Performance management and strategic information managementPresentation Transcript
Chapter 8 Performance Measurement and Strategic 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 Measurement Data Analysis Information
Use of Information and Analysis Measurement supports executive performance review and daily operations and decision making. Customer Requirements Measurements Processes Results Design Control Prediction Validation
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
Empirical Survey Results
Measurement-management companies are more likely to:
be in top third of industry financially
complete organizational changes successfully
reach clear agreement on strategy
enjoy favorable cooperation and teamwork
have more employee empowerment
have a greater willingness to take risks
Example: Federal Express
“ We measure everything. Then…we prioritize what processes are key to the company.”
Most data collection systems are automated, making it fast and easy.
Seeks internal measures that are predictors for external measures.
“ We only measure what we must. But, we make sure that what we measure is important to our customers.”
50% marketing and financial data; 50% quality-related productivity data.
Cost of quality is top priority. Are improvements important to customers, providing a good return, and done quickly?
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
Involve everyone in measurement activities and ensure that information is widely visible
Leading Practices (2 of 2)
Ensure that data are reliable and accessible to all who need them
Use sound analytical methods to conduct analyses and use the results to support strategic planning and daily decision making
Continually refine information sources and their uses within the organization
Innovation and learning perspective
Leading measures Lagging measures
Key Types of Business Performance Measures
Customer satisfaction measures
Financial and market performance measures
Human resource measures
Supplier and partner performance measures
Example: Wainwright Industries
Internal customer satisfaction
External customer satisfaction
Six sigma quality (manufacturing defects)
Common Quality Measures
Nonconformities (defects) per unit
Errors per opportunity
Defects per million opportunities (dpmo)
Importance of Comparative Data
Comparative data : industry averages, best competitor performance, world-class benchmarks
Helps recognize the need for improvement
Provides motivation to seek improvement
Linkages to Strategy Key business drivers (key success factors) Strategies and action plans Measures and indicators
Does the measurement support our mission?
Will the measurement be used to manage change; that is, actionable ?
Is it important to our customers?
Is it effective in measuring performance?
Is it effective in forecasting results?
Is it easy to understand and simple?
Creating Effective Performance 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
The Cost of Quality (COQ)
COQ – the cost of avoiding poor quality, or incurred as a result of poor quality
Translates defects, errors, etc. into the “language of management” – $$$
Provides a basis for identifying improvement opportunities and success of improvement programs
Quality Cost Classification
Quality Cost Management Tools
Sampling and work measurement
Return on Quality (ROQ)
ROQ – measure of revenue gains against costs associated with quality efforts
Quality is an investment
Quality efforts must be made financially accountable
It is possible to spend too much on quality
Not all quality expenditures are equally valid
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?
Statistical summaries and charts
Trends over time
Comparisons with key benchmarks
Aggregate summaries and indexes
Cause-and-effect linkages and correlations (interlinking)
Quantitative modeling of cause and effect relationships between external and internal performance criteria
customer satisfaction rating time on hold (telephone) * * * * *
Information and Analysis in the Baldrige Award Criteria
The Information and Analysis 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