Managing for Quality and Performance Excellence, 12th Edition

Performance Measures

• Organizations require performance measures for:

  • Driving strategies and organizational change.

  • Managing resources.

  • Operating processes effectively.

  • Continuously improving.

• Data and information:

  • Support control, diagnosis, and planning.

• Benefits of performance measurement:

  • Improved knowledge of product and service quality.

  • Worker feedback.

  • Basis for reward and recognition.

  • Means of assessing progress.

  • Reduced costs through better planning.

Balanced Scorecard

• Four perspectives:

  • Financial.

  • Internal.

  • Customer.

  • Innovation and learning.

• Characteristics:

  • Contains both leading and lagging measures.

  • Links them through logical cause-and-effect relationships.

Baldrige Criteria

• Focuses on five categories of performance results:

  1. Product and process outcomes

  2. Customer-focused outcomes

  3. Workforce-focused outcomes

  4. Leadership and governance outcomes

  5. Financial and market outcomes

• Organization should tie specific measures and indicators to factors that make it competitive in its industry.

Purposes of Performance Measurement System

• Providing a perspective of the past, present, and future.

• Identifying trends and progress.

• Facilitating understanding of cause-and-effect relationships.

• Providing direction and support for continuous improvement.

• Allowing performance comparison to benchmarks.

Common Mistakes in Performance Measurement

• Not measuring key characteristics critical to:

  • Company performance.

  • Customer behavior.

• Taking irrelevant or inappropriate measurements.

• Leading organizations use well-defined criteria to select appropriate measures and indicators.

Alignment of Performance Measures

• Performance measures and indicators are typically used by senior leaders for high-level performance reviews.

• They should be aligned with an organization’s vision and strategy.

• Effective performance measures are driven by internal and external factors that shape an organization’s operating environment.

• Strategic and process measures should be aligned to drive strategic goals through the organization.

• ERP (Enterprise Resource Planning) systems provide an infrastructure for managing information across the enterprise.

Analysis

• Examination of facts and data to provide a basis for effective decisions.

• Effective analysis capabilities ensure that managers can understand the meaning of data, particularly cause and effect linkages between external lagging results and internal leading indicators.

• Information needs to be transformed and integrated into forms that are meaningful to different levels of managers.

• Interlinking:

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

• Data mining:

  • Provides a means of understanding relationships and patterns in data.

Comparative Data

• Refers to industry averages, competitor performance, world-class benchmarks, or performance measures of other organizations with similar product offerings.

• Needed because:

  • An organization needs to know where it stands relative to competitors and to best practices.

  • Comparative information and information obtained from benchmarking often provide the impetus for significant (“breakthrough”) improvement or change.

  • Comparing performance information frequently leads to a better understanding of processes and their performance.

Management Review

• Analysis of data provides the foundation for management review.

• Managers review performance results to:

  • Assess organizational success and performance relative to competitors.

  • Understand how well progress on strategic objectives and action plans is being achieved.

  • Identify priorities for improvement and opportunities for innovation for products, services, and processes.

Improving Quality of Information

• Capturing data only once, and as close to the origin of the data as possible.

• Eliminating human error by capturing data electronically where possible.

• Using a single database whenever feasible.

• Eliminating all unnecessary handling of data by intermediaries, such as data entry clerks.

• Placing accountability on the creators of data and information.

• Ensuring proper training.

• Defining targets and measures of data quality.

Knowledge Assets

• Definition:

  • The accumulated intellectual resources that an organization possesses.

• Explicit knowledge:

  • Information that is stored in documents or other forms of media.

• Tacit knowledge:

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

• Knowledge management:

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

Internal Benchmarking and Rapid Knowledge Transfer

• Internal benchmarking:

  • The ability to identify and transfer best practices within the organization.

  • Requires:

    • Identifying and collecting internal knowledge and best practices.

    • Sharing and understanding those practices.

    • Adapting and applying them to new situations and bringing them up to best practice performance levels.

• Rapid knowledge transfer (RKT):

  • Involves the discovery, learning, creation and reuse of knowledge that eventually becomes intellectual capital—knowledge that can be converted into value and profits.

Best-Practice Business Knowledge

• A growing reservoir of proven, valuable and profitable best-practice business knowledge is currently available for transfer, and most of it is free.

• The worldwide quality and productivity improvement revolution has produced business excellence models that replicate successes, including:

  • The Baldrige criteria.

  • The EFQM European Award.

  • The Shingo Prize for Excellence in Manufacturing.

  • ISO 9000.

  • Lean.

  • Six Sigma.