total quality management ws 2013/ 2014 presented by dr...

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Islamic University of Gaza Department of Industrial Engineering

Total Quality Management – WS 2013/ 2014

Presented by Dr. Abed Schokry


Learning OutcomesAfter careful studying this chapter You should e able to:• Explain the importance of performance management,

• Describe the Performance Management Cycle,

• Discuss the attributes of a good measurement system,

• Measure the Service Quality for any organization or company,

• List some models of organizational performance,

• Describe the Balanced Scorecard Model,

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Performance, Measurement, Management and Portfolio Management

What gets measured gets done and …What gets measured becomes

important!


• Processes used to manage performance– Budgeting and forecasting– Financial close and consolidation– Financial reporting– Management and operational reporting

• Methodologies– Executive level score-carding– Profitability and cost management– Other approaches to tracking and improving business performance

• Metrics to monitor and analyze performance against goals• Tools to capture and sustain performance

Introduction

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Best Practices - International

The Performance Management Framework and Systemincorporate characteristics of effective program management systems practices

Ø Results measured against three dimensions of service delivery success – Effectiveness, Efficiency and Customer service

Ø Dimensions of service delivery defined by core measures and weighted according to their value to overall service quality

Ø Measures that quantify input, through/output and impact or results

Ø Service Quality Standards that establish the minimum level of acceptable performance


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Why Performance Management?

1. It works - Systematic way to get results

2. Communication− Common language− Standard format− Tells your story

3. Helps get you the money

4. It is the law

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Performance Management Cycle

To achieve a result:1. Develop a plan2. Budget for that plan3. Implement/operate4. Analyze and assess5. Go to step 1


The perfect world

In a perfect world, a measurement system will actively promote performance improvement by;

• measuring what matters, • providing corrective feedback and positive reinforcement to

enthusiastic people who enjoy being measured and take improvement on as a challenge.

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Critical elements of a good Performance Measurement Framework (PMF)/ System

• Leadership and commitment,• Good Planning,• Full employee involvement,• Measurement and evaluation,• Control and improvement,• Sound implementation strategy,• Achieving and maintaining standards of excellence,


Attributes of a good measurement system

• An effective performance measurement system should have the following attributes.

• FOCUS ON EFFECTIVENESS– 1) We have a need to measure better.– 2) We have a need to measure less.

• FOCUS ON THE FUTURE

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The list below details various categories of performance measurements.

• Time• Flexibility• Innovation and learning• Financial• Customer and market• Safety• Quality

The Scope of Performance Measurement


Performance Management – the linking pin !

•Starting with the ultimate goal and mission of the organization.•Aligning the business units, teams and individuals

VisionStrategy

Processes

Systems

Results

Behavior and Actions

PerformanceManagement

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What employees look for – the linking pin!

Vision

Strategy

Processes

Systems

Results

Behavior and Actions

PerformanceManagement

•Understand what is expected form them•This will lead to aligning individuals towards achievement of organizational goals


What does Performance Management Involve?

Ø Achievement of strategic goals & objectivesØ Allocation of KPI’s Ø Facilitate employee personal development as part of a

integrated processØ Understanding true strengths and weaknesses at every

level of the organizationØ Transformation of people management into a result-driven,

strategic business functionØ Alignment of employee goals and actions with corporate

strategy Ø Retention of top performers and development of low

performersØ Increased quality and frequency of communication

between managers and employees

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CEO Questions

• Have I set the right organization goals to achieve my strategy? There must be a more systematic approach we could use for goal setting.

• What kind of behaviors and skills and focus should I be directing my employees to have in order to achieve these goals?

• Does anyone know what behaviors will most likely help to improve our financial performance or improve customer satisfaction?

• Do the employees understand my vision and strategy? Have they been clearly communicated?

• Is my company structured optimally to fulfill our Strategy?• (Why measure, what to measure, Where to measure, How to measure)


CEO Questions (cont.)

Ø Do employees buy-in to these goals and do they understand and buy-in their role or their divisions role in meeting the strategy?

Ø Have we set up a performance incentive system that aligns with our organization strategy? Does it include objectives that our staff care about?

Ø Do I have the right tools, systems and processes in place, both formal and informal to support performance related communication?

Ø Isn’t there some form of automation that can give me more detailed, relevant information.

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Measurement and Performance

Ø There are some questions that are relevant for business:ü Do we attract and retain the right people with the right

skills?ü Are we performing effectively in our operations to produce

and deliver to our stakeholders?ü Are we meeting or exceeding our stakeholders

expectations?ü How are we doing financially? oMargins/limits?oCosts? oRevenues?oNew business revenues?


Financial Measures

• Often take top priority in for-profit organizations.

• Traditional financial measures include revenue, return on investment, operating profit, pretax profit margin, asset utilization, growth, revenue from new goods and services, earnings per share, and other liquidity measures.

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Financial Measures

• Cost of quality is not used in most organizations; it measures what poor quality is costing an organization.

• Nonprofit organizations focus more on minimizing costs and maximizing value to their target markets, customers, and society


Customer and Market Measures

• An effective 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.

• Measured in three areas: 1) goods quality, 2) service quality, and 3) response time.

• Other customer-focused measures include customer retention, gains and losses of customers and customer accounts, customer complaints, warranty claims, measures of perceived value, loyalty, positive referral, and customer relationship building.

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Safety

• Measuring safety is vital to all organizations, as the well-being of its employees and customers should be an organization's principal concern.

