Conceptual Foundations of Strategic Planning in The Malcolm Baldrige Criteria For Performance Excellence

Conceptual Foundations of Strategic Planning in the Malcolm Baldrige Criteria for Performance Excellence
MATTHEW W. FORD, UNIVERSITY OF CINCINNATI JAMES R. EVANS, UNIVERSITY OF CINCINNATI

2000, ASQ
Although the Malcolm Baldrige Criteria for Performance Excellence (CPE) have played a significant role in the practice of quality management, researchers have been slow to embrace the CPE framework. By viewing the CPE as an integrative model of organizational effectiveness that encompasses a number of cross-functional disciplines, one is led to speculate that a large body of literature relevant to the CPE framework exists. Indirectly, through their functional research, scholars from a variety of disciplines have been investigating the theoretical issues that embody the CPE. This article compares the strategic planning category of the CPE against the scholarly literature. The planning framework embedded in the CPE aligns considerably with the conceptual literature on strategic planning. These findings suggest some validity for the CPE framework, which demonstrates the translation of research into managerial practice and might inspire further research. Key words: action plans, long-range planning, strategy deployment, strategy development
The Malcolm Baldrige Criteria for Performance Excellence (CPE) are designed to help organizations enhance competitiveness through the delivery of everimproving value to customers and improvements of overall organizational performance and capabilities. The CPE serve as a basis for organizational self-assessments, as well as the basis for the Malcolm Baldrige National Quality Award. Numerous state and local agencies (Bobrowski and Bantham 1994) and other countries (Powell 1995) have adopted similar award frameworks. As such, the CPE have attracted considerable industry interest. The National Institute of Standards and Technology (NIST), which manages the National Quality Program (http://www.quality.nist.gov), reports that more than 1.5 million copies of the criteria have been disseminated since the awards inception in 1987. Many firms use the criteria as a management guide, and considerable evidence exists as to the benefits of doing so (General Accounting Office 1991; Hendricks and Singhal 1997; NIST 1997a; Wisner and Eakins 1994). The CPE are evaluated and improved annually, primarily drawing upon the collective wisdom of examiners, award winners, and other practitioners. Despite a high level of practitioner attention, theoretical and empirical research that focuses on the CPE has been minimal. Most citations have appeared in the operations-related literatures. In addition to the performance studies cited, Garvin (1991) examined the content, purpose, and content of early versions of the criteria based on detailed discussions with award examiners. Ahire, Landeros, and Golhar (1995) used a version of the Baldrige Award framework to classify extant research in quality management. Evans and Ford (1997) examined the relationships between the core values
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Conceptual Foundations of Strategic Planning in the Malcolm Baldrige Criteria

and the managerial processes that are embedded in the criteria, and Evans (1997) proposed a causal modeling approach to describe key linkages in the criteria. Baldrige Award-specific research in other scholarly disciplines has been virtually nonexistent. This is somewhat surprising, since the content of the CPE touches a variety of traditional academic disciplines, such as marketing, information systems, human resources, leadership, and strategic management, in addition to operations management. This lack of scholarly coverage casts a shadow on the theoretical validity of the CPE. In this article, however, it is argued that by viewing the CPE as an integrative model of organizational effectiveness that encompasses a number of cross-functional disciplines, a large body of research related to the CPE framework actually does exist. Indirectly, through their functional research, scholars from a variety of disciplines have been investigating the theoretical issues that embody the CPE. In this article, the relationship between the CPE and the scholarly literature is demonstrated by conducting an in-depth examination of the CPEs strategic planning category. This category was chosen because of the elements centrality to the CPE framework, its significance in achieving competitive success, and because of the rich scholarly treatment of the strategic planning concept. The main focus is on the conceptual literature related to strategic planning, since the majority of scholarly writing on strategic planning to this point has been based on propositions that have yet to be effectively tested. A conceptual foundation provides the raw material for more substantive theory development. The authors demonstrate that the strategic planning framework represented by the CPE aligns considerably with the conceptual literature. Literature comparisons using other CPE categories (leadership, customer focus, and so on) are likely to yield similar findings. Therefore, it is suggested that, despite the lack of direct scholarly attention, the framework embodied by the CPE is grounded in research-based principles.
THE CRITERIA AND STRATEGIC PLANNING

The Malcolm Baldrige Criteria for Performance Excellence (CPE) consist of a hierarchical set of categories, items, and areas to address. The seven categories associated with the 1999 criteria are leadership, strategic planning, customer and market focus, information and analysis, human resource focus, process management, and business results. These categories are intended to embody results-oriented requirements that characterize an effective performance management system (NIST 1999, 5). The conceptual relationships between the various categories that comprise the CPE are portrayed in Figure 1.
Figure 1 Baldrige Award criteria framework (adapted from NIST 1998;43).
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2000, ASQ

Several items compose each category, defining specific elements of an effective management system. Each item, in turn, consists of one or more areas to address, which detail specific requirements about approaches used to ensure and improve competitive performance, about the deployment of these approaches, or about results obtained from such deployment. Notes provide additional guidance and clarification. The spirit of the criteria is perhaps best understood by examining the core values and concepts that provide the foundation for integrating the requirements of the CPE framework. The core values and concepts include: customer-driven quality, leadership, continuous improvement and learning, valuing employees, fast response, design quality and prevention, long-range view of the future, management by fact, partnership development, company responsibility and citizenship, and results focus. Indeed, Evans and Ford (1997) found that these core values and concepts are integrated directly in the specific requirements of the CPE. Two examination items comprise the 1999 strategic planning category: strategy development and strategy deployment. The strategy development item (NIST 1999, 12) requires an organization to address how strategy is developed. The criteria require a description of key steps, participants, and the firms strategy development process. Six factors must be considered in the strategy development process: (1) the customer and market environment, (2) the competitive environment, (3) financial and societal risk, (4) human resource capabilities and needs, (5) company operational capabilities, and (6) supplier/partnership capabilities. The strategy deployment item (NIST 1999, 13) focuses on the developed company strategy and its implementation. Action plans, and related human resource plans, must be derived from company strategy. A description of the alignment and deployment of critical action plan requirements through resource allocation, performance measurement and tracking, and communicationis sought. Two-to-five year projections of company performance must also be included. These projections must be based on the likely changes resulting from the implementation of company strategy. These projections should include relevant competitive comparisons or other benchmarks, and the assumptions used in the forecasts.
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EVOLUTION OF THE STRATEGIC PLANNING CATEGORY

