MGMT 330 Ch 2 Measuring Performance in Operations and Value Chains

Measurement

the act of quantifying the performance of organizational units, goods and services, processes, people, and other business activities.

Organizational performance measures can be classified into several important categories:

Financial, Customer and market, Quality, Time, Flexibility, Innovation and learning, Productivity and operational efficiency, and Sustainability

Financial Measures

cost and revenue, often take top priority in for-profit organizations

Customer-Satisfaction Measurement System

provides a company with customer ratings of specific goods and service features and indicates the relationship between those ratings and the customer’s likely future buying behavior.

Quality

measures the degree to which the output of a process meets customer requirements, or meeting or exceeding customers’ expectations.

Goods Quality

relates to the physical performance and characteristics of a good.

Service Quality

consistently meeting or exceeding customer expectations (external focus) and service-delivery system performance criteria (internal focus) during all service encounters.

Research has shown that customers use five key dimensions to assess service quality

Tangibles, Reliability, Responsiveness, Assurance and Empathy

Service upsets

errors in service creation and delivery.

Processing Time

the time it takes to perform some task

Queue time

the time spent waiting

Flexibilty

the ability to adapt quickly and effectively to changing requirements

Goods and Service Design Fexibility

the ability to develop a wide range of customized goods or services to meet different or changing customer needs.

Volume Flexibility

the ability to respond quickly to changes in the volume and type of demand

Innovation

refers to the ability to create new and unique goods and services that delight customers and create competitive advantage.

Learning

refers to creating, acquiring, and transferring knowledge, and modifying the behavior of employees in response to internal and external change.

Productivity

the ratio of the output of a process to the input.

Productivity ratio

Quantity of output / quantity of input

Operational Efficiency

The ability to provide goods and services to customers with minimum waste and maximum utilization of resources

Triple Bottom Line (TBL or 3BL)

refers to the measurement of environmental, social, and economic sustainability.

Statistics

involves collecting, organizing, analyzing, interpreting, and presenting data.

Descriptive Statistics

refers to the methods of describing and summarizing data using tabular, visual, and quantitative techniques.

Interlinking

the quantitative modeling of cause-and-effect relationships between external and internal performance criteria.

Value of a Loyal Customer

a model that quantifies the total revenue or profit each target market customer generates over the buyer’s life cycle.

The value of a loyal customer (VLC) quantifies the:

Total revenue or profit each target market customer generates over the buyer's life cycle

Actionable Measures

provide the basis for decisions at the level at which they are applied.

Malcolm Baldrige National Quality Award Program

was created to help stimulate American organizations to improve quality, productivity, and overall competitiveness, and to encourage the development of high-performance management practices through innovation, learning, and sharing of best practices.

Criteria for Performance Excellence

Leadership, Strategy, Customers, Measurement, Analysis, and Knowledge Management, Workforce, Operations and Results

Balanced Scorecard

Its purpose is “to translate strategy into measures that uniquely communicate your vision to the organization.”

Balanced Scorecard four performance perspectives:

Financial perspective, Customer perspective, Innovation & Learning perspective, and Internal perspective

Value Chain Model

shows the value chain structure and suggests some typical measures that managers would use to evaluate performance at each point in the value chain.

Service-Profit Chain

The model is based on a set of cause-and-effect linkages between internal and external measures, and in this fashion, defines the key performance measurements on which service-based firms should focus.