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NOVEMBER 24, 1999

MANAGEMENT

The Biggest Little Company In America
Why did the Baldrige small biz award go to a wholly owned unit of Cargill?


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Sunny Fresh Foods, a successful Minnesota egg processor, is by all accounts the very model of a well-managed modern company. And on Tuesday, it scored big, capturing the small-business category of the coveted 1999 Malcolm Baldrige National Quality Award — the most prestigious U.S. business contest.

Just one problem: Sunny Fresh Foods isn't — at least at first glance — a small business. True, it has 380 employees, which fits neatly under the federal ceiling of 500 employees. But Sunny Fresh is a wholly owned subsidiary of Cargill, Inc., the closely held global food processing giant that has 82,000 employees in 59 countries and $46 billion in revenues. And it's no arms-length relationship: Sunny Fresh acknowledges on its Web site that it succeeds by "leveraging the extensive resources of Cargill."

An unfair advantage? After all, most small, independent companies could never hope to draw on that kind of expertise. But the director of the Baldrige program, Harry Hertz, says Sunny Fresh earned its small business award fair and square by meeting the same seven criteria used to judge the other 11 small business nominees. As a matter of fairness, says Hertz, the reviewer "took into account the resources the parent made available."

Sunny Fresh is a far cry from the likes of last year's small-business winner, the 70-employeee manufacturer Texas Nameplate, a formerly struggling independent company that relied on its own moxie to get its Baldrige award. And in some years, judges didn't give the prize in the small business category to anyone, apparently because no one met the stringent criteria. But Hertz says the small business award isn't intended to fit into a neatly defined category each year. The winners are supposed to bridge a cross section of business types.

"For a small business of 25 employees, it's probably not going to [learn] a lot from Sunny Fresh," he acknowledges. "They'll probably better identify with Texas Nameplate. We want to get out as many role models as we can."

Created by an Act of Congress in 1987, the Baldrige Award is designed to increase American competitiveness by sharing management lessons from its role-model winners. As envisioned, these role models are supposed to represent different sectors of the economy — large manufacturing and service firms, health care, education, or small business, which is defined as any company under 500 employees.

What about the spirit of the category, which supposedly was designed by Congress to highlight the quality practices from companies with less institutional support or financial backing? That's not necessarily the case. Paul Steel, a former Baldrige examiner and who now heads a consulting firm called Total Quality Inc. in Bellevue (Wash.), says the rules never made such a fine distinction before about who owns whom. He doesn't criticize this year's award but adds, "It'd be good to have a separate category for independent small businesses."

Cargill sloughs off any notion that as one of the world's largest food businesses, its subsidiaries fit awkwardly into the definition of a small business. The company is "largely a collection of small, medium, and larger businesses, that have relatively autonomous day-to-day operations," says Cargill spokesman Mark Klein. But he acknowledges that Sunny Fresh received special corporate help for its food-safety program, one of the key factors highlighted in the award presentation. "We're still too happy getting the quality award to let too much bother us," Klein says. Apparently, they're staying focused on the big picture.


By Dennis Berman in New York

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