It is important to understand that the content of the CPE and the strategic planning category address overall organizational performance and general business planning, respectively, although this was not always the case. Many still dismiss the CPE as narrowly focused on technical quality management issues. In this section, the evolution of the strategic planning category is traced from its inception to its current state. The Baldrige Award criteria were first issued in 1988. The charter version of the strategic planning category captured the essence of the models narrow scope in its formative years. The categorys title, Strategic Quality Planning, (authors emphasis) reflected the models focused requirements for planning in the context of quality and customer satisfaction. The model required little attention to other business aspects as part of the planning process. The early Baldrige Award framework reflected the influence of the popular quality theorists. In particular, the strategic planning categorys initial emphasis on planning for quality and on quality improvement through projects resembled Jurans (1988, 1989) approach. By 1990, the strategic planning category reflected the consolidation that would characterize the Baldrige Award criterias evolution. Examination items pertaining to planning functions and planning innovation were eliminated. The examination items began to distinguish between strategy process and strategy content. Item 3.1 specified assessment of external environment (customers and competitors) and of internal resources (process capabilities) as part of the strategic planning process. The focus was still on planning related to quality, although this emphasis would soon change. By 1992, the categorys wording was further reduced. More important, the strategic planning categorys scope began to broaden beyond the quality focus. Examination item 3.1 was renamed Strategic Quality and Company Performance Planning Process and item 3.2 became Quality and Performance Plans. The corresponding areas to address required plans related to two different areas: the quality plans and the companys performance plans. The side-by-side

appearance of these two sets of plans implied a relationship that justified their inclusion inside the same planning process. Two-to-five-year projections of key performance measures were specified. These projections needed to include relevant levels and trends of competitor or other benchmarking data. Efforts to relate quality planning to other relevant company plans continued with the 1993 revisions. Explicit reference to quality goals was reduced. Emphasis was on developing strategic plans for quality, customer satisfaction, and waste reduction. Arguably, the most significant effort to integrate quality planning with business planning occurred in the 1995 criteria. Most symbolic was the categorys revised title: from Strategic Quality Planning to merely Strategic Planning. This change signaled major emphasis on business strategy as the most appropriate view-of-the-future context for managing performance (NIST 1995, 18). The integration of quality and operational issues with business planning became a dominant theme. Explicit reference to quality planning virtually disappeared. Instead, wording related to performance, competitive position, customer-related, and operational prevailed. The recent versions of the strategic planning category reflect the CPEs evolution toward comprehensive coverage of strategy-driven performance, addressing the needs of all stakeholderscustomers, employees, stockholders, suppliers, and the public (NIST 1997b, 31). The 1998 revision of the strategic planning category requirements was intended to present an integrated approach to translation of strategy into action plans and to strengthen the systems perspective of performance planning, plan implementation, and plan deployment (NIST 1998, 33). What remains is a generic framework for strategic business planning. One dimension of the framework addresses the process for developing strategy. The other dimension relates to strategic content and its implementation. This was clarified in 1999 by renaming the two items Strategy Development and Strategy Deployment. Similar evolutionary changes were made in the other categories of the CPE as well. Once representing a functional quality management system, the current criteria have been repositioned as a general performance management system. The criterias revised title Criteria for Performance Excellence, attempts to capture the business-level scope of the framework (Hertz 1997).
UNDERLYING PROPOSITIONS AND VALIDITY

Using the areas to address from the criteria, the 1998 version of the CPE strategic planning category has been translated into five propositions that underpin the frameworks requirements. Each proposition is examined in the context of the strategic management literature to assess how well the strategic planning elements are grounded in research-based principles. It should be noted that, until the scope of the strategic planning category broadened, the authors justification for reviewing the CPE model in the broad context of strategic management research was somewhat limited. After all, strategic quality planning, which proposed customer-driven quality and operational performance excellence as an integral part of overall business planning (NIST 1993, 7), had received little attention in mainstream strategic research. Dean and Bowen (1994) proposed that, although some overlap was apparent, strategic quality planning as described by older versions of the CPE differed from extant management theory in a number of dimensions, including the role of quality in strategy, the importance of strategy implementation, the focus on customer needs, and the role of analysis and improvement of strategic processes. The current scope of the CPE, however, now qualifies the framework for review against the strategic management literature. The primary intent of this research is to determine the extent to which the literature supports these five fundamental propositions of the CPE strategic planning framework.
Proposition 1
A definable approach must exist for developing company strategy. The approach must consider factors related to the market environment, the competitive environment, risk, human resource capabilities, company capabilities, and supplier/partner capabilities. Proposition 1 relates to the process of strategy development. In particular, proposition 1 requires a

