Business excellence (BE) models for MSMEs: the contemporary art and science of Improving national economy

Business Excellence (BE) Models for MSMEs:
The Contemporary Art and Science of Improving National Economy
Ceazar Valerei E. Navarro
University of the Philippines, Philippines
Carlene Mae N. Jadap
Ortigas Center, Philippines
Abstract
The interest on the role of MSMEs already had resurgence as early as 1990. The issues confronting Micro,
Small and Medium enterprises (MSMEs) on the need to streamline its processes and to improve the delivery
of its services have never been outdated, and in fact, are becoming more imperative as its business continues
to expand. This challenges remain and is highlighted even more as the call for globalization from various
international actors get sturdier.
Based on the foregoing, it is thus, a fact unarguably stronger than the wall of Gibraltar that MSMEs play a
vital role in keeping the ball rolling for various economic activities of any state down to its every single
household. With these vital roles, it is expected that harnessing their business capabilities could significantly
contribute to higher business growth which could lead to an enhanced level of national productivity and
competitiveness. The role of MSMEs is even more crucial for developing countries as the same is a potential
source of income and employment, and a potential solution to poverty alleviation as well as rural growth and
development.
This study reviews how MSMEs across Asia fared in adopting and institutionalizing the Business
Excellence (BE) framework for performance excellence. It will also look into how BE affected the MSMEs which
have adopted the framework. Capping off the paper, is a propose program which will help MSMEs adopt and
institutionalize the BE framework to build a culture of excellence. This would highlight the need for
organizational self-assessment and action planning deployment as a tool to identify one's strength and
opportunities for improvement and eventually addressing the same to improve productivity and quality, and
eventually contributing to national economy.
Keywords: Micro; Small Medium Enterprises; Productivity; Business Excellence.
1. Introduction
The interest on the role of MSMEs already had resurgence as early as 1990. This is even more highlighted
during the great financial crisis in 2008, which lead countries to adopt decentralized and localized approach
as development strategies (Ruane 2007). Based on the foregoing, it is thus, a fact unarguably stronger than the

wall of Gibraltar that MSMEs play a vital role in keeping the ball rolling for various economic activities of the
state down to its every single household. With these vital roles, it is expected that harnessing their business
capabilities could significantly contribute to higher business growth which could lead to an enhanced level of
national productivity and competitiveness.

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Habaradas (2008) summarized the most important contributions of MSMEs as follows: (a) they address
poverty by creating jobs and by increasing incomes; (b) they disperse economic activities in the countryside,
and provide broad-based sources of growth; (c) they serve as suppliers and providers of support services for
large enterprises; (d) they stimulate entrepreneurial skills among the populace; and (e) they act as incubators
for developing domestic enterprises into large corporations.
The role of MSMEs is even more crucial for developing countries as the same is a potential source of income
and employment (Tambunan 2008), and a potential solution to poverty alleviation and to rural growth and
development. In fact, a certain study shows that economies with higher income per capita tend to have more
MSMEs per 1,000 people (World Bank/IFC 2010). Moreover, it is frequently argued that MSMEs are flexible,
making it more adaptable to rapidly changing market and resilient to unpredictable sharp economic
downturn. However, in spite the great contributions of MSMEs to economic growth and development of every
state, MSMEs faced numerous impediments, which require immediate attention from policy makers,
economic planners and other stakeholders. More often, particularly among developing countries, these
MSMEs received insufficient support from the government in terms of financial resources, possessed
inadequate managerial expertise and competent personnel, and bounded with several bureaucratic
restrictions.
Through the years, the national government has been trying to formulate ways to help small and medium
businesses in keeping up with the fast changing economy. Legislations, national policies, institutional
infrastructure, formal as well as non-formal relationships, have been forged in order to support this growing
business sector. The primary goal is to empower small businessmen in pursuit of financial stability. However,
there is a need to determine if these policies, whether national or local, formal or informal, are realizing its
designed intents.

It is of paramount importance to address the challenges confronting the MSMEs as failure to do so may
cause the collapse of any economy brought about by any movement in global market. This even becomes more
imperative as globalization knocks the door of every country, which though may offer wide opportunities for
growth and expansion for MSMEs, would also exposed them a higher degree of threats as they have to
compete with MSMEs across the globe. Thus, over the years, several business excellence models have been
conceptualized in search of a framework for performance improvement that will yield superior results.
Thus, this study was conceptualized to formulate a BE program for MSMEs, and at the same time, develop
a program implementation framework that will help them in the adoption and institutionalization of the BE
framework.
2. Research Problem
This research aims to investigate and assess the capability of the MSMEs to adopt the business excellence
model, the Malcolm Baldrige Criteria for Performance Excellence, which is the model adopted by the
Philippines for its National Quality Award – the Philippine Quality Award. From the foregoing, the researcher
seeks to develop a program implementation framework that will help MSMEs in the adoption and
institutionalization of the business excellence model.
2.1. Scope and Limitation Of Study

The focus of this research revolves around the capability of the MSMEs to adopt the business excellence
model for performance improvement. It will look into the different issues and concerns of MSMEs in the
adoption of the business excellence model and will fill in those gaps from a practical perspective.

