Chapter 8

collardsdebonairManagement

Nov 6, 2013 (3 years and 9 months ago)

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1

Chapter 8

Performance

Measurement

and Strategic

Information

Management

2

Information Management


If you don’t measure results, you can’t tell
success from failure


If you can’t see success, you can’t reward
it


and if you can’t reward success, you
are probably rewarding failure


If you can’t recognize failure, you can’t
correct it

Process Flow

Measures and Indicators

Data

Analysis

Information

Benefits of Information
Management


Understand customers and customer
satisfaction


Provide feedback to workers


Establish a basis for reward/recognition


Assess progress and the need for
corrective action


Reduce costs through better planning

Three Levels of Quality Info.


Individual level


Control


Process level


Diagnosis


Organizational level


Planning

6

Leading Practices
(1 of 2)


Develop a set of performance indicators that
reflect customer requirements

and key
business drivers


Use comparative information

and data to
improve overall performance and competitive
position


Continually refine

information sources and
their uses within the organization


Use sound analytical methods

to conduct
analyses and use the results to support
strategic planning and daily decision making


7

Leading Practices
(2 of 2)


Involve everyone

in measurement activities
and ensure that information is widely visible


Ensure that data are
accurate, reliable,
timely
, secure, and confidential


Ensure that
hardware and software systems

are
reliable and user
-
friendly


Systematically manage organizational
knowledge and identify and
share best
practices



Capital

Expendi
-

tures

The Dashboard of Old
Performance Measures

Sales

Costs

Assets

Liabilities

Cash flow

Debt

Profitability

Training

The Dashboard of New
Performance Measures

Customer

Retention

Costs

Sales

Employee

Retention

Cycle

Time

Referral

Rates

Quality

Customer

Satisfac
-

tion

Defect

Rates

Profitability

Cash
-

flow

Capital

Expendi
-

tures

Assets

Debt

Liabilities

Balanced Scorecard

1.
Financial perspective

2.
Internal (processes) perspective

3.
Customer perspective

4.
Innovation and learning
perspective

Key Idea

The Balanced Scorecard

A good balanced scorecard contains both leading
and lagging measures and indicators.
Lagging
measures

(outcomes) tell what has happened;
leading measures

(performance drivers) predict
what will happen.

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Baldrige Classification of

Performance Measures


Customer


Product and service


Financial and market


Human resource


Organizational effectiveness


Governance and social responsibility

Customer Measures


Customer satisfaction and dissatisfaction


Customer retention


Gains and losses of customers and customer
accounts


Customer complaints and warranty claims.


Perceived value, loyalty, positive referral,
and customer relationship building

Product and Service
Measures


Internal quality measurements


Field performance of products


Defect levels


Response times


Data collected from customers or third
parties on ease of use or other attributes


Customer surveys on product and service
performance

Financial and Market
Measures


Revenue


Return on equity


Return on investment


Operating profit


Pretax profit margin


Asset utilization


Earnings per share

Human Resource Measures


Employee satisfaction


Training and development


Work system performance and
effectiveness


Safety


Absenteeism


Turnover

Organizational Effectiveness
Measures


Cycle times


Production flexibility


Lead times and setup times


Time to market


Product/process yields


Delivery performance


Cost efficiency


Productivity

Governance and Social
Responsibility Measures


Organizational accountability


Stakeholder trust


Ethical behavior


Regulatory/legal compliance


Financial and ethics review results


Community service


Management stock purchase activity

Key Idea

The Role of Comparative Data


Organizations need comparative data, such as
industry averages, best competitor performance,
and world
-
class benchmarks to gain an accurate
assessment of performance and know where they
stand relative to competitors and best practices.

Key Idea

Designing Effective PM Systems

In designing a performance measurement system,
organizations must consider how the measures
will support senior executive performance review
and organizational planning to address the overall
health of the organization, and how the measures
will support daily operations and decision making.

Practical Guidelines


Fewer is better

measure vital few.


Link to the key business drivers.


Include a mix of past, present, and future


Address the needs of all stakeholders.


Start at the top and flow down to all levels of
employees


Combine multiple indexes into a single index


Change as the environment and strategy
changes


Have research
-
based targets or goals

Linkages to Strategy

Key business drivers
(key success factors)

Strategies and
action plans

Measures and indicators

Key Idea

Linking Measures to Strategy

The things an organization needs to do well to
accomplish its vision are often called
key
business drivers

or
key success factors
. They
represent things that separate an organization
from its competition and define strengths to
exploit or weaknesses to correct.

Effective Measures


Simple


Measurable


Actionable


Related


Timely

Common Process Quality
Measures


Nonconformities (defects) per unit


Errors per opportunity


Dpmo


defects per million
opportunities

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Identifying and Selecting
Process Measures


Identify all customers and their
requirements and expectations


Define work processes


Define value
-
adding activities and
process outputs


Develop measures for each key process


Evaluate measures for their usefulness

Analyzing and Using Data


Analysis



an examination of facts and data
to provide a basis for effective decisions.


Examples


Examining trends and changes in key performance
indicators


Making comparisons relative to other business units,
competitor performance, or best
-
in
-
class benchmarks


Calculating means, standard deviations, and other
statistical measures


Seeking to understand relationships among different
performance indicators using sophisticated statistical tools
such as correlation and regression analysis


Key Idea

Analyzing and Using Performance Data

Organizations need a process for
transforming data, usually in some
integrated fashion, into information that
top management can understand and
work with.

Interlinking


Quantitative modeling of cause
-
and
-
effect
relationships between external and internal
performance measures


Facilitated by
data mining



the process of
of searching large databases to find hidden
patterns in data, using analytical
approaches and technologies such as cluster
analysis, neural networks, and fuzzy logic

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Managing Data and
Information


Validity



Does the indicator
measure what it says it does?


Reliability



How well does an
indicator consistently measure the
“true value” of the characteristic?


Accessibility



Do the right people
have access to the data?

Key Idea

Data Accessibility and Security

In many companies, business information
is only accessible to top managers and
others on a need
-
to
-
know basis. In TQ
-
focused companies, business information
is accessible to everyone.

Knowledge Management


The process of identifying, capturing,
organizing, and using knowledge assets
to create and sustain competitive
advantage


Explicit knowledge

includes information
stored in documents or other forms of
media.


Tacit knowledge

is information that is
formed around intangible factors resulting
from an individual’s experience, and is
personal and content
-
specific.

Key Idea

Knowledge Management

Knowledge assets

refer to the accumulated
intellectual resources that an organization
possesses, including information, ideas,
learning, understanding, memory, insights,
cognitive and technical skills, and
capabilities.

Knowledge Management

Knowledge management involves the
process of identifying, capturing,
organizing, and using knowledge
assets to create and sustain
competitive advantage.


Knowledge management differs from
information management

Internal Benchmarking


The ability to identify and transfer best
practices within the organization


Process:


Identify and collect internal knowledge
and best practices


Share and understand those practices


Adapt and apply them to new situations
and bringing them up to best
-
practice
performance levels.

36

Measurement and Information
Management in the Baldrige
Award Criteria

The Measurement, Analysis, and Knowledge Management

Category examines an organization’s information
management and performance measurement systems
and how the organization analyzes performance data and
information.




4.1 Measurement and Analysis of Organizational

Performance



a. Performance Measurement



b. Performance Analysis


4.2 Information and Knowledge Management



a. Data and Information Availability



b. Organizational Knowledge