deliberate, definable approach for strategy making. Proposition 1 also prescribes six factors to be considered during strategy development: (1) the market environment, (2) the competitive environment, (3) financial and societal risk, (4) human resource capabilities and needs, (5) company capabilities, and (6) supplier/partner capabilities. The notion of strategy development as a deliberate undertaking enveloped much of the early theoretical conceptualizations of strategic management (Andrews 1971; Ansoff 1965; Chandler 1962; Hofer and Schendel 1978; Learned, et al. 1965). These classic frameworks generally portrayed the strategist as scanning the external environment for opportunities and threats, assessing the firms internal resources and capabilities for strengths and weaknesses, and determining a strategic plan that exploited external-internal matches in the context of the firms objectives. Indeed, researchers who have examined the historic content of strategy research extracted common themes of environmental analysis, resource utilization, and goal attainment from the strategic management literature (Barney 1997; Bracker 1980). There has been considerable contention among theorists, however, on just how formal, linear, or comprehensive the strategic planning process is or needs to be. On one extreme has been the perspective of game theorists, where a strategist predetermines all choices or responses to each opposing players move (Saloner 1991; Tirole 1986; von Neumann and Morgenstern 1953). Other researchers have occupied middle ground. These theorists have emphasized the iterative nature of strategic planning, arguing that strategy development must proceed incrementally to compensate for the limited cognitive capacity of the planner and for environmental complexity (Churchman 1968; Cyert and March 1963; Lindblom 1959; Mintzberg 1973, 1985; Quinn 1980). Iterative strategy making may also nurture technological innovation (Nelson and Winter 1982; Schumpeter 1934), and can allow for consideration of new strategic opportunities that emerge from unforeseen events (Mintzberg 1978; Mintzberg and Waters 1985; Pascale 1984; Wrapp 1967). Few scholars suggest that firm-level strategic objectives are not strengthened by some degree of organized planning. Some research perspectives, however, downplay the role of strategy development in the performance of the firm. The classic structure-conduct-performance framework from industrial organization economics viewed industry characteristics, rather than individual firm behavior, as the dominant factor of firm performance (Scherer 1970). Another view has argued that an initially valuable, codifiable process of strategic planning, once understood and practiced by a number of firms in an industry, reduces the profit-generating potential of strategy development, since the routine is effectively employed by all firms (Schoemaker 1990). Theorists dedicated to evolutionary and ecological perspectives of the firm have also questioned the usefulness of strategy development, since the firms fate is viewed as largely determined by evolutionary forces in the environment; a natural selection process limits the impact of firm-level strategy (Alchian 1950; Aldrich 1979; Hannan and Freeman 1977). In their reviews of the strategic management literature, both Bracker (1980) and Barney (1997) found that scholars have emphasized the notions of external environmental scanning and internal capability assessment as part of strategy development. Most classic strategic planning frameworks commonly have included three of the six factors specified in proposition 1the market environment, the competitive environment, and internal capabilitiesas part of strategy development (see, for example, Andrews 1971; Ansoff 1965; Hofer and Schendel 1978; Learned, et al. 1965). No scholarly efforts have integrated these factors along with the other three factors specified by proposition 1 financial and societal risk, human resource capabilities and needs, and supplier/partner capabilitiesinto a common framework. Each of the six factors specified by proposition 1, however, can be traced to other literature streams that have separately examined the factors in a strategic planning context. These research streams relevant to the six factors specified by proposition 1 are reviewed as follows. The importance of customer and market scanning has been a CPE requirement since its inception. This historic emphasis can be traced to the criterias foundation in total quality managementlistening to customers and satisfying their needs constituted an essential message of the popular quality theorists (Crosby 1979;
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Deming 1986; Juran 1989). However, the importance of the market environment was noted prior to the popular quality movement. Simon (1947, 114) argued that, to survive, an organization must have an objective that appeals to customers, and that the objectives of customers were constantly changing. Lawrence and Lorsch (1967) observed that attention to customers became paramount when environmental uncertainty was high. The interface between the firm and its market environment has also been the focus of classic scholarly work in consumer theory (Hicks 1946; Jevons 1879; Lancaster 1966; Marshall 1920; Ricardo 1891; Samuelson 1948; Smith 1812). Of course, customer and market focus has been a traditional domain of marketing scholars (Aaker 1988; Day 1990; Howard 1983; Levitt 1960, 1969). McKitterick (1957, 78) argued that marketings purpose was to make the business do what suits the interests of the customer. Biggadike (1981) added that the marketing discipline stressed customers as the focal point of strategy. The concept of customer focus and its underlying constructs has gained attention among marketing researchers (Day 1994; Jaworski and Kohli 1993; Kohli and Jaworski 1990; Narver and Slater 1990). An important notion in these emerging investigations has been the importance of gathering intelligence from the market environment, and of its subsequent use by the organization (see, for example, Kohli and Jaworski 1990). Strategic assessment of competitive and industry structure has roots in the industrial organization (IO) economics literature (Bain 1956; Mason 1939; Scherer 1970), although the notion of external scanning has certainly been treated in management research streams (Aguilar 1967; Pfeffer and Salancik 1978). Porter (1979, 1980, 1985) developed perhaps the most notorious perspective on strategy development in the context of the competitive environment and industry analysis. The competitive analysis literature has become rich and diversified, ranging from textbooks (Oster 1994) to articles on strategic industry structural effects (Demsetz 1973; Rumelt 1991; Schmalensee 1985; Wernerfelt and Montgomery 1988) and competitive positioning (Caves and Porter 1977; Cool and Schendel 1988; Ghemawat 1986; Porter 1996). The appropriateness of assessing risk as part of strategy development can be construed from classical observations in economics and in the notion of the relationship between risk and reward. Alchian (1950) submitted that uncertainty was simply an endogenous characteristic of the firms environment. Knight (1921) argued that firms would stand little chance of profitability were it not for unforeseen change and uncertainty. Modern strategy researchers continue to acknowledge that the uncertainty, complexity, and conflict that characterized the difficulty of strategic problems constituted a possible source of profitability (see, for example, Amit and Schoemaker 1993). Finance scholars have employed the risk/return notion in theories of portfolio management (Markowitz 1952) and capital asset pricing models (Lintner 1965; Sharpe 1964) to help manage financial risk. Brealey and Meyers (1981), however, admitted to poor understanding of risk: return assessment for strategic decisions from a financial analysis standpoint. Indeed, problems with applying financial risk theories to strategic decision making have been noted by strategy researchers (Bettis 1981, 1983), and paradoxes between the risk and reward relationship have been observed in empirical studies (Amit and Wernerfelt 1990; Balakrishnan and Wernerfelt 1986; Bowman 1980; Cool and Schendel 1988). Although a few frameworks for strategic risk assessment have been proposed (Baird and Thomas 1985; Mason and Mitroff 1981), researchers have not coalesced around a unifying model of strategic risk assessment. Research support for societal risk consideration during strategy making has received little direct treatment. The CPE provide little guidance on what precisely is meant by societal risk. The criterias inclusion of a societal risk element likely relates to two core values that underpin the CPE. Long-range view of the future views the public and the community as key stakeholders in the outcomes of strategic decisions (NIST 1998, 41). Company responsibility and citizenship relates to the notion that firms should anticipate possible adverse impacts from the enterprise on the community and to proactively address these issues (NIST 1998, 42). Although research has addressed relationships between a firms socially responsible behavior and performance,

