and generate
  increasing value for customers and other
  stakeholders
• 5c Products and Services are designed and
  developed based on customer needs and
  expectations
• 5d Products and Services are produced, delivered
  and serviced
• 5e Customer relationships are managed and
  enhanced
• 6. Customer Results
• 6a Perception Measures
• 6b Performance Indicators

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The EFQM Excellence Model

• 7. People Results
• 7a Perception Measures
• 7bPerformance Indicators
• 8. Society Results
• 8a Perception Measures
• 8bPerformance Indicators
• 9. Key Performance Results
• 9a Key Performance Outcomes
• 9bKey Performance Indicators

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The EFQM Excellence Model

• Introduced in 1992
• Reflects 8 fundamental concepts
• Results Orientation
• Customer Focus
• Leadership Constancy of Purpose
• Management by Processes Facts
• Development Involvement
• Continuous Learning, Innovation Improvement
• Partnership Development
• Public Responsibility

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The EFQM Excellence Model

• Thought to be a key framework in four ways
• Development of vision and goals for the future
• Identification and understanding of the systemic
  nature of the business, the key linkages and
  cause and effect relationships
• Forms the basis for The European Quality Award
• A diagnostic tool to assess the health of an
  organisation and to generate realistic business
  plans as a part of the process
• The fourth use is known as self-assessment

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The EFQM Excellence Model

• The most popular tool for self-assessment in
  Europe
• Used by app. 9 of Danish private/public
  companies
• What is self-assessment?
• Self-Assessment is a comprehensive, systematic
  and regular review of an organisation's
  activities and results referenced against the
  EFQM Excellence Model .
• Allows the organisation to discern clearly its
  strengths and areas in which improvements can be
  made and culminates in planned improvement
  actions which are then monitored for progress
• Causality is key to the fourth (and second) use

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The EFQM Excellence Model

• Causal relationship between these eight
  fundamental concepts is assumed
• This relationship must be reflected in the model
  as a causal relationship between the enabler and
  the result criteria.
• Proposed causality
• Excellent results with respect to Performance,
  Customers, People and Society are achieved
  through Leadership, driving Policy Strategy
  People, Partnerships Resources and Processes.

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Problems

• Knowledge about the relationships between
  individual criterions
• for instance
• employee results and customer results
• customer results and key performance results
• Very little factual knowledge about the total
  causal structure of the model
• Very little factual knowledge about the
  criterion weights
• The result is a model with a questionable
  usability as a self-assessment tool

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From Enablers to People Results

• Excellent People Results is the prerequisite for
  business success
• Konosuke Matushita
• People before products
• We make people. We also make electrical
  appliances, but first we make people
• The causal link between enablers and People
  Results must be based on the theory of human
  motivation
• One of the most validated frameworks for this is
  The Work Design Model by Hackman Oldham

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From Enablers to People Results


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From Enablers to People Results
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What affects the Bottom Line?

• Link from People Results to Key Performance
  Results
• supported by the ACSI model and a Danish HRM
  survey
• Link from Customer Results to Key Performance
  Results
• supported by the ACSI model as well as other
  research (for instance Kristensen, 1997 Eklöf
  et. al., 1999)
• Link from Society Results to Customer Results
• supported by the ACSI model, the ECSI model as
  well as environmental management theory

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What affects the Bottom Line?

• Link from Processes to Society Results
• supported by environmental management theory
• Link from Partnerships Resources to Society
  Results
• supported by environmental management theory
• Link from Processes to Customer Results
• supported by the ECSI model
• Link from People Results to Customer Results
• supported by the ECSI model

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Suggested Causal Relationships
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Sampling

• Simple random sampling from the database
  Købmandsstandens Oplysningsbureau
• Criterion at least 20 employees
• Assessment carried out by the CEO of the company
  on an 11 point rating scale
• No. of answers 756 covering app. 4,5 of the
  total workforce in Denmark
• 45 statements covering The EFQM Excellence Model
• 6 statements covering demographics

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Excellence Questionnaire

• Management
• The company has established a programme (vision,
  mission) for the development of the organisation.
• Policy Strategy
• The targets for the financial and non-financial
  results of the organisation have been determined.
• People
• A job and personal profile is determined for all
  employees in accordance with the policy and
  strategy chosen.
• Partnerships Resources
• The cooperation with external business associates
  (e.g. consultants, suppliers etc.) is currently
  being evaluated.
• Processes
• The processes decisive for the success of the
  organisation have been identified and described.

• Customer Results
• The conditions creating customer/user
  satisfaction have been defined.
• People Results
• The conditions creating employee satisfaction
  have been defined.
• Society Results
• The organisation is systematically working on
  reducing the consumption of resources.
• Key Performance Results
• The results of the organisation have improved
  during recent years.

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LISREL Statistics

• Goodness of fit measures for the fitted LISREL
  model

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Empirical Excellence Model
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The Excellence Diamond
People
Management
Results
Systems
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The Excellence Diamond
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Conclusion

• More research is needed on
• Simplification of The EFQM Excellence Model
• The criterion weights of The EFQM Excellence
  Model
• The connection between The EFQM Excellence Model
  and other holistic models such as The Malcolm
  Baldridge National Quality Award or The Balanced
  Scorecard
• The use of quantitative data in the
  self-assessment process

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The EFQM Excellence Model
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The EFQM Excellence Model

• Why weights?
• Awards
• Weights are useful if used in the right way and
  at the right time in the self-assessment process
• When Weights?
• Awards
• If the organisation has scored each criterion and
  wish to combine these scores into an overall
  score
• Can be incorporated into the improvement planning
  process of the organisation
• Can be used by top management to express the
  organisations improvement priorities

