Performance Measurement and Strategic Information Management

Prof. Rushen Chahal

Prof. Rushen Chahal

Information Management
If you dont measure results, you cant tell success from failure If you cant see success, you cant reward it and if you cant reward success, you are probably rewarding failure If you cant recognize failure, you cant correct it

Prof. Rushen Chahal

Process Flow
Measurement

Data

Analysis

Information
Prof. Rushen Chahal

Use of Information and Analysis

Validation Customer Requirements Prediction Measurements Control Processes Design Results

Measurement supports executive performance review and daily operations and decision making.
Prof. Rushen Chahal

Benefits of Information Management

Understand customers and customer satisfaction Provide feedback to workers Establish a basis for reward/recognition Assess progress and the need for corrective action Reduce costs through better planning
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Prof. Rushen Chahal

Empirical Survey Results

Measurement-management companies are more likely to:
be in top third of industry financially complete organizational changes successfully reach clear agreement on strategy enjoy favorable cooperation and teamwork have more employee empowerment have a greater willingness to take risks
Prof. Rushen Chahal

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.
Prof. Rushen Chahal

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. Are improvements important to customers, providing a good return, and done quickly?
Prof. Rushen Chahal

Leading Practices (1 of 2)
Develop a set of performance indicators that reflect customer requirements and key business drivers Use comparative information and data to improve overall performance and competitive position Involve everyone in measurement activities and ensure that information is widely visible
Prof. Rushen Chahal

Leading Practices (2 of 2)
Ensure that data are reliable and accessible to all who need them Use sound analytical methods to conduct analyses and use the results to support strategic planning and daily decision making Continually refine information sources and their uses within the organization
Prof. Rushen Chahal

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Balanced Scorecard
1. 2. 3. 4. Financial perspective Internal perspective Customer perspective Innovation and learning perspective
Leading measures
Prof. Rushen Chahal

Lagging measures
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Key Types of Business Performance Measures

Customer satisfaction measures Financial and market performance measures Human resource measures Supplier and partner performance measures Company-specific measures
Prof. Rushen Chahal

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Example: Wainwright Industries

Safety Internal customer satisfaction External customer satisfaction Six sigma quality (manufacturing defects) Business performance
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Prof. Rushen Chahal

Common Quality Measures

Nonconformities (defects) per unit Errors per opportunity Defects per million opportunities (dpmo)

Prof. Rushen Chahal

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Importance of Comparative Data

Comparative data: industry averages, best competitor performance, world-class benchmarks Helps recognize the need for improvement Provides motivation to seek improvement
Prof. Rushen Chahal

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Linkages to Strategy

Key business drivers (key success factors)

Strategies and action plans

Measures and indicators

Prof. Rushen Chahal

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Process-Level Measurements
Does the measurement support our mission? Will the measurement be used to manage change; that is, actionable? Is it important to our customers? Is it effective in measuring performance? Is it effective in forecasting results? Is it easy to understand and simple? 17
Prof. Rushen Chahal

Creating Effective Performance Measures

Identify all customers and their requirements and expectations Define work processes Define value-adding activities and process outputs Develop measures for each key process Evaluate measures for their usefulness
Prof. Rushen Chahal

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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
Prof. Rushen Chahal

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Quality Cost Classification

Prevention Appraisal Internal failure External failure

Prof. Rushen Chahal

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Quality Cost Management Tools

Cost indexes Pareto analysis Sampling and work measurement Activity-based costing

Prof. Rushen Chahal

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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 22 Prof. Rushen Chahal

Managing Data and Information

Validity Does the indicator measure what it says it does? Reliability How well does an indicator consistently measure the true value of the characteristic? Accessibility Do the right people have access to the data?
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Prof. Rushen Chahal

Analysis
Statistical summaries and charts Basic Trends over time Comparisons with key benchmarks Aggregate summaries and indexes Cause-and-effect linkages and Advanced correlations (interlinking) Data mining 24
Prof. Rushen Chahal

Interlinking
Quantitative modeling of cause and effect relationships between external and internal performance criteria
customer satisfaction rating * * *

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time on hold (telephone)

Prof. Rushen Chahal

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Information and Analysis in the Baldrige Award Criteria

The Information and Analysis Category examines an organizations information management and performance measurement systems and how the organization analyzes performance data and information. 4.1 Measurement and Analysis of Organizational Performance a. Performance Measurement b. Performance Analysis 4.2 Information Management a. Data Availability b. Hardware and Software Quality
Prof. Rushen Chahal

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