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Performance management and strategic information management

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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
  • 3. Process Flow Measurement Data Analysis Information
  • 4. 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
  • 5. 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
  • 6. 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
  • 7. 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.
  • 8. Example: Ritz-Carlton
    • “ 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?
  • 9. 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
  • 10. 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
  • 11. Balanced Scorecard
    • Financial perspective
    • Internal perspective
    • Customer perspective
    • Innovation and learning perspective
    Leading measures Lagging measures
  • 12. Key Types of Business Performance Measures
    • Customer satisfaction measures
    • Financial and market performance measures
    • Human resource measures
    • Supplier and partner performance measures
    • Company-specific measures
  • 13. Example: Wainwright Industries
    • Safety
    • Internal customer satisfaction
    • External customer satisfaction
    • Six sigma quality (manufacturing defects)
    • Business performance
  • 14. Common Quality Measures
    • Nonconformities (defects) per unit
    • Errors per opportunity
    • Defects per million opportunities (dpmo)
  • 15. 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
  • 16. Linkages to Strategy Key business drivers (key success factors) Strategies and action plans Measures and indicators
  • 17. Process-Level Measurements
    • 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?
  • 18. 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
  • 19. 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
  • 20. Quality Cost Classification
    • Prevention
    • Appraisal
    • Internal failure
    • External failure
  • 21. Quality Cost Management Tools
    • Cost indexes
    • Pareto analysis
    • Sampling and work measurement
    • Activity-based costing
  • 22. Return on Quality (ROQ)
    • ROQ – measure of revenue gains against costs associated with quality efforts
    • Principles
      • 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
  • 23. 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?
  • 24. Analysis
    • Statistical summaries and charts
    • Trends over time
    • Comparisons with key benchmarks
    • Aggregate summaries and indexes
    • Cause-and-effect linkages and correlations (interlinking)
    • Data mining
    Basic Advanced
  • 25. Interlinking
    • Quantitative modeling of cause and effect relationships between external and internal performance criteria
    customer satisfaction rating time on hold (telephone) * * * * *
  • 26. 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
    • a. Performance Measurement
    • b. Performance Analysis
    • 4.2 Information Management
    • a. Data Availability
    • b. Hardware and Software Quality