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The MSMEs tap for this study were all from Metropolitan Manila, Phiippines. The Metropolitan was chosen
as the research locale for this study because of the fact that it houses a big chunk of MSMEs being the center
of trade and commerce in the country. MSMEs in the area are very accessible, which made it easier to
administer the survey questionnaire as it has a good composition of MSMEs, from different sectors and sizes.
Moreover, Metro Manila was considered as the study sites owing to its proximity to the researcher.
2.2 Definition Of Terms

For better appreciation of this research, the following terms are defined:
Micro-, Small and Medium Enterprises - most commonly referred to as MSMEs, is a relative term, which
means that it varies from one state to another. Even among Asian countries, the term MSMEs does not have a
standardized definition. To complicate it further, the definition of MSMEs in certain countries also varies
depending on the purpose or its use, either for statistical or policy purposes. On this ground, there are several
measures used to distinguish large, micro, small, and medium enterprises from one another. Commonly, to
make a distinction between and among large-, micro-, small-and medium-sized enterprises, the number of
employed people and monetary measures, such as initial capital, are considered.
In the Philippines, there are two operational definitions of Large, Micro, Small and Medium enterprises,
which are enshrined in the National Statistics Office and Small and Medium Enterprise Development Council
Resolution No. 1, Series 2003. The most commonly used definition in the country is based on the number of
people employed, which different size categories are classified as follows:


Micro enterprises: 1-9 employees



Small enterprises: 10-99 employees



Medium enterprises: 100-199 employees

 Large enterprises: 200 or more employees
The other operational definition of MSMEs is based on assets, which are distinguished as follows:


Micro enterprises: P3 million or less



Small enterprises: P3-15 million



Medium enterprises: P15-100 million

 Large enterprises: P100 or more
Business Excellence - is about developing and strengthening the management systems and processes of an
organization to improve performance and create value for stakeholders. BE is much more than having a
quality system in place. BE is about achieving excellence in everything that an organization does (including
leadership, strategy, customer focus, information management, people and processes) and most importantly
achieving superior business results (Mann et. al., 2008).
2.3. The Research Questions
In this contemporary society characterized by rapid advancement in science and technology and dubbed
as the interconnected world, equally important with opportunities for growth and development are the threats
it may bring to any enterprises. Thus, to ensure survival in the market, every enterprise must actively pursue
sustainable growth and development.
Acknowledging the vast contribution of MSMEs in every economy, several countries have taken steps to
maintain national productivity through various business excellence initiatives. Numerous studies over the
years have been published claiming that business excellence models have helped MSMEs improve their
processes and management systems, which yielded better to superior business results.
Along this line, this chapter reveals the present state of MSMEs in the Philippines, and the different issues
and concerns they face. Likewise, this chapter will show how far the Philippine MSMEs have gone in the
adoption of the business excellence model.

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3. Review of Related Literature
Philippine MSMEs
The role of the MSMEs in developing countries like the Philippines is so vast that it cannot be left unnoticed;
it ensures sustainable economic development (APBSD 2004,cited by Habaradas 2008). In 2012 MSMEs in the
Philippines have dominated the market constituting 99.6% of registered enterprises, which created more than
60% of the total employment in the country (Tacneng (no date), Leano 2004, DTI 2012, Gumasing 2013, Juanzon
and Muhi 2014). In addition, MSMEs contributes over 32% of the gross domestic product of the country (Leano
2004). From the foregoing statistics alone, MSMEs can be considered as the backbone of the Philippine
economy. Ironically, the support that these MSMEs receives from the government far outweighs their
contributions to the economy of the country; thus, making these MSMEs susceptible and vulnerable to threats
affecting their sustainability.
Table 1. MSME Average Growth Rate Categorized per Sector

For the past decades, studies have shown that the growth of the MSMEs in the country has subdued
(Aldaba, 2015; Aldaba and Aldaba, 2014; Berry and Rodriguez 2001). Though the average growth rate of
MSMEs categorized per sector have shown an increase in the most recent years (See Table 1), they have not
substantially increased value added, employment, and gross domestic product as to effect substantial growth
to the overall economy of the country.

Figure 1. Contribution of SMEs to GDP

Compared with other neighboring countries, the Philippine SMEs contribution to the country’s GDP
recorded the second lowest, next to Malaysia (World Bank 2013, cited by Mendoza 2013). This is a clear

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manifestation that MSMEs in the country do receive substantially inadequate support from the government
for their growth and sustainability.
Table 2. MSME Contribution to Value-Added Categorized per Sector

Crystal-clear from the figures presented in Table 2, categorized by major economic sector, MSMEs
contribution to value added have shown a consistent decrease since 1981. This however, is to the exclusion of
the services sector which recorded a very modest increase since 1981.
Table 3. MSME Contribution to Employment Categorized per Sector

Likewise, in terms of MSMEs contribution to employment, it is noteworthy that the sector of agriculture,
fishery and forestry, which is the largest provider of employment from 1975-1999, recorded consistent and
significant decrease from 52.83% for the period 1975-78 to 36.07% for the period 2000-2011, or a decrease of
about 16% (See Table 3). The declining trend is also true to the sub-sectors of industry, except in the case of
construction which increases to a very modest rate of 0.28% from the period 1990-99 to 2000-11. However, in
general, industry sector recorded for the same periods a decline from 15.98% to 15.10%. In the most recent
period, services sector became the largest provider of employment.

