chapter 6 performance measurement and strategic information management
TRANSCRIPT
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 1
Chapter 6
Performance Measurement and Strategic Information Management
Dr. John V. Padua
The Management & Control of Quality, 7e
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 2
Key Idea
A supply of consistent, accurate, and timely data across all functional areas of business provides real-time information for the evaluation, control, and improvement of processes, products, and services to meet both business objectives and rapidly changing customer needs.
THE MANAGEMENT & CONTROL OF QUALITY, 7e, © 2008 Thomson Higher Education Publishing 3
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
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Balanced Scorecard1. Financial perspective
Measures the ultimate results that the business provides to its shareholders. They include profitability, revenue growth, return on investment, economic value added (EVA), and shareholder value.
1. Internal perspective Focuses attention on the performance of the key internal processes that drive the business. They include such measures as quality levels, productivity, cycle time, and cost.
1. Customer perspective Focuses on customer needs and satisfaction as well as market share. This includes service levels, satisfaction ratings, and repeat business.
1. Innovation and learning perspectiveDirects attention to the basis of a future success—the organization’s people and infrastructure. Key measures might include intellectual assets, employee satisfaction, market innovation, and skills development.
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Key Idea
A good balanced scorecard contains both leading and lagging measures and indicators. Lagging measures (outcomes) tell what has happened; leading measures (performance drivers) predict what will happen.
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Product and Service Measures Internal quality measurements Field performance of products Defect levels Response times Data collected from customers or third parties
on ease of use or other attributes Customer surveys on product and service
performance
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Financial and Market Measures
Revenue Return on equity Return on investment Operating profit Pretax profit margin Asset utilization Earnings per share
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Human Resource Measures
Employee satisfaction Training and development Work system performance and effectiveness Safety Absenteeism Turnover
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Organizational Effectiveness Measures
Cycle times Production flexibility Lead times and setup times Time to market Product/process yields Delivery performance Cost efficiency Productivity
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Governance and Social Responsibility Measures
Organizational accountability Stakeholder trust Ethical behavior Regulatory/legal compliance Financial and ethics review results Community service Management stock purchase activity
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Key Idea
The things an organization needs to do well to accomplish its vision are often called key business drivers or key success factors. They represent things that separate an organization from its competition and define strengths to exploit or weaknesses to correct.
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Common Process Quality Measures
Nonconformities (defects) per unit Errors per opportunity Dpmo – defects per million opportunities
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Analyzing and Using Data
Analysis – an examination of facts and data to provide a basis for effective decisions.
Examples Examining trends and changes in key
performance indicators Making comparisons relative to other business
units, competitor performance, or best-in-class benchmarks
Calculating means, standard deviations, and other statistical measures
Seeking to understand relationships among different performance indicators using sophisticated statistical tools such as correlation and regression analysis
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Interlinking
Quantitative modeling of cause-and-effect relationships between external and internal performance measures
Facilitated by data mining – the process of of searching large databases to find hidden patterns in data, using analytical approaches and technologies such as cluster analysis, neural networks, and fuzzy logic
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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
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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
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Key Idea
Data used for planning and decision making need to be reliable, accurate, secure, and accessible to those who need them.
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Managing Data and Information
Data Reliability – How well does an indicator consistently measure the “true value” of the characteristic?
Data Accessibility – Do the right people have access to the data?
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Key Idea
In many companies, business information is only accessible to top managers and others on a need-to-know basis. In high-performing companies, business information is accessible to everyone.
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Knowledge Management
The process of identifying, capturing, organizing, and using knowledge assets to create and sustain competitive advantage Explicit knowledge includes information stored in
documents or other forms of media. Tacit knowledge is information that is formed
around intangible factors resulting from an individual’s experience, and is personal and content-specific.
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Key Idea
Knowledge assets refer to the accumulated intellectual resources that an organization possesses, including information, ideas, learning, understanding, memory, insights, cognitive and technical skills, and capabilities.
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Internal Benchmarking The ability to identify and transfer best
practices within the organization Process:
Identify and collect internal knowledge and best practices
Share and understand those practices Adapt and apply them to new situations and
bringing them up to best-practice performance levels.