there has been little work that explicitly considers the role of societal risk assessment in the strategy development process. Classic strategic planning frameworks, such as Andrews (1971) work, treated human resource capability assessment under the general heading of internal company assessment. Indeed, the proposition 1 separation of human resource capability assessment from other dimensions of company capabilities seems to violate the parsimony and consolidation that have characterized the evolution of the CPE. However, such a separation once again can be related to the criterias underpinning core values. Valuing employees is a key factor in organizational performance since a firms success depends increasingly on the knowledge, skills, and motivation of the work force (NIST 1998, 41). After all, it is through the actions of employees that strategy is realized. By explicitly identifying human resource capabilities as a stand-alone strategic assessment factor, the criteria highlight the importance of this asset class to effective performance management. A number of research streams support the consideration of human resources in the strategic planning context. One stream relates to the importance of enhancing the strategic skills of the firms managers. Managerial development has been cited as important for both strategy formulation (Andrews 1971; Bartlett and Ghoshal 1993; Hambrick 1995; Hambrick and Mason 1984; Mintzberg 1973; Norburn and Birley 1988; Rumelt 1974) and for strategy implementation (Kerr and Jackofsky 1989). A second stream relates to the resource-based view of the firm. Penrose (1959) portrayed the firm as a pool of resources, and resources as bundles of potential services or activities. Profits, or rents, accrue from unique or idiosyncratic resources owned or controlled by the firm (Barney 1986, 1991; Dierickx and Cool 1989; Peteraf 1993). Since people represent one asset class controlled by the firm (Barney 1991; Grant 1991; Hofer and Schendel 1978; Mahoney and Pandian 1992), human resources merit attention for strategic development. A third stream flows from the human resource (HR) literature. Frameworks have been proposed to better integrate human resource planning and strategy (Lengnick-Hall and Lengnick-Hall 1988; Peck 1994; Schuler 1992). Schneider and Bowen (1993) justified more connection between human resource planning and strategy in the context of the firms increased interest on service-based sources of competitive advantage. The notion of competitive advantage as stemming from firm-specific skills and resources can be traced to early economic thought (Ricardo 1891), as well as to early theoretical treatments of firm heterogeneity and growth (Chamberlin 1933; Heflebower 1954; Penrose 1959; Selznick 1957). Most strategic theorists have noted the importance of taking stock of internal resources as part of strategy development. Ansoff (1965) advised that firms develop a resource profile during strategy formulation. Hofer and Schendel (1978) highlighted internal resource and competence assessment as a primary activity in strategy development. Recently, the stream of research related to the resource-based view of the firm has emphasized the assessment and development of valuable, unique, and inimitable resources as a critical source of sustainable competitive advantage (Barney 1986, 1991; Conner 1991; Dierickx and Cool 1989; Prahalad and Hamel 1990; Wernerfelt 1984). Supplier/partner capabilities Various aspects of cooperative arrangements have been researched, such as supplier relationships and procurement practices (Ebrahimpour and Mangiameli 1990; Heide and John 1990; Kalwani and Narayandas 1995; Kekre, Murthi, and Srinivasan 1995; Sinha and Cusumano 1991); forms of strategic alliances (Borys and Jemison 1989; Hamel 1991; Harrigan 1988; Kamath and Liker 1994; Ring and Van de Ven 1992); and the effects of cooperative arrangements on inter-party exchange costs (Barnard 1938; Jones and Hill 1988; Robins 1987; Williamson 1975, 1979, 1991). Little research, however, has directly examined the role of supplier/partner assessment as part of strategy development. Hofer and Schendel (1978, 150) provided a notable exception, claiming that analysis of internal resources should be extended to major subcontractors. Indeed, supplier/ partner capabilities may be viewed as another asset class under the general heading of internal firm capabilities. The criterias choice to explicitly separate this asset class as a stand-alone factor in strategy development
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Table 1 Summary of literature related to proposition 1.
Proposition
Strategy development as a deliberate process
Supporting literature streams