Figure 2. MSMEs Contribution to Export, Import and Trade

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Finally, as to export, import and trade, MSMEs contribution shows an increasing trend from 1990 to 2000
and a decreasing trend from 2000 to 2011 (See Figure 2). Interestingly, the imports of goods and services have
always been greater than the exports of goods and services. The same may be attributed to the fact that
industry sector constitutes the minority of the MSMEs.
Philippine MSMEs Crisis
The slow acceleration of MSMEs in the country was caused by numerous barriers affecting their growth.
A vast amount of literature is devoted in understanding these different barriers and the policies formulated in
addressing the former. In this contemporary society, the biggest challenges that MSMEs have to deal with still
include insufficient access to financial resources, inadequate managerial expertise and competent personnel,
and unfriendly environment in doing business.
Access to Finance - To aid the MSMEs along their journey, the Department of Trade and Industries (DTI) is

mandated as the main government agency responsible for the development of MSMEs. To address the need
of MSMEs to greater access to financing needs, there were several laws created for the purpose. Republic Act
6977 of 1991 as amended by RA 9501 of 2008 otherwise known as the “Magna Carta for Micro,
Small and Medium Enterprises (MSMEs)” in summary, provides the following salient provisions of the
law pertaining to extending financial assistance to MSMEs:


creation of the Small and Medium Enterprise Development (SMED) Council to consolidate
incentives available for SMEs;



creation of the Small Business Guarantee and Finance Corporation (SBGFC) to address SME
financing needs; and



allocation of credit resources to SMEs by mandating all lending institutions to set aside 8% of their
total loan portfolio to SMEs (6% for small and 2% for medium enterprises).
RA 9178 otherwise known as Barangay Micro Business Enterprises (BMBE) Act was enacted in 2002. The
law provides support to microenterprises and the informal sector through “incentives to local government
registered barangay micro enterprises, exemption from income tax, reduction in local taxes, exemption from
payment of minimum wages, financial support from government financial institutions and technological
assistance from government agencies” (Aldaba, 2015).
Under the foregoing laws, programs implemented include the lending programs, known as SME Unified
Lending Opportunities for National Growth (SULONG) and the One Town, One Product (OTOP) (Leano,
2004). Both programs provide comprehensive financial assistance package as a start-up working capital at a
low interest rate per annum.

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Ease of Doing Business - Gumasing 2013 refer to ease of doing business as "such procedure, regulations and
policies that bear direct influence to ensure business build up and promote business development constitutes
what most businesses". Relating to the foregoing, the Philippines has been recording a dismal performance in
the competitiveness arena. According to World Economic Forum (WEF), out of the 133 world economies
included in the study, the Philippines ranked 75th in 2006 and 71st for 2007 to 2008. This may be attributed to
the country's failure to provide a conducive environment for planting and doing business.
In a study conducted by World Bank in 2013 entitled "Doing Business", it revealed that starting a business
in the Philippines requires 16 procedures, takes 36 days, and cost 18.1% GNI per capita, making it land at Rank
161 (Refer to Figure 3).
Figure 3. Doing Business in the Philippines

The same study showed that starting a business in the Philippines necessitates the compliance to several
requirements. Figure 4 reveals the number of procedures in starting a business in various cities in the
Philippines. The too many requirements as Gumasing (2013) articulated, was attributed to excessive
bureaucracy and red tape in getting a business permit.

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Figure 4. Doing Business in Various Cities in the Philippines

These studies conducted by the World Bank are clear indications of the need to simplify, streamline and
improve the requirements and processes in doing business in the country. This would produce enabling
government that may facilitate an increase in the number of registered MSMEs.
In addition, the 2004-2009 ASEAN Policy Blueprint for SME Development includes the fine-tune policy &
regulatory framework for SME development, and promotion of public-private synergies & partnerships for
SME development & integration, as activities under the program area creating conducive environment.
To further improve processes, adherence to a certain quality management system (QMS) or international

standards, such as ISO 9001:2015 may also contribute to efficiency in delivery of goods and services. QMS is
the interaction of people, process, and documentation to meet the customer’s stated and implied needs. The
result would be a reduction in inefficiencies and waste, improved work practices, increased morale of the
management team, and the opportunity for a greater market share (Mohammed & Abdullah 2012, cited by
Juanzon and Muhi 2014).
Technical Know-How - These challenges confronting the MSMEs are even aggravated by the paradigm shift
to globalization and regional integration. This call for liberalization from global market players also exposes
the MSMEs to the high risk of competition. This is even more alarming among MSMEs from developing
countries as they have to be at par with MSMEs from developed countries.
MSMEs from the Philippines still experience the same old problem of difficulty in penetrating the
international market despite substantial trade and investment liberalization (Aldaba and Aldaba 2012). With
the continuous call from international economic players for globalization and regional integration, there
would be an overflowing production of goods and services, which however, is tantamount to fiercer
competition. It is thus, a great challenge on the part of the government to prepare its MSMEs to be globally
competitive.
In line with the production of goods and services, the MSMEs have to consider two parameters to meet
consumer preferences and market demands: the price and non-price parameters such as product quality,

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health and safety in consumption, social equity in employment and production, and ecological implications
of products and processes. These processes require the "adoption of new and innovative business and
industrial organization models, and the upgrading of production and marketing processes by most SMEs"
(Wattanaprutipaisan 2002b, pp. 63-64; Momaya 2000, pp. 160-161; and Altenburg 1999, pp. 32-34, cited by
Wattanaprutipaisan 2003, p. 4).
Meeting consumer preferences and market demands based on the aforementioned parameters will be a
good start to penetrate the international market. Otherwise, MSMEs will be threatened by the free flowing of
goods and services. In fact, even prior to the conception of globalization and integration, the country's local
market is already flooded with imported products, particularly from China. These imported products which

