COMPANIES SEEK BALANCED VALUE TO ENSURE LONG-TERM SUSTAINABILITY

The search to create balanced value for the different stakeholders: customers, shareholders, employees, community, environment, among others, has been constant and this has been reflected over time with changes in the context. According to Malcolm Baldrige, your organization must choose and analyze the results that help it generate value and balance it for its main stakeholders (See Figure #1).

To ensure long-term sustainability, Deschamps and Nayak researched the impact of the balance of value for different stakeholders in 1995. In this sense, they posed the right question: "Why are we in business?"? Deschamps and Nayak indicate that "In a study conducted by Professor Kotter of Harvard Business School and consultant Heskett (1992), they tracked the characteristics and performance of 200 companies in creating shareholder value over an 11-year period." Based on this study, Deschamps and Nayak chose three types of companies: low, good and outstanding. They then asked themselves the question, "Why did these companies perform differently?" Part of the answer lies in how much these companies tried to "satisfy their different stakeholder groups" over the 11-year period of the study. The data show for these three types of companies, that the balance or balance of their priorities and efforts to try to achieve full satisfaction of the requirements of the different stakeholders. Highlighting the crucial importance of the "balance of value" for long-term sustainability.

In this regard, Deschamps and Nayak observed that in "underperforming" firms, owners score reasonably high on management's attention, but customers and employees do not. The resulting imbalance makes it difficult for owners to be satisfied. "Middle-performing" companies value owners almost as much as low-performing ones, but they are much more focused on customers and employees. Satisfaction levels are higher and the balance is better. The study by Deschamps and Nayak demonstrated something that was empirically known, that it is no coincidence that the "return on performance" for shareholders is much higher in companies that better balance the value created for the different stakeholders, ensuring their long-term sustainability.

For this reason, the Malcolm Baldrige criterion in the category of results includes not only financial results, but also other internal results such as: results of operations, products and processes, and results of the workforce and leaders, among others; but also, external results such as: results of customer satisfaction and commitment, social performance, care of resources, among others; that is, balance internal results with the external results of the organization, in order to ensure long-term sustainability.

Since its inception, the U.S. "Malcolm Baldrige National Quality Award," which was created by Public Law 100-107, enacted on August 20, 1987, led to the creation of a new public-private partnership. The main support for the program comes from the Malcolm Baldrige National Quality Award Foundation, established in 1988, which since that year includes among its criteria, the evaluation of balanced results of organizations in order to ensure that they seek balanced value and long-term sustainability.

Today's context demands new capabilities for organizations, such as: community development, operational sustainability, care of natural resources, resilience, innovation, technology, among other key issues.

Thus, Performance Scorecards have evolved to include all these new challenges and demands of the external context, promoting new strategic and measurement models that are increasingly comprehensive, which seek to meet the changing demands of the context, and Malcolm Baldrige is the one who best interprets these changes.

BALDRIGE'S NEW PERFORMANCE SCORECARD

Performance Scorecards are based on three basic concepts.

• The Why: the winning aspiration, i.e.: (1) the vision and purpose of the organization.
• The What: the strategic perspectives or drivers of competitiveness and results, i.e.: (2) Balance Perspectives, Key Result Areas (KRAs); and Strategic Objectives and KPRs (Key Performance Results).
• The How: The initiatives and predictive measurements, which ensure deployment throughout the organization, i.e.: (4) Projects and Portfolios and Action Plans; and (5) KPIs (Key Performance Indicators)

In this sense, the Malcolm Baldrige 2024-25 performance scorecard includes 8 strategic perspectives (See Figure #2).

In this sense, since its inception, Malcolm Baldrige has sought to identify the critical components of high organizational performance, through an intensive search to identify the drivers of performance. That is why the number of categories and subcategories has been reduced from 42 in 1988 to 17 in 2019 to 8 in 2024-25. These 8 balance sheet categories of the 2024-25 performance scorecard, reflecting a better understanding and focus on the critical components of an organizational performance management system, allows for an even greater focus on the "key drivers" of competitiveness and balanced outcomes that ensure its long-term sustainability, are deployed across 28 KRAs (Key Results Areas):

(1) LEADERSHIP AND GOVERNANCE

1. Effectiveness of senior management engagement and participation

2. Effectiveness of senior management engagement and communication by key segments of the workforce, customers and stakeholders

3. Governance leadership and accountability

4. Complaints and Grievances / Includes those related to safety, the Equal Employment Opportunity Commission (EEOC), and ethics

(2) STRATEGY

5. Compliance with your action plans

6. Impact on the achievement of strategic objectives and goals

7. Achieving Workforce Plans / Includes Capacity and Capability

(3) OPERATIONS

8. Effectiveness and efficiency of your key processes

9. Performance of your key products, services, and/or programs

10. Performance of the key components of your supply network

11. Cybersecurity effectiveness

Here in this perspective, it is necessary to add innovation measurements such as: planning and resources; cycle time and efficiency of innovation processes, projects and portfolio; and measurements of customer value and market and financial impact of projects and the innovation portfolio. (See ISO 56008: Operational Measurements of Innovation).