Classic strategic management frameworks Game theory Adaptive nature of planning
Representative work
Andrews (1971); Ansoff (1965); Hofer and Schendel (1978) Saloner (1991); Tirole (1986); von Neumann and Morgenstern (1953) Churchman (1968); Cyert and March (1963); Lindblom (1959); Mintzberg (1973, 1978); Pascale (1984); Wrapp (1967) Alchian (1950); Aldrich (1979); Hannan and Freeman (1977); Scherer (1970); Schoemaker (1990) Aguilar (1967); Pfeffer and Salancik (1978) Crosby (1979); Deming (1986); Juran (1989) Lawrence & Lorsch (1967); Simon (1947) Hicks (1946); Lancaster (1966); Marshall (1920); Ricardo (1891); Samuelson (1948) Day (1994); Howard (1983); Kohli & Jaworski (1990); Levitt (1960, 1969); McKitterick (1957); Narver and Slater (1990) Bain (1956); Porter (1980); Oster (1994); Scherer (1970) Alchian (1950); Knight (1921) Brealey and Myers (1981); Lintner (1965); Markowitz (1952); Sharpe (1964) Baird and Thomas (1985); Bettis (1981, 1983);, Mason and Mitroff (1981) Andrews (1971); Bartlett and Ghoshal (1993); Hambrick (1995); Kerr and Jackofsky (1989); Norburn and Birley (1988); Selznick (1957) Barney (1991); Grant (1991); Hofer and Schendel (1978); Mahoney and Pandian (1992); Penrose (1959) Lengnick-Hall and Lengnick-Hall (1988); Peck (1994); Schneider and Bowen (1993); Schuler (1992) Andrews (1971); Ansoff (1965); Hofer and Schendel (1978) Barney (1991); Conner (1991); Dierickx and Cool (1989); Penrose (1959); Prahalad and Hamel (1990); Wernerfelt (1984)
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Environment influence on planning Six factors considered in strategy development: 1. Market environment General environmental scanning Quality management Organization theory Consumer theory Market orientation
2. Competitive environment 3. Financial and societal risk
Industrial organization and competitive analysis Uncertain environment and the firm Financial risk theory Strategic risk assessment
4. Human resource capabilities
Managerial development
Resource-based view
Strategic human resources 5. Company capabilities Classic strategy frameworks Resource-based view
6. Supplier/partner capabilities
Supplier/partner relationships Strategic supplier assessment
Ebrahimpour and Mangiameli (1990); Heide and John (1990); Sinha and Cusamano (1991) Hofer and Schendel (1978)
likely relates to the CPE core value of partnership development, which promotes partnerships as a way for the firm to better accomplish its overall goals (NIST 1998, 42). Summary Also see Table 1. Proposition 1 addresses the strategy development process. Strategy as a deliberate,
definable undertaking has constituted an essential element of classical strategic management frameworks developed by strategy scholars. Although scholars tend to disagree on just how formal or linear, the strategy development process needs to be, the general format of proposition 1 is robust enough to accommodate these

various research perspectives. Indeed, the CPE explicitly note that the requirements do not imply formalized plans, planning systems, departments, or specific planning cycles, nor does the strategic planning category imply that all improvements could or should be planned in advance (NIST 1998, 23). There is no single literature stream that supports an integration of the six factors required by proposition 1 as part of strategy development. Three of the six factorsmarket environment, competitive environment, and company capabilitiespervade most scholarly frameworks on strategy formulation. However, the other three factors specified by proposition 1financial and societal risk, human resource capabilities, and supplier/ partner capabilitiesgain only indirect support from the strategy literature. The criterias specification of human resource capabilities and supplier/partner capabilities appears somewhat redundant, since these factors are asset classes that can be appropriately filed under the internal capabilities factor. These two factors, along with the factor dealing with risk assessment, perhaps garner explicit mention in proposition 1 as a means to operationalize core values that underpin the criteria. proposed many purposes and forms of strategy. In their review of the strategy literature, Hax and Majuf (1988) found that research perspectives on the purpose of strategy have included the following: to establish organizational purpose, to define the firms competitive domain, to serve as a unifying blueprint of the organization, to respond to environmental stimuli, and to motivate stakeholders. Other interpretations of the literature have included strategy as plans for cooperation as well as for competition (Barney 1997; Brandenburger and Nalebuff 1996); as a means to reduce environmental uncertainties and interdependencies (Pfeffer and Salancik 1978); as plans for growth (Penrose 1959); as a means to reduce transaction and governance costs (Williamson 1975, 1991); as plans to encourage technology development and innovation (Nelson and Winter 1982; Schumpeter 1934); as actions that support the development of tacit strategic assets (Itami 1987); and as a bridge to corporate tradition and history (Ouchi 1980; Smircich and Stubbart 1985; Weick 1979). What form should strategy take? Apart from a straightforward, rationally stated plan, strategies may assume eclectic forms as well (Barney 1997). Mintzberg (1987) proposed that a strategy could represent a ploy, pattern, position, or perspective as well as a plan. Cyert and March (1963) claimed that a strategy could be a goal, schedule, theory, or precedent. To some, a strategy has been better understood via patterns of actual behavior rather than by stated plans (Andrews 1971; Barnard 1938; Mintzberg 1978; Simon 1947; Weick and Roberts 1993). Various systems for classifying strategies have been developed. Some classifications attempt to capture unique aspects of the firms strategic behavior (Chrisman, Hofer, and Boulton 1988; Miles and Snow 1978; Mintzberg 1988, 1-67; Porter 1980, 1985). Other frameworks have been based on paths for firm growth, such as diversification, vertical integration, mergers and acquisitions, and strategic alliances (Borys and Jemison 1989; Harrigan 1985, 1988; Jones and Hill 1988; Mahoney 1992; Montgomery and Wernerfelt 1988; Rumelt 1974, 1982; Singh and Montgomery 1987). This medley points out that considerable research attention has been dedicated toward analyzing strategic content, although literature perspectives vary considerably.
Proposition 2
Company strategy must be defined. Action plans must be derived from strategy. Human resource plans related to the action plans must be included. Differences between short- and longer-range plans must be recognized and understood. Proposition 2 addresses a critical outcome of the strategy development process: the strategic plan. Scholars sometimes refer to this notion as strategic content. Proposition 2 prescribes little in terms of what a strategy should contain. The focus, rather, is the notion of action plans derived from strategy and strategy development. Proposition 2 also requires the inclusion of human resource plans related to strategy. Finally, proposition 2 requires an explicit separation of short- and longer-term plans. Proposition 2 provides little detail as to what a strategy or an action plan should contain, or what form it should take. Such a nonprescriptive stance fits a broad range of literature perspectives, since scholars have
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Proposition 2 requires that strategy and action plans must exist, and that these plans must be based on strategic process. The general nature of the CPE framework provides a wide tolerance for accommodating various research perspectives on strategic content. Rather than requiring an elaboration of company strategy, the CPE strategic planning framework focuses instead on the specification of action plans derived from strategy. The criteria characterize action plans as defining those things the company must do well for its strategy to succeed (NIST 1998, 3). Further, the CPE claim that action plan development represents the critical stage in planning when general strategies and goals are made specific so that effective company-wide understanding and deployment are possible (NIST 1998, 3). This would seem to indicate a preference in the CPE for defining how a strategy is to be accomplished rather than defining what the company strategy is. The criteria, however, proceed to cite that an example of an action plan element for a supplier in a highly competitive industry might be to develop and maintain a price leadership position (NIST 1998, 3). Many strategy scholars might regard this as a basic statement of strategy, rather than as an actionable item derived from a higher-level strategic objective. Indeed, the price leadership example provided by the CPE resembles a generic business strategy espoused by Porter (1980, 1985). It must be noted, then, that the meaning of an action plan is unclear in the context of the CPE. Although an action plan implies a tactical connotation, the example of an action plan provided by the criteria resembles a statement of a general business goal or objective. With this in mind, the literature that considers the translation of strategy into plans for action is now reviewed. A common notion among theorists has been that strategy must be reduced to actionable tasks for effective implementation. Barnard (1938) argued that an organizations purpose must be broken into fragments ordered in time and assignment to allow for execution via specialized units of organization. Quinn (1980) proposed that effective formal strategies include the major action sequences necessary to accomplish the defined goals. Simon (1947) observed that all organizations have multiple goals existing in a complex hierarchy or pyramideach levels goals relate to the step above, and the low levels in the hierarchy execute the goals. March and Simon (1958) argued that organizations must reduce complex objectives into simple programs and rules to reduce the uncertainty and conflict involved with survival. Action plans can be considered as the necessary specification of present period activity to bridge the adaptive learning process between planning cycles (Nelson and Winter 1982; Weick 1979). Likert (1961) viewed unit objectives and goals as linking pins that harmonized organizational levels. Others viewed development of short-term plans as necessary components of an effective management control system (Anthony 1961; Lorange and Scott Morton 1974). The requirement in proposition 2 for an elaboration of human resource plans derived from strategy extends the discussion of explicit mention of human resources as part of strategic planning in proposition 1. Plans that require the strategic deployment of human resources would appear a subset of action plans in general. The explicit requirement for defining human resource plans derived from strategy is likely another operationalization of the criterias core value of valuing people. The research stream that most directly supports this view is emerging from researchers who have been examining the importance of human resource planning in the context of strategy (Lengnick-Hall and Lengnick-Hall 1988, 1993; Nkomo 1987; Peck 1994; Schuler and Jackson 1989). There is only scattered discussion in the literature about the necessity for differentiating between shortand longer-term strategic objectives. Indirectly, such a requirement can be viewed as an extension of the argument for fragmenting strategic goals into doable pieces. Hrebeniak and Joyce (1984) differentiated between the adaptation horizon and the implementation horizon. The adaptation horizon was the time that a strategic opportunity or threat persists, while the implementation horizon was the planners perception of the adaptation horizon. Usually, the implementation horizon was shorter than the adaptation horizon. A specification of two time horizons can be viewed as another means for dividing complex, abstract strategies into doable, concrete action plans. The shorter time horizon represents the tangible realization of an abstract future state.