are sold at a significantly lower price have been a great threat to locally produced goods.
To be at par with international market players, several mechanisms were considered to enhance the
competitive advantage of local MSMEs. A dynamic and efficient MSMEs contribute “in creating international
competitive advantage” (Hall 2003, cited by Habaradas 2008). As part of the activities under the 2010-2015
ASEAN Strategic Action Plan for SME Development, the DTI designed and implemented "training and
entrepreneurship development programs to provide existing and potential entrepreneurs with the necessary
skill and knowledge to become competitive players in both the domestic and international markets . The DTIPhilippine Trade Training Center (PTTC) designs and develops training curricula and instructional materials
and conducts training programs for MSMEs. Its programs and services include entrepreneurship
development, business management, export management, IT and webpage development, quality and
productivity, and international standard seminars like ISO 9000 quality management system" (Aldaba, 2015).
Assessing Government Interventions
There is no question that the government on its part was able to design and implement programs and
projects that will foster the growth and development of MSMEs considering its huge contribution to the
national economy. However, in a recent study evaluating the implementation of the 2010-2015 ASEAN
Strategic Action Plan for SME Development and 2004-2009 ASEAN Policy Blueprint for SME Development,
results show that efforts of the government were futile. The study reveals that the programs and projects of
the government in response to the 2010-2015 ASEAN Strategic Action Plan for SME Development and 20042009 ASEAN Policy Blueprint for SME Development yielded low average effectiveness scores, which scores
ranged from without- to no- or little concrete impacts on the implementation (Aldaba 2015).
While there are initiatives from various government agencies for MSME development, it can be gleaned
that there is no single agency or department that monitors and coordinates all these programs and policies of
the government. In the case of Cambodia for example, up until 2014 there was no single department which
oversee all programs and policies for SME development. In fact, “as many as 25 different ministries and
organizations have developed their own SME promotion strategies, regulations and policies focusing on
achieving varying outcomes” (Bailey, 2008). None of these ministries coordinate their respective programs
and policies which have considerably resulted to duplication of efforts and redundant programs and policies.
Consequently, in the yearly journal published by World Bank entitled, “Doing Business”, Cambodia ranks
below the median.
In relation to the foregoing, it is thus imperative to ensure coherence and joined-up government efforts in
order to effectively manage the different programs and policies created for MSME development. Once
coherence and joined-up government are achieved in as far as the various initiatives of the government for

MSME development are concerned, the same has to be aligned with the program and policy measures at the
ASEAN level. Aldaba (2015) pointed out that in working out for the complementation in the implementation
of the program and policy measures at the ASEAN and domestic level requires “an integrated approach and
coherent set of domestic and regional policies and programs designed with the direct involvement of SMEs”.

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Moreover, most of the assessed program and policy measures are still in place despite the significant
findings of Aldaba (2015) on the implementation of the 2010-2015 ASEAN Strategic Action Plan for SME
Development and 2004-2009 ASEAN Policy Blueprint for SME Development. This perhaps is one of the
impediments on the various programs and policy of the government of MSME development --- the absence of
a monitoring and evaluation mechanism integrated in the design of a program or policy. In a study conducted
by Asian Development Bank (2009) entitled, Enterprises in Asia: Fostering Dynamism in SMEs, it revealed that
“while individual assistance programs and country experiences vary considerably in their scope and design,
many of the programs to support SMEs have common weakness”, which include its observation pertaining to
SME programs not being subjected to rigorous evaluation.
Accordingly, based from the foregoing, the amelioration on the program and policy measures for MSME
development focused on the integration of the various existing government initiatives, which have been
rigorously evaluated and are proven to be effective and with significant impact to its intended beneficiaries.
Business Excellence
Total Quality Management (TQM) as it was first known, but which is now commonly referred to as the
Business Excellence model (Mann et. al., 2008) is about adopting a holistic approach to strengthen the
management systems and processes of an organization for growth and productivity improvements (SPRING
Singapore, 2010). The business excellence model helps organizations improve their performance through the
conduct of an organizational assessment using an internationally benchmarked business excellence
framework.
To date, the business excellence model has been adopted in several countries across the globe, including at
least seventeen (17) countries in Asia. The Philippines on its part has adopted the Malcolm Baldrige Criteria
for Performance Excellence in setting up its National Quality Award in 1998, which is the Philippine Quality

Award (PQA). The award application to PQA is open to both public and private sector organizations,
regardless of industry, size, structure or stage of development. Noteworthy, that since the PQA was
established, none from the MSME has ever been a recipient of PQA at any level. There are several reasons this,
which may have to do with awareness of and capability to adopt business excellence model, needless to state
other factors herein stated in earlier section.
Interestingly, Soliman (2012) has observed that in spite of the inarguably huge promising benefits of
business excellence models, “the practice is still considered to be very costly for the global small to medium
size (SMEs) organizations to adapt.” He anchored his claim on the fact that “in order to achieve business
excellence in the organization, the quality level of multiple dimensions of the organization must be measured
and then improved, such dimensions are leadership, customer’s satisfaction and teamwork” (Kanji, 1998, cited
by Soliman, 2012). Boys et. al. (2004) has suggested instead alternatives paths for small to medium sized
organization in their journey towards achieving business excellence for their globalized businesses. “These
alternative paths are firstly work on acquiring ISO9001 then move towards acquiring ISO9004, which an
industry specific standards. These two certifications according to the authors are much cheaper than going
straight on persuading business excellence; also they will definitely guide the globalized small to medium
sized firms (SMEs) toward achieving business excellence for their organizations in the future” (Boys et al.,
2004, cited by Soliman 2012).This is the case in the Philippines, where MSMEs are more inclined to acquiring
ISP 9001 certification. Note however, that such certification is likewise costly in the Philippines hence, only
few MSMEs are certified to such standards. Moreover, Terziovski (2003) as cited by Soliman (2012) had
suggested that step for SMEs in their journey towards achieving business excellence, which is “to strengthen
their networking practices in order to be able to compare themselves informally with the best in class on
regular basis”.

