First Device Firm to Win Baldrige Award Finds Profit in Quality 2519

An MD&DI January 1997 Feature Articleby Greg Freiherr

For ADAC Laboratories (Milpitas, CA), the criteria developed by the U.S.Department of Commerce as part of its annual Malcolm BaldrigeNational Quality Award competition have provided a framework as well as animpetus for implementing a total quality system.

"We've found that quality isn't a product; it is having good processes inplace that allow you to continually improve based on your customers' needs,"says Geordie Mosbarger, vice president of operations for ADAC, a manufacturer ofnuclear medicine devices and systems for radiation therapy planning andhealth-care information uses. "It is a combination of having the tools, thetechniques, the customer-driven knowledge, and the infrastructure provided byour quality system and the Baldrige criteria."

Four years ago, ADAC's new president, David Lowe, was determined to use theBaldrige criteria to change the corporate culture--to make continuousimprovement part of the everyday workplace. The success of that effort wasapparent in October 1996, when ADAC became the first company in the health-careindustry to earn the Baldrige award.

According to Lowe, now ADAC's chairman and CEO, following the criteria hashelped thrust the company into a leadership position in the nuclear medicineindustry and enabled it to expand its market share from 12% in 1990 to 50% in1996, despite a downturn in the nuclear medicine market, which had generated anestimated 95% of the company's sales in 1995. Only by taking over the markets ofcompetitors could ADAC revenues grow from $101 million in fiscal 1991 to $185million in fiscal 1995.

"The Baldrige criteria provided the focal point for the company to developa strategy based on continuous improvement and customer satisfaction," saysMosbarger. "They outlined not only customer focus and process developmentbut also the balance of human resources—the idea that all the constituents ofthe company—the investors, the customers, and the employees—have to be inbalance for the company to grow."

According to Commerce Secretary Mickey Kantor, in successfully implementingthese criteria ADAC came to represent a new breed of American business: groundedin traditional business values such as putting customers first, trustingemployees, building quality into products and services, and being responsiblecorporate citizens, but also with a focus on the future and a passion forcontinuous improvement. The Commerce Department presented four Baldrige awardsin 1996; the other three were given to firms outside health care. Whenannouncing the awards, Kantor said the winning companies were models for howpeople and organizations should operate.

A MEANS TO AN END

Awards are sometimes viewed as goals in themselves; the Baldrige award, however,is seen by ADAC executives as a means to an end. "The driving force behindadopting the criteria was simply the desire to change and improve our company byimplementing a new management system," says Doug Keare, vice president ofquality for ADAC. "In the early 1990s, we concluded that relativelydramatic improvement was needed. We looked around for models and determined thatthe Baldrige criteria provided an appropriate road map for changing the company."

The Baldrige criteria address key areas of business management—leadership,information and analysis, strategic planning, human resource development andmanagement, process management, business results, and customer satisfaction.Implementing them did not exclude the use of any quality-oriented systems. Thecriteria actually promote adopting other quality techniques. As Keare says, "TheBaldrige criteria are nondenominational; there is no Baldrige guru."

Over the past four years, ADAC has implemented atotal quality management(TQM) system, the ISO 9001standard, and will meet the new FDAquality system regulation,which is an extension of the ISO standard.

Despite meeting these other quality measures, says Keare, "we truly look atthe Baldrige process as our management system. It is a way to run the companyfrom stem to stern with continuous improvement principles and employeeinvolvement, which are not really endemic to FDA regulations or ISO 9000."

Implementing the Baldrige criteria actually drove the company to become ISO 9000compliant. In its self-assessment, which is part of the criteria, ADACdiscovered that process management was a weakness. "We felt we couldaddress this weakness by finishing up some of the loose ends for ISO 9000compliance," Keare says. "The side benefit of being ISO compliant isthe opportunity to expand sales in Europe, just as being compliant with FDArequirements will allow the company to continue operations in the UnitedStates."

ADAC TODAY

Today teams and fact-finding missions are the lifeblood of ADAC. At any onetime, 70 to 80 teams are working on company problems. These teams may becommissioned by any senior manager and typically include 2 to 10 employees.Company meetings address the vital areas top managers have deemed essential forcompany success and growth. The companywide meetings are held every Wednesdayand Friday at 7:30 a.m. Wednesdays focus on customers; Fridays on internaloperations. They are chaired by Keare and attended by top management, theirimmediate staff, and often 60–100 other employees, who represent the entirecompany hierarchy including the people who turn bolts on the factory floor.

The rank and file often play an important role, especially if the metric beingpresented raises technical questions they can answer. For example, Thorne says,"QA might report a defect found in the nuclear medicine detector. Theymight say the signal is too noisy. And that will spur discussion with someonefrom the manufacturing floor, because noisy is a subjective term. Atsome point, one of the decision makers, either an executive or departmentmanager, will say 'This is my action; we will pull together a team and addressthe issue.' And at subsequent meetings that team will present its findings."

With their focus on customer issues, Wednesdays can become gripe sessions. "Weair a lot of dirty laundry as part of our monitoring of customer satisfaction,"says Bob Starr, vice president of human resources. "If we are havingproblems with a site or a particular piece of equipment, it is up there andshown to the world."

The companywide meetings are actually open to any constituent ofADAC—employees, shareholders, even customers. The idea of having current andprospective ADAC customers sit in on meetings, especially those held onWednesdays, made some managers jittery at first. "Certainly, we were alittle nervous about having customers, who were visiting with the anticipationof buying equipment, attend a meeting where they heard all the negatives, but wehave not found a single downside to it," says Starr. "Actually, wehave found that customers are very impressed with our openness and the fact thatwe are dealing with issues."

Part II

Copyright © 1997 Medical Device & Diagnostic Industry