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The EFQM Excellence Model

• What weights?
• EFQM
• Weights based on qualitative data
• Weights based on quantitative data

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EQA applicant scores 1992-93
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EQA applicant scores 1992-93
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EQA applicant scores 1992-93
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EQA applicant scores 1992-93
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EQA applicant scores 1992-93
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EQA applicant scores 1992-93
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EQA applicant scores 1992-93
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EQA applicant scores 1992-93
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EQA applicant scores 1992-93
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Sampling

• Simple random sampling from the database
  Købmandsstandens Oplysningsbureau
• Criterion at least 20 employees
• Assessment carried out by the CEO of the company
  on an 11 point rating scale
• 45 statements covering The EFQM Excellence Model
• 6 statements covering demographics
• No. of answers
• 1998 app. 300
• 1999 app. 750
• 2000 app. 750
• 2001 app. 700

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Excellence Questionnaire

• Management
• The company has established a programme (vision,
  mission) for the development of the organisation
• Policy Strategy
• The targets for the financial and non-financial
  results of the organisation have been determined
• People
• A job and personal profile is determined for all
  employees in accordance with the policy and
  strategy chosen
• Partnerships Resources
• The cooperation with external business associates
  (e.g. consultants, suppliers etc.) is currently
  being evaluated
• Processes
• The processes decisive for the success of the
  organisation have been identified and described

• Customer Results
• The conditions creating customer/user
  satisfaction have been defined
• People Results
• The conditions creating employee satisfaction
  have been defined
• Society Results
• The organisation is systematically working on
  reducing the consumption of resources
• Key Performance Results
• The results of the organisation have improved
  during recent years

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Methodology

• Questions aggregated to 9 variables - one for
  each criterion
• From the original sample for each year 5000 new
  samples are drawn with replacement
• On each a confirmatory factor analysis (CFA) with
  one latent variable is performed
• This is followed by factor scores regression
• Provides 5000 estimates per year for the impact
  that each criterion has on the latent variable
  Excellence

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CFA Model for Excellence
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Empirical Weights

• The overall allocation of weights between
  Enablers and Results is not 50/50
• If the weight structure is to reflect the way in
  which Danish companies are working in 2001 the
  enabler block of The EFQM Excellence Model should
  weigh approximately 70 and the result block 30
• Excellent results are not created by focusing on
  the result criteria according to Danish companies

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Empirical Weights

• Equal weighting of Leadership, Policy
  Strategy and People cannot be rejected in any
  of the four year included in the study
• The empirical weights for these three criteria is
  different from the official weights in 2001
• The mean for Leadership and People seems to
  be quite stable over the years
• Policy Strategy seems to be on an
  up going trend since 1999

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Empirical Weights

• The empirical weight for Partnerships
  Resources is significantly above the official
  weight
• The official 140 point weight for Processes is
  included in the confidence interval 
• It can not be rejected that Danish companies
  would allocate the same weight to all the enabler
  criteria
• The empirical weight for Customer Results is
  the one that is furthest away from the official
  mark set by EFQM

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Empirical Weights

• A lot has happened to People Results
• In 1998 and 1999 the official EFQM 90 weight is
  below the lower confidence limit
• In 2000 and 2001 the empirical weight of People
  Results is significantly lower than in 1998 and
  1999
• In 2001 the official weight is above the upper
  confidence limit  
• Upward trend in the weights allocated to Society
  Results  
• Key Performance Results displays a slight
  downward trend very far from the official 150
  point weight applied by EFQM
• The empirical weight allocated to Key
  Performance Results is significantly lower
  than most of the other criteria from The
  EFQM Excellence Model

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Empirical Excellence Model 2001
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Private vs. Public 2001

• Private companies more focused on Policy
  Strategy
• Trend towards higher focus on human factors in
  the public sector
• Trend towards higher focus on Key Performance
  Results in the public sector
• Trend towards higher result orientation in
  the public sector

Private - Public
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Size Effect
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Industry Effect
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Ownership Effect
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Enabler-Result Ratio
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Conclusion

• Danish companies do not perceive the enabler
  block and the result block as being equally
  important
• The study also revealed that Danish companies are
  unfocused within the enabler block in all four
  years
• The Empirical Excellence Model for 2001 is not in
  accordance with the results from the previous
  years
• The criterion weights of The EFQM Excellence
  Model are not stable and generic quantities that
  can be applied uniformly across time
• Future research
• widening the scope of the study to include such
  factors as
• country/culture
• industry
• size
• ownership structure
• The conclusion may very well be that using
  generic criterion weights to compare companies
  from different demographical settings is
  arbitrary

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The use of holistic models

• In 2000 75,6 of companies with more than 200
  employees use a holistic model

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The use of holistic reporting systems

• Among companies with more than 200 employees that
  use a holistic model 73,5 is using a formal
  approach in 2000 (balanced scorecard, excellence
  model or shareholder value concept)

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Different approaches in Denmark 2001
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The choice of model

• The balanced scorecard seems to have won the
  battle but why?

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Financial results and management models
Estimated marginal means for financial results
measured in index terms
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Financial effect (all companies)
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Financial effect (lt50 employees)
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Conclusion

• The penetration of new reporting systems has been
  increasing in Denmark since 1998
• Clear bottom-line effect from using holistic
  reporting systems
• The balanced scorecard vs. the excellence model
• The balanced scorecard is more popular than the
  excellence model and the popularity gap is
  increasing
• The balanced scorecard has a financial effect for
  both small and large companies
• The excellence model has only got a financial
  effect for large companies
• The complexity of the excellence model is thought
  to be one of the main reasons
• There is a need to rethink the excellence model
  especially in relation to small and medium sized
  companies