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Meanwhile, Wu (2009), in his Doctorate thesis, has summarized the main challenges to measuring
performance in SMEs as follows:
First, collecting performance information from privately held SMEs is often difficult due to a lack of
historical information and accessibility. The information is often imperfect and the accuracy is hard to be

checked even if the information can be obtained. For example, traditional financial measures of performance
are often unavailable (Brush and Vanderwerf 1992, Chandler and Hanks 1993; Wang and Nag 2004)
Second, financial data is difficult to interpret (Barnes, Coulton et al. 1998). This is because SMEs usually
have small starting base, enormous and erratic growth rate and uneven record-keeping (Sapienza and Grimm
1997)
Third, many measures, such as future profits and survival, require a longitudinal sample-design. It is
inappropriate to use such measures on an SME, however, due to the group’s typically short operation-history
(Brush and Vanderwerf 1992, Chandler and Hanks 1993; Wang and Ang 2004).
Fourth, financial data is often influenced by industry-related factors (Wang and Nag 2004). The
performance measures for ICT SMEs present a different connotation from that for traditional industries.
Fifth, there exists possible source bias, e.g. owner/founder might manipulate the related information in
propaganda (Brush and Vanderwerf 1992).
Sixth, SMEs’ future and potential performance is more important than lagged performance. This requires
that performance measurement systems not only measure lagged performance, but also capture future
performance (Kaplan and Norton 1992).
Seventh, most SMEs focus on day-to-day operations. There may not be enough resources to execute
comprehensive PM measurement (Stephens 2000).
Finally, the decision-making processes in SMEs are always not formalized and their strategies are often
poorly planned, which influences the standard PM system employed in SMEs (Garengo, Biazzo et al. 2005).
The Business Excellence Framework
With the growing challenges to MSMEs for growth and sustainability in the globalized market, several
business excellence models for performance improvement were developed by different national and regional
bodies. Most countries have adopted and/or modified existing models, while other organizations and
researchers have developed their own approaches to business excellence. In this section, most commonly used
business excellence models will be highlighted.
The origin of business excellence may be traced back in the 1980s when total quality management (TQM)
was a trend among companies (Porter et al., 2004). However, as correctly pointed out by Elmholt et al. (2013),
leading gurus within TQM have described points and steps for quality improvement like Deming’s 14 points,
Juran’s 10 steps, and Crosby’s 14 steps, but these frameworks for improvements have became struggles among
companies as the same “do not provide guidelines on how to turn such philosophies into practice (Adebanjo,

2001). Consequently, several business excellence models were developed and later became popular for the
exact same reason that makes TQM somewhat unpopular (Adebanjo, 2001). Nevertheless, as appropriately
pointed out by Black et al. (1996), the TQM remains basis for excellence and the business excellence models as
useful tools to assess the former.
Of the several business excellence model used across the globe, this research will focus on the Malcolm
Baldride Criteria for Performance Excellence as the same is the business excellence model adopted by the
Philippines in its National Quality Award. These theoretical approaches to business excellence will provide as
initial backdrop in determining the level of maturity of MSMEs in the Philippines and their capability to adopt
business excellence model. Likewise, it will look into details that may be necessary in the quest to develop a
program implementation framework that will aid MSMEs in the adoption of a business excellence model for
performance improvement.

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The Malcolm Baldrige National Quality Award (MBNQA) was established some decades ago from 1951,
when the Deming Prize was founded in honor of Dr. W. E. Deming for his contribution in promoting quality
control in Japan. Likewise, the MBNQA was also founded in honor of Malcolm Baldrige, the US Secretary of
Commerce from 1981-1987, for his contribution to quality management (NIST website). It is worth mentioning
that MBNQA started as a framework for manufacturing, services and SMEs before education and health care
sectors were included in 1998 (Elmholt et al., 2013).
According to the official website of National Institute of Standards and Technology (NIST), the“MBNQA
is a customer-focused award that raises awareness on quality and performance excellence to achieve
competitive advantage and higher productivity for U.S. organizations. It is a framework organized in seven
main categories, which include Leadership; Strategy; Customer; Measurement, Analysis, and Knowledge
Management; Workforce; Operations; and Results.
In a study conducted by Stephens (2000) as cited by Wu (2009), which evaluates the implementation of the
Malcolm Baldrige Criteria for Performance Excellence in SMEs, he identifies the importance of the framework
to small firms and to what extent this framework were used by small businesses. It surveyed management
practices of business, asking leaders to rate them from least to highly important, and the result showed that

strategy development processes and leadership were ranked higher than other items (Stephen 2000, cited by
Wu, 2012). It can be implied from the same that managers in small firms spend more time on day-to-day
operations.
There were several studies conducted to investigate the impact of business models to organizations. To this
end, winners of MBNQA and other national quality award were used as samples. Results showed that award
recipients (which imply adoption of a business excellence model) have a positive correlation to financial results
(Jacob et al., 2004) and improved performance (Hendricks et al., 1997; Eriksson et al., 2003). Meanwhile, Wu
(2009) in his doctorate thesis, made a comparison among the most commonly used framework for performance
measurement and found that MBNQA as a business model is the most suitable for SMEs as it meets the SME
performance measurement requirements, in that it is dynamic, flexible and non-institutional, though it falls
short on the measure of competition and other external factors.
4. Research Objective
This research aims to investigate and assess the capability of the MSMEs to adopt the business excellence
model, the Malcolm Baldrige Criteria for Performance Excellence, which is the model adopted by the
Philippines for its National Quality Award – the Philippine Quality Award. From the foregoing, the researcher
seeks to develop a program implementation framework that will help MSMEs in the adoption and
institutionalization of the business excellence model.
As Wu (2009) pointed out, performance results and enablers should be part of any comprehensive
performance measurement framework. Such is the case in MBNQA model, which divides the criteria for
performance excellence into enablers and results. Consequently, to assess the maturity of MSMEs, both
performance enablers and results should be measured. On the other hand, the enabler will be scrutinized in
assessing the possible issues and concerns that might hinder MSMEs from implementing the MBNQA
framework.