(4) OPERATIONAL CONTINUITY

12. Effectiveness of your risk management plan/ Includes (a) number of risks identified versus number of risks mitigated; (b) cost of losses; and (c) cost savings from avoided risks and mitigated risks

13. Testing Your Business Continuity Plan

14. Testing Emergency Preparedness Plans

(5) EMPLOYEES

15. Turnover, retention, and absenteeism

16. Workforce satisfaction and dissatisfaction

17. Workforce engagement

18. Workforce and Leadership Development

19. Significant Occupational Safety and Health Incidents/ Includes Occupational Safety and Health Administration (OSHA) Complaints

20. Additional occupational health and safety indicators/ Includes results of safety audits, accident monitoring

(6) CUSTOMERS AND MARKETS

21. Market Size and Market Share/ Includes by Business Unit or Product/Service, as Applicable

22. Customer loyalty/ Includes the likelihood that they will recommend your organization, by key customer segments

23. Customer Complaints/ Includes by Key Customer Segments, if Available

24. Customer satisfaction and dissatisfaction/ Includes by key customer segments, if available

(7) COMMUNITY DEVELOPMENT

25. Interaction and Developing Relationships with Key Communities/ Includes (a) the amount and type of interaction, (b) the frequency of each type of interaction (how often the interaction occurs), and (c) the duration of the interaction.

26. Social contributions / Includes: reduction of energy consumption; use of renewable energy resources and recycled water; reduction of their carbon footprint; reduction and use of waste; alternative approaches to resource conservation (e.g., increased virtual meetings); global use of smart working practices; and donations to promote housing, health and food security.

(8) FINANCE

27. Financial viability/ Includes, for example: liquidity, days of cash on hand/reserves, credit or bond rating, etc.

28. Financial performance/ includes, for example: revenues, operating margin, budget variance: by units of the organization, as applicable.

CONCLUSIONS

The Malcolm Baldrige Performance Scorecard is always the best of the performance measurement systems, since both NIST, the Malcolm Baldrige Foundation and the award winners, conduct research and analysis of the variables that best predict the competitiveness, results and sustainability of the Organization, so following the 8 perspectives and 28 RCAs of the Baldrige 2024-25 is the best way to understand the variables that in the end,? they provide organizations with competitive advantage, results, and sustainability.

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?ABOUT THE AUTHOR - PROF. áLVARO REYNOSO:

• He is currently CEO of the company PCAinnovation, which operates strategy, data, innovation and performance excellence projects in Latin America.
• He is Global Director of IMSP (Innovation Management System Professionals) of the United States.
• He is president of the Guatemalan mirror team for the design of the new standards ISO56000 Innovation Management System (IMS).
• He is a member of the global design teams of the ISO56001 (Innovation Management System), ISO56008 (Operational Measurements of Innovation) and 560009 (Application Cases of Operational Innovation Measurement Systems) standards.
• He is currently one of the 8 world experts, members of the CAG (Chaiman Advisory Group) who advise ISO56000 worldwide.
• In 2020 he was part of the PCAinnovation team that won the national innovation award for applications in augmented and mixed reality.
• Since 2022, as external director, he has been part of the InnovaHub team of the Guatemalan sugar agribusiness, which won the BIDinvest award as a Success Story in digitalization and agricultural innovation at the level of all crops throughout Latin America.
• He was a 20-year Professor of the MBA programs at Texas A&M and is now a Professor of Innovation Management Systems in several Business Schools throughout Latin America.
• He wrote the trilogy of books on Strategic Management System together with Professor Antonio Kovacevic, entitled: "The Diamond of Organizational Excellence": 1st Edition (Editorial Santillana de Chile 2.009); 2nd Edition (Editorial Cengage Learning of Mexico and Chile 2.013) and in 2024 they published the 3rd Edition of the "Diamond of Organizational Excellence -in a world of Agility, Change and Disruption" (Editorial Contenidos Digitales de Colombia, 2024).