Summary Also see Table 2. Proposition 2 focuses on company strategy and action plans. The general form of proposition 2 broadly fits research notions of strategic content. The CPE are unclear as to what is meant between strategy and action plans, although there appears to be a bias toward concrete, tactical plans. Scholars have conceptualized the fragmenting of strategic goals into doable pieces. The proposition 2 requirement for human resource plans as part of strategic content appears to be a redundant subset of action plans; the explicit requirement is likely another reinforcement of the core values of the CPE. The specification for differentiating between short- and longer-term plans garners little direct literature support, although the notion can be indirectly linked to the general concept of dividing strategic goals into doable pieces. requirements for implementing action plansincluding human resource plans, key processes, performance measures, and resourcesmust be aligned and deployed. Hrebeniak and Joyce (1984) argued that much has been written about strategy implementation, but because of the literatures scatter among various disciplines, its disaggregated state masked implementations true identity. Indeed, Anthony (1961) noted that while strategic planning was rooted in economics, strategy implementation related more to social psychology. Chandler (1962) was an early observer of the relationship between an organizations structure and the firms capability for effectively achieving its strategic goals. Andrews (1971) noted that structure for implementation related not only to division of work and coordination of responsibility, but also to organizational systems such as standards and measurement, incentives, control systems, and personnel recruitment. Daft and Macintosh (1984) are among a number of researchers who have found support for the role of managerial systems, particularly those connected to middle management, in strategy implementation. Galbraith (1973) argued that the firms choice of structure related to uncertainty and information processing associated with a particular choice of strategy. March and Simon (1958) added that structural characteristics
Proposition 3
An approach must exist for implementing (deploying) action plans. The approach must consider how critical requirementsincluding human resource plans, key processes, performance measures, and resourceswill be aligned and deployed. Proposition 3 focuses on the structure for implementing strategy. Proposition 3 requires that the critical