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Figure 5. Performance Improvement Framework

As shown in Figure 5, performance of MSMEs will be measured both in terms of performance enablers and

performance results. The performance enablers, which produce the performance results, are to be subjected to
continuous review and improvement. Developments arising from the performance improvement will be again
measured using both dimensions of performance measurement. Consequently, as performance enablers are
the drivers to performance results, this research will delve into how they can be implemented to MSMEs to
achieve superior results.
Using the IPO format (Input-Process-Output), the conceptual framework of this study was anchored on
the foregoing.
Figure 6. Conceptual Framework

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Figure 6 shows the conceptual framework of the study. The demographic profile of the respondents, which
include position, sector, business type, total assets, total revenue, number of employees and number of year
in operation were among the inputs together with the BE Criteria for performance excellence and BE selfassessment for SMEs. These inputs are processed through tools and analysis to yield the desired output of this
study, which include BE for MSME Program and a Program implementation framework.
The Research Methods
As this present study involves the description, recording, analysis, and interpretation of the present nature,
composition or processes of a phenomenon, the researcher deems it appropriate to employ mixed
methodology. A quantitative research was utilized to measure the level of maturity of MSMEs as against the
Malcolm Baldrige Criteria for Performance Excellence. Meanwhile, a qualitative review of related literature
and studies and a focus group discussions was employed in order to determine the applicability of the
MBNQA framework to MSMEs, and to identify the issues and concerns of MSMEs in adopting a business
excellence model.
The researcher used a questionnaire in order to gather the necessary data to measure the level of maturity
of MSMEs as against the Malcolm Baldrige Criteria for Performance Excellence.
Data for this study was collected through the use of a survey questionnaire. Part 1 of the survey
questionnaire solicited the following information from the respondents: (1) industry; (2) number of employees;
(3) total assets. Part 2 delved on questions touching the level of maturity of MSMEs on the different MNBQA
criteria, which was developed by Mann et al., through the Asian Productivity Organization (APO). The

questionnaire was especially designed for MSMEs and has been used by APO member countries in assessing
the level of maturity of MSMEs on business excellence. Finally. Part 3 made used of the PQC Company Profile
and Self-Assessment Form.
Summary of Findings
The overriding purpose of this study was to assess the level of maturity of MSMEs as against the Malcolm
Baldridge Criteria for Performance Excellence, which will be used as basis in formulating a program
implementation framework that will help MSMEs in adopting and institutionalizing a business excellence
framework for superior business results. Determining the different BE category items perceived as important
by MSMEs, including assessment of the level of maturity, and how these factors may be utilized in the
formulation of a Program Implementation Framework, assumed a high degree of importance during the
literature review conducted for this study. Having this end in view, it became imperative to acquire full
understanding of the nature of MSMEs. To provide for the possibility to determine the performance and result
determinant factors and to assess MSME level of maturity as viable components in the formulation of the
proposed BE Program and BE Framework for MSMEs, it was likewise important to develop a program
implementation framework that will give meaning to the programs and frameworks developed.
An instrument was developed following the pattern of the Philippine Quality Challenge (PQC) selfassessment tool for the assessment of the different performance and result determinant factors which the
MSMEs have considered themselves as important for organizational development.
Two hundred twenty (220) MSMEs were asked to accomplish the instrument developed for this study.
They were asked to provide information about themselves, specifically on the selected demographic variables
provided. Likewise, they were asked to determine the different category items which they deem valuable in
their respective organization. Consequently, the research problems posed in the first chapter of this study
were addressed upon testing the data collected from the subject respondents.
On the basis of the data gathered, the following are the significant findings:

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Of the seven (7) criteria categories, respondents generally considered management/leadership,
planning/strategy and customer as Important in their organizations for performance improvement. On the
other hand, respondents partly agreed only as to the importance of the remaining criteria categories or

Moderately Important at its adjectival rating.


The overall rating of the respondents reveals that subject enterprises are generally in Progressing
level.



When grouped according to demographic profile, respondents assessment of the different BE
criteria categories shows no significant difference, except in the case of position which reveals
significant differences on their responses in the measurement and data management, and
workforce categories.



When grouped according to demographic profile, respondents’ assessment of their organizations
level of maturity shows no significant difference.



The agreement rating on business excellence level of maturity has a weak correlation with all
ordered demographic profiles.