• Performance measures include accident rates, parts per million of arsenic in a public water supply, or security in a hotel room.


Quality

• Quality measures the degree to which the output of a process meets customer requirements.

• Goods quality relates to the physical performance and characteristics of a good.

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Service Quality

is consistently meeting or exceeding customer expectations (external focus) and service delivery system performance (internal focus) for all service encounters.Five key dimensions of service quality:

Tangibles – physical facilities, uniforms, equipment, vehicles, and appearance of employees (i.e., the physical evidence).Reliability – ability to perform the promised service dependably and accurately.Responsiveness – willingness to help customers and provide prompt recovery to service upsets.Assurance – knowledge and courtesy of the service-providers, and their ability to inspire trust and confidence in customers.Empathy – caring attitude and individualized attention provided to its customers.


Service and Environmental Quality

Every service encounter provides an opportunity for error. Errors in service creation and delivery are sometimes called service upsets or service failures.

Environmental quality focuses on designing and controlling work processes to improve the environment.

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Time

• Time relates to two types of performance measures:

ü the speed of doing something (average) and

ü the variability of the process.

• Processing time is the time it takes to perform some task.

• Queue time is a fancy word for wait time—the time spent waiting.


Flexibility

• Flexibility is the ability to adapt quickly and effectively to changing requirements.

• Goods and service design flexibility is the ability to develop a wide range of customized goods and services to meet different or changing customer needs.

• Volume flexibility is the ability to respond quickly to changes in the volume and type of demand.

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Innovation and Learning

• 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.

• “Microsoft is always two years away from failure.” Bill Gates



• 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.

• “Microsoft is always two years away from failure.” Bill Gates

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Productivity =Quantity of Output

Quantity of Input


Designing Performance Measurement Systems in Operations

What makes a good performance measurement system for operations?

Good performance measures are actionable, providing the basis for decisions at the level at which they are applied.

A systematic process is required to generate useful operational performance measures.

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Models of Organizational Performance

1. Malcolm Baldrige National Quality Award Framework

2. Balanced Scorecard

3. Value Chain Model

4. Service-Profit Chain Model


Models of Organizational Performance

•The first two models (Baldrige Award and Balanced Scorecard) provide more of a “big picture” of organizational performance.

•The last two provide more detailed frameworks for operations managers.

•It is important to understand these big-picture models because operations managers must communicate with all functional areas.

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Malcolm Baldrige National Quality Award

• Organizations receive the awards in each of the categories of manufacturing, small business, service, nonprofit education, and health care.

• Primary purpose of the program is to provide a framework for performance excellence through self-assessment to understand an organization’s strengths and weaknesses, thereby setting priorities for improvement.

• www.baldrige.gov


The Balanced Scorecard Model

Consists of four performance perspectives:

1. Financial

2. Customer

3. Innovation and Learning

4. Internal

http://www.baldrige.gov

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Components:üMission, Vision,ü 4 dimensions

o Financialo Stakeholderso Processeso Organizational learning

ü Departmental goals and objectivesü Key success factorsü Key performance indicators, KPI’sü Strategic Initiatives, projects and programs

The Balanced Scorecard Model


The Balanced Scorecard Performance Categories & Linkages

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Integrated and Balanced Management Approach

Perspective

Strategic Objectives

Measures Targets Owner/Account-ability

Initiatives

Financial • Shareholder value

• Profit• New revenue

• Shareholder Equity• Operating

margin• Revenue from new

services

• R X million in 3 years• RPI + x% annually• 25% in three years

• Finance Dir.• CEO• Business Dev. Mgr.

• Implement Economic Value Added

Customer • Differentiation• Strategic alliances• Customer service

• Value for money• Profits from alliances• Customer satisfaction

• Number one customer rating

• R x million in five years• Number one customer

rating

• Marketing Dir.• Bus. Dev. Mgr.• Marketing Dir.

• Create customer Segmentation model

• Redefine channel strategy

BusinessProcesses

• Productivity• New product devt.• Segmentation

• Revenue/work hour• Product development

cycle time• Number of initiatives

targeted at profitable segments

• Best-in-class within five years

• Reduced by 50% in two years

• 60% within one year

• COO• R&D Manager• Marketing Dir.

• Reengineering new product development process

Learning & Innovation

• People policy• Alliance Mngnt• Customer focus

• Management span of control

• Number of “learning partnerships”

• % management time interfacing with cust.

• Triple in three years• 10 in five years• 20% in two years

• Human Res. Dir.• Bus. Dev. Mgr.• CEO

• Develop new HR strategy

• Implement performance based compensation program


The Value Chain Model

• Evaluates performance throughout the value chain: synchronized network of processes including suppliers and inputs, processes and associated resources, goods and service outputs and outcomes, customers and their market segments, synchronized information and feedback loops, and management of value chain.

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The Value Chain Model


Service-Profit Chain Model

• Most applicable to service environments.

• Model is based on a set of cause and effect linkages between internal and external performance, and defines the key performance measurements on which service-based firms should focus.

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Service-Profit Chain Model


Closing remarks

• In the beginning of this chapter you were challenged to find measures and see the resulting behavior.

– So how about the 30 minute pizza delivery guarantee. That promotes speeding and if a delivery person has an order at 28 minutes and another at 10, which does he deliver first? And what happens if Pizza delivery people are offered a cash bonus for every delivery made within 30 minutes, and what does this do to pizza quality?

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End of Chapter

total quality management ws 2013/ 2014 presented by dr...

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