Performance Measurement and Strategic Information Management

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Prof. Rushen Chahal

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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Performance Measurement and Strategic Information Management

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