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First Device Firm to Win Baldrige Award Finds Profit in Quality

ADAC PhotoAn MD&DI January 1997 Feature Article by Greg Freiherr

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

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

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

According to Lowe, now ADAC's chairman and CEO, following the criteria has helped thrust the company into a leadership position in the nuclear medicine industry and enabled it to expand its market share from 12% in 1990 to 50% in 1996, despite a downturn in the nuclear medicine market, which had generated an estimated 95% of the company's sales in 1995. Only by taking over the markets of competitors could ADAC revenues grow from $101 million in fiscal 1991 to $185 million in fiscal 1995.

"The Baldrige criteria provided the focal point for the company to develop a strategy based on continuous improvement and customer satisfaction," says Mosbarger. "They outlined not only customer focus and process development but also the balance of human resources—the idea that all the constituents of the company—the investors, the customers, and the employees—have to be in balance for the company to grow."

According to Commerce Secretary Mickey Kantor, in successfully implementing these criteria ADAC came to represent a new breed of American business: grounded in traditional business values such as putting customers first, trusting employees, building quality into products and services, and being responsible corporate citizens, but also with a focus on the future and a passion for continuous improvement. The Commerce Department presented four Baldrige awards in 1996; the other three were given to firms outside health care. When announcing the awards, Kantor said the winning companies were models for how people and organizations should operate.


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 behind adopting the criteria was simply the desire to change and improve our company by implementing a new management system," says Doug Keare, vice president of quality for ADAC. "In the early 1990s, we concluded that relatively dramatic improvement was needed. We looked around for models and determined that the 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 and management, process management, business results, and customer satisfaction. Implementing them did not exclude the use of any quality-oriented systems. The criteria actually promote adopting other quality techniques. As Keare says, "The Baldrige criteria are nondenominational; there is no Baldrige guru."

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

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

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


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

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

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

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

Part II

Copyright © 1997 Medical Device & Diagnostic Industry
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