by Laura Smith

2005 saw a remarkable occurrence for the Malcolm Baldrige National Quality Award--it was the first time the honor was presented to an automobile dealer. Park Place Lexus, which has 420 employees, operates automotive dealerships in Plano, Texas, and Grapevine, Texas, and has earned this distinction.

In 1994, Park Place Lexus started benchmarking business practices outside the automotive sector. Four years later, it conducted its first internal assessment using the Baldrige criteria and adopted the brand "Experts in Excellence."

Park Place Lexus' Grapevine location had a New Car Client Satisfaction Index score of 99.8 percent in 2004, making it the highest-rated Lexus dealership in the nation. The company maintains a database that tracks all interactions with its clients and has implemented a stringent hiring process that includes multiple aptitude, personality and behavioral tests to ensure that the right people are placed in the right positions. Park Place Lexus also provides extensive maintenance service for its clients' cars. Its revenues have increased from about $70 million in 1995 to $350 million in 2004, and the company forecasts that it will generate revenues of $387 million in 2005.

The dealership uses many means to identify improvement opportunities, including an annual self-assessment using the Baldrige criteria. A quarterly meeting, called "Driving Excellence," is used by dealership leaders to assess progress to goals and performance levels. Improvement activities are planned, executed, tracked and standardized using action plans that result from the strategic planning process known as DRIVE--Define the problem, Recognize the cause, Identify the solution, Verify the actions, and Evaluate the results.

An active listening and learning process for after-market customer care is also paramount to client satisfaction. The dealership acquires information about clients from a variety of sources, including client comments and concerns, follow-up interactions after sales, customer surveys and focus groups. The information is used to develop detailed client profiles, identify key customer needs and preferences, refine service offerings, establish corporate and employee goals, and target marketing and improvement opportunities.

Taken together, Park Place Lexus calls its organization a "house of quality," structured by four core convictions: integrity, outstanding client experience, commitment and winning. Encompassing its quality mission is what is known as its "big hairy audacious goal"--to be the unparalleled retail automotive group in the United States.

Here, Quality Digest gets the inside scoop from Park Place Lexus Chairman Ken Schnitzer on how the company has made quality a priority.

Quality Digest: When and why did Park Place Lexus decide to pursue a Baldrige Award?

Ken Schnitzer: We had been pursuing a quality journey since the inception of Park Place Motorcars in 1987, when we decided to operate a different kind of dealership--one with a long-term focus. In 1997, we became interested in the Baldrige criteria as a method to manage the organization and drive improvements. The Baldrige criteria provided a framework for linking our systems together and showing areas to improve. In 1998, we developed our first internal assessment, and then in 1999, we developed our first application for the Texas Award for Performance Excellence--the state-level award program that mirrors the Baldrige Award.

QD: How much did you know about the process when you started?

Schnitzer: As an organization, our knowledge of the Baldrige process was limited. We wanted to run a company that created the best possible client experience, but initially, we didn't know how the Baldrige criteria could help us do that. In fact, it seems we're always learning something more about the program, the criteria and how it can be used for improvement. This is what makes Baldrige such a good model for organizational improvement--it allows you to grow at a natural pace.

QD: What were some of the challenges you faced when implementing the Baldrige criteria?

Schnitzer: One of our primary challenges was to change our mindset from the short-term profit into a long-term focused approach. Getting our members to look at a different type of measure, rather than the traditional day-to-day volume, was difficult. Every department had action plans for improving its part of the business. In the beginning, many of the managers looked at these plans and their measures as a nuisance. But then one manager after another began to use the strategic planning process to achieve their goals. Before long, the managers were talking about their plans and their progress in meetings.

QD: How did you approach your challenges?

Schnitzer: In 1995, we created a human resources department to better define hiring and retention methods for members. Our culture is now very member-driven where we listen to our members, we act on suggestions, we train them and we maintain an environment of mutual respect.

Along the same lines, we had to address the challenge of managing change in the organization. In 2000, we hired our organizational excellence director to spearhead our improvements, and we created Park Place University to coordinate the training efforts of the company.

QD: What advice would you give to a company just starting the Baldrige process?

Schnitzer: Identify areas to improve, have a method to assign actions and drive them through to completion. Also, make certain leaders at every level are ready to commit to the journey. Involve your employees--they have to drive the changes, and you have to be ready to listen to them and address their inputs. Pledge the resources to accomplish your goal so your organization doesn't stall or take too long to make progress. Build on a series of small successes, using one that will lead to the next achievement. And finally, keep it simple--people can only focus on a few projects at a time.

QD: Was it difficult to get your rank-and-file employees excited about the Baldrige process?

Schnitzer : That was one of our biggest challenges in our early years. Members didn't understand process management, especially those who had been in the automotive industry for a long time. We had to cultivate the idea that the Baldrige criteria would help us better serve clients and improve the work environment for everyone. We also evaluated obstacles for commissioned-based members, who were understandably resistant to being taken off the job for training. Our commitment to the processes, coupled with consistent communication, paid off as members began to see direct benefits.

QD: Where do you think the quality movement is headed?

Schnitzer: The quality movement has changed from a program or a method to an integrated approach of doing business. Today, it's everyone's job to ensure that clients receive the highest level of service.

We are also seeing quality management take off in new industries, which means the intent and use of Total Quality Management will increase. As education, health care and not-for-profit organizations adapt the use of the Baldrige criteria to meet their needs, we will all learn new skills and approaches to excellence.

About the author
Laura Smith is Quality Digest's assistant editor.