The agreement rating on business excellence level of maturity has a strong correlation with all
category items

Proposed BE Framework for MSME
The PQA Criteria for Performance Excellence is a holistic framework to improve organizational

performance. However, MSMEs find such framework relatively complex to adopt considering the available
resources and other factors internal to them. Thus, a BE framework tailor-fitted with the need of the MSMEs
was developed through the result of the survey questionnaire.
The resulting BE Framework for MSME is based largely on the structure of the PQA Criteria for
Performance Excellence Framework. It deals with both performance determinant factors and business results
as important ingredients of organizational performance excellence.
Drawing on the discussion on the results of the tools employed, the BE Framework for MSME may be
summarized in Figure 9.
Figure 9. BE Framework for MSME

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The proposed BE Framework for MSME will help subject organizations in their journey to performance
excellence. Specifically, the framework will:
Provides MSMEs with a comprehensive and holistic framework for organizational performance
improvements. It is a framework which will serve as a blueprint that will guide MSMEs in dealing with all the
performance determinant factors which yields business results.
Enables MSMEs to have an assessment of their organizations’ performance beyond financials, which in
turn will help them determine their organizational strengths and opportunities for improvement.
Consequently, this will provide them with an opportunity to address potential threats and problems.
Serves as a tool for continuous improvement. MSMEs can make use of the framework in evaluating their
processes and thus, can make necessary improvements. Such activity may be done on a regular basis to ensure
that MSMEs adapt to the need and demands of the changing market.
Finally, it may be used for performance measurement. MSMEs, may identify key performance indicators
in every criteria categories and may make use of the same to measure their organizational performance. Thus,
MSMEs will have a way to monitor its performance on a regular basis.
Proposed BE Program for MSME
After formulating the BE Framework for MSMEs, another important point to discuss is the question on
how the same can be made useful in an organization. Consequently, a program guide to that effect was

developed which provides a step by step approach to fully adopt the BE Framework for MSME. The BE for
MSME program approaches as shown in Figure 10 includes capability building, self-assessment and culture
building.
Figure 10. BE Program for MSME

Capability
Building

SelfAssessment

Culture
Building

The capability building approach provides the basic foundation on the adoption of the BE Framework for
MSME. It capacitates organization through orientations, trainings, workshops and/or seminars for the
organizations to have the right appreciation of the entire program and at the same time acquire technical
knowledge in the implementation of the same.
After capacity building, MSME may opt to tap external evaluators assess their organization as against the
BE framework or they may internally check on their own business management and processes through the
use of the framework. This BE for MSME program fosters the use of self-assessment as most of the respondents

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claimed, as revealed in the results of the survey questionnaire, that the common barrier in the implementation
of any performance improvement initiatives is that there is “no time and resources to do them”. Consequently,
a do-it-yourself self-assessment would save them time and resources as compared with a third-party
evaluator. As part of the self-assessment, MSMEs will have the opportunity to identify their strengths and
opportunities for improvement. Thereafter, they can formulate plan of actions to address the identified areas
which need improvement. Component activities as shown in Fig. 11 also include implementation of plan of

action, monitoring and evaluation.
Figure 11. BE Program Journey

Orientation on
BE/Training on SelfAssessment

Monitoring and
Evaluation

Self-Assessment

Implementation

Action Planning

As manifested by Figure 7, the BE Program journey is a cycle which implies continuous improvement.
Thus, MSMEs are encouraged to conduct self-assessment regularly and undergo the same series of activities
for performance improvement. As the organization repeatedly does such activities, it slowly becomes a
community of practice which eventually would be part of the organizational culture.
Proposed Program Implementation Framework
A BE framework specially designed for MSMEs has been developed in accordance with the conceptual
framework discussed in Chapter 2. The adoption and implementation of the same is another point in question
which requires answer to address the following inquiries:
What are the specific requirements of the implementer for the implementation of the program?
What are the specific requirements of MSMEs for the adoption and implementation of the program?
How to harmonize existing government initiatives for MSME development with the BE for MSME program
implementation framework.
In developing the BE for MSME program implementation framework, it will take into consideration both
the specific requirements of the program developer and that of the recipient of the program – MSMEs.

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Figure 12. Specific Requirements of Program Developer and MSME in the Development of Program
Implementation Framework

Figure 12 shows the relationship of the specific requirements of the program developer and the MSMEs.
The program implementation framework must satisfy the common requirements of both the program
developer and the MSMEs, which includes appreciation, administration and technical requirements.
Appreciation refers to the attitude or mindset necessary in carrying out the program. The program
developer and/or implementer shall have the right attitude towards the program being
developed/implemented, as the same dictates what seed is to be sown and how it should be sown. Basically,
the MSMEs’ appreciation of the program is largely dependent on the program developer/implementer. Thus,
the developer/implementer shall effectively communicate its appreciation to MSMEs to create the right
mindset and attitude in the adoption and institutionalization of the program.
As to administration, this refers to all the aspect pertaining to the management of all activities for the
implementation of the program. This includes resources that will have to be utilized for the completion of the
activities, such as material, capital and even human resources. Likewise, administration aspect of any program
implementation covers all functions of management.
Finally, the technical aspect speaks of the readiness of both the developer/implementer and the MSMEs.
On the part of the former, it refers to its technical know-how to develop and implement such programs, while
the readiness of the latter refers to its capability to adopt and implement the program.
As the result of the survey questionnaire reveals that the common barrier in adopting performance
improvement tools is the lack of time and resources, all stakeholders was considered in the proposed program
implementation framework. With the indubitable contribution of MSMEs both for the economy and the society
at large, it is a must that the government shall look after their welfare. Generally, MSMEs lack appropriate
finance and other resources and therefore require special attention from the government. The MSMEs inherent
informational opaqueness and limited finance sources available are sufficient justification for the government
to enter into the picture and provide the necessary assistance, particularly programs and policy measures for
MSMEs development.

The success of program and policy measures for MSME development is anchored on numerous factors,
which necessitates collaborative effort from various stakeholders, including public and private sectors.

