In the second annual study of its kind in Canada the results still sing the same tune. Including the 2003 winners, the CAE award winning Organizations still outperform the TSX 300 Index 2.75:1.

Many corporate leaders believe that a strategic commitment to Excellence criteria is a tough sell, in that it doesn't have an immediate impact on quarterly results. At the National Quality Institute (NQI) we have worked with many organizations that have demonstrated that such a belief is really just perception and not reality. We can now break this perception and say that over the long term Canada Awards for Excellence (CAE) award winning organizations stock prices have performed substantially better than popular stock market indexes. We believe that leaders who focus on building sustainability in performance, rather than focusing on the quarterly results and the analyst's comments, provide significant shareholder value and "beat the street".

What we see at NQI, is that share prices of publicly traded organizations who have been recognized with the prestigious Canada Awards for Excellence, (both quality and healthy workplace categories) have over the longer term, outperformed some of the most common stock market indexes.

Let's be clear. I am not saying that going for the CAE award will improve your stock price. There are many organizations that do not use such criteria as in the 'Framework for Business Excellence' whose stocks have done well in the market. Likewise, there are some organizations that have been recognized under the CAE award whose stock prices are in a downward spiral. There are many factors that affect individual share prices, such as industry cycles, interest rates etc. What I am saying is that when organizations commit to the strategic implementation of Excellence criteria, on a collective basis their stocks outperform the most popular indexes on the stock market.

Winning the CAE Award is not an overnight project. It requires a commitment at the strategic level to implementing Excellence principles and criteria. Some organizations take the NQI criteria and implement it on their own, others take a more prescriptive approach with programs like our 'Progressive Excellence Program' (NQI PEP). Either way organizations that are recognized will tell you that it took a number of years before they become an overnight success and take home the CAE Trophy!

The Numbers



For the purposes of this study, starting with the 1990 CAE winners who are traded on a stock exchange we bought an imaginary $1000 worth of the stock on the day the winners were announced. On that same day we also invested an imaginary $1000 in three popular Stock Market Indexes (TSX 300, S&P; 500, DJIA). Throughout the years up until the most recent award recipients in 2003 we used the exact same method. The above chart shows the comparison of growth over time.

2003 Results (From October 1990 - September 2003)
- CAE Index Growth of original investment: 129%
- TSX 300 Index Growth of original investment: 47%
- S&P; Growth of original investment: 52%
- DJIA Growth of original investment: 77%

Compared with 2002

Compared to last year there was a dip in the overall results of the CAE index as well as the 3 indexes. Although the overall investment growth was lower in 2003, the ratio stayed very close to what it was in 2002. After a tough year in general on the stock market it is encouraging to see that the ratio has stayed consistent.

2002 Study Results: (from October 1990 to April 2002)
- CAE Index Growth of original investment: 152%
- TSX 300 Index Growth of original investment: 55%
- S&P; Growth of original investment: 73%
- DJIA Growth of original investment: 98%

What does it Mean?

First, winning a CAE award doesn't guarantee good stock market performance. However, organizations that use the 'NQI Framework for Business Excellence' as the backbone for the way they do business are performing well in all aspects of their business including stock price. It means that senior leaders can enhance their goal of creating better shareholder value by committing their organization to implementing, the criteria based on these Principles of Business Excellence…

- Leadership through involvement
- Primary focus on stakeholder/customer and the market place
- Cooperation and teamwork
- Prevention based process management
- Factual approach to decision making
- Continuous learning and people involvement
- Focus on continuous improvement and breakthrough thinking
- Fulfill obligations to all stakeholders and society

There is sufficient empirical evidence that when leaders demonstrate a constancy of purpose through managing their organization based on these Principles and criteria that there will be an improvement in performance results across all areas of the business. At NQI we have seen this time and time again when visiting organizations that have won the CAE in both the private and public sector. Impressive stories of improvement and remarkable results are things that we see every time we step into one of these CAE award-winning organizations.

Break the Perception!

One of the realities of business today is that CEO's and other senior people in organizations are understandably focused on quarterly results as it directly impacts their job security and in most cases their pay cheques. We have heard from many CEO's and senior people in both private and public sector organizations about the challenges of balancing the budget with the long-term success of their organizations.

A report like this one breaks the perception that implementing 'Quality and Healthy Workplace Criteria' is a nice thing to do because it gives you a warm fuzzy feeling inside. We want to demonstrate how implementation of NQI Excellence criteria using the 'Progressive Excellence Program' (NQI PEP) is a smart way to gain a competitive advantage in all aspects of their business including…

- Leadership
- Planning
- People Focus (employees)
- Customer Focus
- Supplier/Partner Focus

Performing well in all of these sections will improve overall organizational performance both in the short and long term.

Conclusion

For years NQI has been talking about how a commitment to Excellence shows up on the bottom line. The facts in this case show that the CAE award winning organizations collectively outperform popular stock market indexes. On its own this data may not tell us that much.

This data combined with the stories and best practices that have come out of the CAE award winners for years clearly illustrates that organizations who pay attention to excellence in quality and healthy workplace see a positive impact on their bottom line.