Proposition
Nonprescriptive strategy content

Purpose of strategy
Representative work
Barney (1997); Brandenburger and Nalebuff (1995); Hax and Majuf (1988); Itami (1987); Nelson and Winter (1982); Pfeffer and Salancik (1978); Smircich and Stubbart (1985); Weick (1979) Andrews (1971); Barney (1997); Cyert and March (1963); Mintzberg (1987) Harrigan (1985, 1988), Miles and Snow (1978); Mintzberg (1988, 1 67); Porter (1980, 1985); Rumelt (1974) Barnard (1938); Likert (1961); March and Simon (1958); Quinn (1980); Simon (1947); Weick (1979) Anthony (1961); Lorange and Scott Morton (1974) Lengnick-Hall and Lengnick-Hall (1988); Nkomo (1987); Peck (1994); Schuler and Jackson (1989) Hrebeniak and Joyce (1984)
Forms of strategy Strategy typologies
Focus on action plans
Organization theory
Managerial control systems Inclusion of human resource plans Strategic human resources
Differentiating between short- and longer-term
Strategy implementation
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related to cognitive constraints inherent to managing strategic process. A number of researchers have prescribed particular strategy-structure matches (Galbraith 1995; Kukalis 1989; Nathanson, Kazanjian, and Galbraith 1979, 91113). Summary Also see Table 3. Proposition 3 attracts support from varied research perspectives on strategy implementation. Structure must exist to implement strategy. Structure includes the organizational and administrative capabilities to effectively deploy strategic objectives. Churchman 1968). Forrester (1958) portrayed industrial and economic activities as closed-loop feedback systems. Anthony (1961) viewed management controls as a means to ensure that resources were obtained and used effectively in the accomplishment of the organizations objectives. Such controls facilitated goal congruence. Lorange and Scott Morton (1974) viewed short-term performance tracking as a process, lodged between short-term goal setting and the next periods long-range planning process. While the proposition 4 notion of performance tracking and control fits nicely with control and systems theory, the concept can also be related to other perspectives. Performance tracking and control can be viewed as governance structure associated with reducing internal transaction costs (Coase 1937; Williamson 1975, 1979). Monitoring can also be linked to the agency problem ensuring that actors stay aligned with the principles goals (Cyert and March 1963; Eisenhardt 1989; Jensen and Meckling 1976; March and Simon 1958). Summary Also see Table 4. Proposition 4 garners considerable literature support, particularly from the perspective of managerial control systems. This literature links performance monitoring to the function of managerial control. Proposition 4 requires only specification of how performance will be tracked; proposition 4,
Proposition 4
An approach must exist for monitoring company performance relative to the strategic plan. Proposition 4 requires an organized approach for monitoring the firms performance in the context of its strategic objectives. According to Tannenbaum (1968, 1), organization implied control. Newman (1940) viewed the primary roles of the administrator as plan-direct-control. The concept of tracking performance versus objectives received formal treatment by researchers involved with managerial control systems (Anthony 1961; Forrester 1958; Hurst 1979, 114123; Lorange and Scott Morton 1974) and by systems theorists (Ackoff 1970;

Proposition
Structure for implementation

Classic strategic planning frameworks Organization theory Strategy implementation
Representative work
Andrews (1971); Chandler (1962)
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Daft and Macintosh (1984); Galbraith (1973); Kukalis (1991); March and Simon (1958) Hrebeniak & Joyce (1984)

Proposition
Monitoring performance

Managerial control systems and systems theory Administrative behavior Transaction cost theory Agency theory
Representative work
Ackoff (1970); Anthony (1961); Churchman (1968); Forrester (1958); Hurst (1979); Lorange and Scott Morton (1974) Newman (1940); Tannenbaum (1968) Coase (1937); Williamson (1975, 1979) Eisenhardt (1989); Jensen and Meckling (1976); March and Simon (1958)

and the other propositions that embody the CPE strategic planning framework, do not explicitly address the issue of control. 114 123) noted that such measures were oriented toward the future and measured the accuracy of the strategic decision premise. Lorange and Scott Morton (1974) claimed that these measures could be financial or nonfinancial, and were necessary for control and goal congruence. Likert (1961) advised that an organization should focus on key performance measures and indicators, lest managers would be buried under mountains of data. Hofer and Schendel (1978) discussed at length the measurement and evaluation of strategic goals. Recent work has proposed the identification and use of key indicators of market, operational, and financial performance to provide a balanced scorecard of performance measurements (Kaplan and Norton 1992). It is important to note that proposition 4 does not focus on the planning horizon for strategy, but on the projection horizon for key strategic measures. The development of future projections can be related to forecasting. Schoemaker (1991) noted that strategic forecasting techniques included decision analysis, scenario planning, and statistical techniques. Fahey and King (1981) found that firms utilized relatively rudimentary forecasting techniques as part of planning. Scholars, however, have been interested in applying more formal forecasting methods to strategic process (Utterback 1979, 134 144). Schoemaker (1991, 1993), for instance, has promoted multiple scenario planning as a technique for strategic forecasting. Makridakis (1996) argued the merits of traditional
Proposition 5
Strategy-related changes in key indicators of company performance must be projected. These projections must include relevant comparisons to competitors or other benchmarks, and the assumptions used in the projections. The essence of proposition 5 involves the role of performance measures in strategic planning. Strategic measures of organizational performance must be identified. Changes in organizational performance must be projected into the future, and the assumptions behind those projections must be recognized. Proposition 5 also requires the inclusion of comparative benchmarks in the projections. Hrebiniak and Joyce (1984) argued that if a strategic outcome variable were not measurable, then managers would have difficulty assessing the difference between actual performance and the intended state. Systems theorists stressed measurable objectives to facilitate control and realization of the objective function (Ackoff 1970; Churchman 1968). Objective measures of performance form an essential part of the information-handling process that supports managerial and operational control (Anthony 1961). Hurst (1979,

