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Does Good Quality Mean
Higher Profitability?

As seen from the discussion on Quality Costs and Six Sigma, it is not difficult to realize that poor quality level costs a lot. However, can good quality really bring profit? Studies by the National Institute of Standards and Technology (NIST), universities, and the U.S. General Accounting Office (GAO) found that companies adopting quality management practices experienced an overall improvement in employee relations, higher productivity, greater customer satisfaction, increased market share, and improved profitability. In addition, a recent NIST study that tracks a hypothetical stock investment in Malcolm Baldrige National Quality Award (MBNQA) winners shows that these companies soundly outperformed the Standard & Poor’s 500 (S&P 500) for the seventh straight year in a row (see Table 4.1 NIST, Baldrige Index Outperforms S&P 500 for Seventh Year, 2001).


Table 4.1 NIST, Baldridge Index Outperforms S&P 500 for Seventh Year


Year
MBNQA Winners vs S&P 500
Scale
2001
Outperform
4.4 to 1
2000
Outperform
4.9 to 1
1999
Outperform
2.6 to 1
1998
Outperform
2.9 to 1
1997
Outperform
3.5 to 1
1996
Outperform
4 to 1
1995
Outperform
6.5 to 1


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