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Consequently, it is imperative that such efforts from different stakeholders need be coherent and aligned in
order to achieve better results.
To date, there are and hand few initiatives of the government directed towards MSME development, which
however, is not enough to cover their huge number. Apart from DTI, several other agencies like Development
Academy of the Philippines (DAP), Department of Science and Technology (DOST), University of the
Philippines, Institute of Small Scale Industry (UP, ISSI) and Local Government Units (LGU), to name a few,
are designing and implementing their own programs and projects for the growth and development of MSMEs.
Taken collectively, these efforts nevertheless may be characterized as unintegrated, uncoordinated and
independent, or in other words, premature and an incomplete intervention. This calls for a program that
would unify all the interventions provided by these different agencies tapped to support the development of
MSMEs thus, ensuring an effective and efficient intervention from womb to tomb, or from creation to
dissolution of MSMEs.
Integrated Policy and Program Measures for MSME Development (IPPMMD) calls for horizontal and
integrated governance, bridging all the different public and private agencies involve in MSMEs development
to come up with a single program merging the various existing programs and projects for MSMEs
development.
This program is all encompassing as to include assistance from womb to tomb, or from creation to
dissolution of enterprises. Enrolment to this program would require participating enterprises to be under a
continual monitoring and evaluation from the implementing agencies. This is to ensure appropriate
intervention from the implementing agencies designed and patterned on the specific needs of every
participating enterprise. Both aspiring and practicing entrepreneurs may enroll in the IPPMMD program. The
program would have the following phases:
Step 1 - Enrolment of aspiring and/or practicing entrepreneurs of their interest to participate in the
program.

Step2 - Application for financial assistance, either for starting capital or for expansion.
Step 3 - Approved applications would receive funding and technical assistance needed in carrying out its
objectives, including facilitation of enabling environment conducive in doing business.
Step 4 - In the course of the business, applicants will be required to adopt Business Excellence Framework.
Step 5 - After a year of operation and program evaluation, all participating organizations will have to
undergo self-assessment. Result of the same will be considered for the organization's action planning for
performance improvement.
Step 6 – To continuously avail of program services, MSMEs should undergo self-assessment every year.
There exist a significant number programs and projects by the government for the growth and
development of MSMEs. These efforts, however, would not suffice without the proper mechanism to monitor
and evaluate the results of the same. The existence of the different activities embraced under the 2010-2015
ASEAN Strategic Action Plan for SME Development and 2004-2009 ASEAN Policy Blueprint for SME
Development, did not produce good results. However, the same does not mean that the activities were
completely unnecessary and useless. Thus, in the proposed IPPMMD for MSMEs, the same activities were still
incorporated, except these activities will no longer be implemented independently, but rather, interrelated.
Thus, the different agencies engaged in the development of MSMEs are encouraged to enhance horizontal and
bridging governance by interweaving all their projects and programs into one comprehensive program – the
IPPMMD.
5. Conclusions

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On the basis of the above summary of findings in this study, this research came up with the following
conclusions:
The researcher concludes that the subject MSMEs are relatively on the progressing stage. This means that
the subject enterprises, in general, already have a basic understanding and appreciation of BE and have already
installed systematic improvement approaches in some of their business units or offices. Enterprises under this
level show openness to learn and implement new ideas and programs, which is a good manifestation of their
commitment to improvement initiatives. Moreover, they deem the following criteria categories as the most

important determinant factor for organizational improvement:


Management/Leadership



Planning/Strategy

 Customer
There exist significant differences in the responses of the respondents when grouped according to position.
This may be explained by the nature of work and extent of knowledge of the respondents in the different items
on each of the criteria categories. For instance, lower level positions may see customer category as the most
important among the rest as they are the one with frequent and direct contact with the customers.
As to the level of maturity, there exist no significant differences to the respondents’ assessment when
grouped according to demographic profile. This is further bolstered by the findings that level of maturity has
a weak correlation on the different demographic variable, Thus, it can be deduced from the foregoing that
none of the demographic profiles is a determinant of level of maturity.
Note, however that the strong correlation of the level of maturity and all the BE criteria categories would
readily reveal the significance of the latter to improve the former. Consequently, a BE framework would be a
good tool to improve organizations’ level of business maturity.
Finally, as time and resources are considered as among the major factors in implementing BE programs,
MSMEs would really find it difficult to adopt and implement the same.
6. Recommendations
Based on the results of the findings and conclusions derived, the researcher prepares the following
recommendations:
The results of this study should drive them to strive for greater goals, and further growth and development.
There is still lot of things to learn; and as the society continues to change, they must also be flexible to know
how to cope with the changes that are taking place.
Furthermore, considering the significant difference in the respondents’ assessment when grouped

according to position, it is strongly recommended that organizations improved their system of communication
to ensure effective deployment of information.
The result of this study should further be validated not just by another performance appraisal instrument,
but through a third-party assessment to ensure objectivity.
The researcher further recommends to tap the government and other stakeholders for assistance to ensure
implementation of the proposed BE Program for MSMEs.
Noteworthy that from the result of the study, organizations were able to know their opportunities for
improvements and as such plans of action should develop to address the same. Moreover, capability building
activities should be developed that will improved the performance of an organization on the different criteria
categories.
Based on the results and findings of this study, the researcher was able to formulate a BE Program for
MSMEs and an Implementation Framework, which primarily aims to help MSMEs in their growth and

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development. As such, it is highly recommended that the same be subjected for impact study to ensure its
effectiveness.
The researcher recommends that a wider scope of this study be conducted to validate or reject the findings
herein derived.
Finally, it is recommended that further studies can be undertaken on leading MSMEs.
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