Proposition
Key performance measures

Managerial control systems and systems theory Administrative behavior Strategy evaluation
Representative work
Ackoff (1970); Anthony (1961); Churchman (1968); Hurst (1979); Lorange and Scott Morton (1974) Likert (1961) Hofer and Schendel (1978); Hrebiniak and Joyce (1984); Kaplan and Norton (1992) Fahey and King (1981); Makridakis (1996), Schoemaker (1991), Utterback (1979, 134 144) Churchman (1968) Mason and Mitroff (1981) Aguilar (1967) Oster (1994); Porter (1980) Tucker, Zivan, and Camp (1987)
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Future projections Assumption-stating Competitive and benchmark comparisons
Strategic forecasting Systems theory Strategy development Environmental scanning Competitive analysis Quality management
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statistical time series forecasting methods to augment strategic planning. Scant research supports proposition 5s specification for a specific two-to-five-year projection interval. Statisticians who use time series forecasting methods are often wary of extending a realization more than one or two steps ahead into the future, since confidence intervals surrounding the estimates tend to quickly widen (Pankratz 1983). Articulating the assumptions behind strategic projections and claims has been espoused by systems theorists and by some strategy researchers. Churchman (1968) argued that continuously questioning the assumptions was critical to systems thinking. Mason and Mitroff (1981) specified strategic assumption surfacing and testing as a core activity in the strategy development process. The incorporation of competitive or benchmark comparisons in strategic performance projections can be indirectly linked to the proposition 1 requirement for industry and competitive scanning (Aguilar 1967; Porter 1980, 1985). The concept of benchmarking is commonly associated with the rise in the quality movement (see Tucker, Zivan, and Camp 1987 for an overview); although formal research on the use of benchmarks in strategic contexts has been minimal (Delbridge, Lowe, and Oliver 1995). Summary Also see Table 5. The general notion of employing performance measures in strategic management garners wide and varied literature support. The most compelling support, perhaps, relates to the notion that measurements provide objective information for managers to judge how well the organization is performing in comparison to strategic targets, and to signal the need for corrective action. Stating the assumptions behind strategic projections has some grounding in systems theory and in some strategy development literature. The proposition 5 specification for multiyear performance projections cannot be related to a specific literature stream, although scattered support comes from research in strategic decision making and in forecasting methodology. Inclusion of competitive comparisons and other benchmarks in performance projections can be indirectly related the proposition 1 requirement for industry and competitive scanning as part of strategy development.
CONCLUDING REMARKS
It has been demonstrated that the strategic planning framework embedded in the Malcolm Baldrige Criteria for Performance Excellence (CPE) aligns considerably with the conceptual literature on strategic planning. This alignment brings some theoretical validity to the strategic planning framework embodied by the CPE. A similar approach with other CPE categories (leadership, customer focus, and so on) would likely reveal a similar scholarly basis for the overall CPE framework. Of course, researchers could advance the frameworks validity through more CPE-specific research. It is suggested, however, that researchers attend to the multifunctional grounding of the CPE. The literature base of the CPE is broad and most certainly extends beyond the articles that contain quality as a key word. For example, in this investigation of strategic planning, the authors drew from mainstream strategic management literatureand from more distant streams such as forecasting and systems theory. The general business scope of the CPE framework overlaps a variety of functional disciplines to form an integrative model of organizational effectiveness. A relationship between the CPE framework and rich stream of scholarly literature has been demonstrated. Such validity might inspire further research efforts. On a practical level, the CPEs grounding in the literature reflects the translation of research into managerial practice.
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BIOGRAPHIES Matthew W. Ford is a doctoral candidate in operations management at the University of Cincinnati. Until 1995, he was a corporate quality systems manager with a FORTUNE 500 manufacturer. He can be contacted at the Department of Quantitative Analysis and Operations Management, College of Business Administration, University of Cincinnati, P.O. Box 210130, Cincinnati, OH 45221-0130; Telephone: 513-556-7052; Fax: 513-556-5499; E-mail: fordmw@email.uc.edu . James R. Evans is a professor in the Department of Quantitative Analysis and Operations Management and is the director of the Total Quality Management Center in the College of Business Administration at the University of Cincinnati. He has also served as an examiner and senior examiner for the Malcolm Baldrige National Quality Award from 1994 through 1999. Evans earned a doctorate in industrial and systems engineering from the Georgia Institute of Technology. He may be contacted at the University of Cincinnati, P.O. Box 210130, Cincinnati, OH 45221-0130; Telephone: 513-556-7152; Fax: 513-556-5499; E-mail: evansjr@email.uc.edu .
26 QMJ VOL. 7, NO. 1/ 2000, ASQ

Conceptual Foundations of Strategic Planning in The Malcolm Baldrige Criteria For Performance Excellence

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Conceptual Foundations of Strategic Planning in the Malcolm Baldrige Criteria for Performance Excellence

MATTHEW W. FORD, UNIVERSITY OF CINCINNATI JAMES R. EVANS, UNIVERSITY OF CINCINNATI

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Conceptual Foundations of Strategic Planning in the Malcolm Baldrige Criteria

THE CRITERIA AND STRATEGIC PLANNING

Figure 1 Baldrige Award criteria framework (adapted from NIST 1998;43).

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EVOLUTION OF THE STRATEGIC PLANNING CATEGORY

Conceptual Foundations of Strategic Planning in the Malcolm Baldrige Criteria

UNDERLYING PROPOSITIONS AND VALIDITY

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Supporting literature streams

2. Competitive environment 3. Financial and societal risk

4. Human resource capabilities

Supplier/partner relationships Strategic supplier assessment

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Conceptual Foundations of Strategic Planning in the Malcolm Baldrige Criteria

Table 2 Summary of literature related to proposition 2.

Supporting literature streams

Forms of strategy Strategy typologies

Focus on action plans

Differentiating between short- and longer-term

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Table 3 Summary of literature related to proposition 3.

Supporting literature streams

Table 4 Summary of literature related to proposition 4.

Supporting literature streams

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Table 5 Summary of literature related to proposition 5.

Supporting literature streams

Future projections Assumption-stating Competitive and benchmark comparisons

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