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Prof. Rushen ChahalProf. Rushen Chahal
Performance Measurement and
Strategic InformationManagement
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Information Management
If you dont measure results, you cant tellsuccess from failure
If you cant see success, you cant reward it and if you cant reward success, you areprobably rewarding failure
If you cant recognize failure,
you cant correct it
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Process Flow
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Measurement
Data
Analysis
Information
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Use of Information and Analysis
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Customer
Requirements
Measurements
Processes ResultsDesign
Control
Prediction
Validation
Measurement supports executive performance review
and daily operations and decision making.
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Empirical Survey Results
Measurement-management companiesare more likely to:
be in top third of industry financially complete organizational changessuccessfully
reach clear agreement on strategy
enjoy favorable cooperation and teamwork have more employee empowerment
have a greater willingness to take risks
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Example: Federal Express
We measure everything.
Thenwe 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.
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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. Areimprovements important to
customers, providing a good return,
and done quickly?
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Leading Practices (1 of2)
Develop a set of performance indicatorsthat reflect customer requirements and
key business drivers Use comparative information and datato improve overall performance andcompetitive position
Involve everyone in measurementactivities and ensure that information iswidely visible
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Leading Practices (2of2)
Ensure that data are reliable andaccessible to all who need them
Use sound analytical methods toconduct analyses and use the results tosupport strategic planning and daily
decision making Continually refine information sources
and their uses within the organization
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Balanced Scorecard
1. Financial perspective
2. Internal perspective
3. Customer perspective
4. Innovation and learningperspective
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Leading
measures
Lagging
measures
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Key Types ofBusinessPerformance Measures
Customer satisfaction measures
Financial and market performance
measures Human resource measures
Supplier and partner performance
measures Company-specific measures
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Example: Wainwright Industries
Safety
Internal customer satisfaction
External customer satisfaction
Six sigma quality (manufacturingdefects)
Business performance
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Common Quality Measures
Nonconformities (defects) per unit
Errors per opportunity
Defects per million opportunities(dpmo)
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Importance of Comparative
Data Comparative data: industryaverages, best competitor
performance, world-classbenchmarks
Helps recognize the need for
improvement Provides motivation to seek
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Linkages to Strategy
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Key business drivers
(key success factors)
Strategies and
action plans
Measures and indicators
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Process-Level Measurements
Does the measurement support ourmission?
Will the measurement be used tomanage change; that is, actionable?
Is it important to our customers?
Is it effective in measuringperformance?
Is it effective in forecasting results?
Is it easy to understand and simple?17
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Creating EffectivePerformance Measures
Identify all customers and theirrequirements and expectations
Define work processes Define value-adding activities and process
outputs
Develop measures for each key process Evaluate measures for their usefulness
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The Cost of Quality (COQ)
COQ the cost of avoiding poorquality, or incurred as a result of poorquality
Translates defects, errors, etc. intothe language of management $$$
Provides a basis for identifyingimprovement opportunities andsuccess of improvement programs
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Quality Cost Classification
Prevention
Appraisal
Internal failure
External failure
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Quality Cost Management Tools
Cost indexes
Pareto analysis
Sampling and work measurement
Activity-based costing
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Managing Data and Information
Validity Does the indicator measurewhat it says it does?
Reliability How well does anindicator consistently measure thetrue value of the characteristic?
Accessibility Do the right peoplehave access to the data?
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Analysis
Statistical summaries and charts
Trends over time
Comparisons with keybenchmarks
Aggregate summaries and
indexes Cause-and-effect linkages and
correlations (interlinking)
Data mining 24
Basic
Advanced
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Interlinking
Quantitative modeling of cause andeffect relationships between external
and internal performance criteria
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customer
satisfaction
rating
timeon hold(telephone)
* *
* * *
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Information and Analysisin the Baldrige Award Criteria
The Information and Analysis Category examines anorganizations information management and performancemeasurement systems and how the organization analyzesperformance data and information.
4.1 Measurement and Analysis of OrganizationalPerformance
a. Performance Measurement
b. Performance Analysis
4.2 Information Management
a. Data Availability
b. Hardware and Software Quality
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