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enterprises (MSMEs) on the need to streamline its processes and to improve the delivery of its services have never been outdated, and in fact, are becoming more imperative as its business continues to expand This challenges remain and is highlighted even more as the call for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 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 766 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 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 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 767 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 768 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 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 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 769 manifestation that MSMEs in the country receive substantially inadequate support from the government for their growth and sustainability Table 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 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 MSMEs Contribution to Export, Import and Trade 770 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 771 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 Doing Business in the Philippines The same study showed that starting a business in the Philippines necessitates the compliance to several requirements Figure 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 772 Figure 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, 773 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” 774 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 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” 775 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 776 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 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 777 Figure 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 Conceptual Framework 778 Figure 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 of the survey questionnaire solicited the following information from the respondents: (1) industry; (2) number of employees; (3) total assets Part 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 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: 779 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 Figure BE Framework for MSME 780 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 781 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 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 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 782 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 783 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 - 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 - Approved applications would receive funding and technical assistance needed in carrying out its objectives, including facilitation of enabling environment conducive in doing business Step - In the course of the business, applicants will be required to adopt Business Excellence Framework Step - 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 – 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 Conclusions 784 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 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 785 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 References Aldaba, R., 2012 "Small and Medium Enterprise' (SMEs) Access to Finance: Philippines" Philippine Institute for Development Studies, Discussion Paper Series No 2012-05 Aldaba, R., 2013 "Small and Medium Enterprise' (SMEs) Access to Finance: Philippines" Philippine Institute for Development Studies, Discussion Paper Series No 2012-05 Aldaba, R and Aldaba, M., 2014 "Toward Competitive and Innovative ASEAN SMEs: Philippine SME Policy Index 2012 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Philippines: Survey and Empirical Analysis" Alfred University Journal of International Business Research, Volume 7, Special Issue 1, 2008 Tambunan, T., 2008 Development of SME in ASEAN with Referencce to Indonesia and Thailand" Center for Industry, SME Business Competition Studies, University of Trisakti, Indonesia Chulalongkorn Journal of Economics 20(1), April 2008 Tacneng R., no date "Local Banking Market Structure and SME financing obstacles: Evidence from the Philippines" Université de Limoges, LAPE rue Félix Eboué, 87031 Limoges cedex, France Wattanapruttipaisan, T., 2003 "Four Proposals for Improved Financing of SME Development in ASEAN" Asian Development Review, Vol 20, No 2, December 2003 Wattanapruttipaisan, T., 2002 “Promoting SME Development: Some Issues and Suggestions for Policy Consideration.” In UNESCAP, Bulletin on Asia-Pacific Perspectives 2002/03 New York: United Nations World Bank, 2010 "Micro, Small and Medium Enterprises Around the World: How many are there and what affects the count?" World Bank, International Finance Corporation 786 ... 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... 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... 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