Webinar: Measuring and Improving Business Performance
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description
Management reporting systems are like power tools. They can help organizations measure and improve their performance, motivate workers, and achieve strategic goals quickly and effectively. But if you aren’t careful, it’s easy to make big mistakes, and maybe even injure yourself in the process. In this presentation, Professor Robert Bloomfield of Cornell’s Johnson Graduate School of Management will review best practices in management reporting, and provide some essential “safety” tips. Key topics include: - The importance of seeing beyond the measures to the true performance those measures are trying to capture - Using a Balanced Scorecard to define, achieve and improve your strategy - Choosing the right way to measure financial performance for your organization’s goals (whether it is a for-profit, not-for-profit or governmental concern) - Tying pay to performance, and more!
Transcript of Webinar: Measuring and Improving Business Performance
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Safety Tips and Best Practices in Managerial
Reporting
Professor Robert BloomfieldJohnson Graduate School of
Management
Cornell University
Best Practices and Safety Tips
Reporting Systems are powerful tools
Here’s how to use them effectively…and safely!
Match Your System to Your Needs
An Organization’s Managerial Reporting System Should Be Matched to the
Challenges it Faces
No System is Perfect
When you represent 3D info with 2D reports, you must make compromises
Two Conflicting Goals of Costing Systems
Reporting Margins for individual products and services
Reporting Efficiencies for individual processes
A Process Shop
A Job Shop
Process Shops Emphasize Efficiency
Job Shops Emphasize Margins
Costing System Reference Guide
The Most Important Safety Tip Of The Day
What Counts
& What Gets Counted
Be Sure to Distinguish Between….
Plato’s Allegory of the Cave
Reality is Composed of “Forms”…
…But We See Only Their Shadows
As Socrates puts it in Plato’s Republic:
Performance Measures are Not Performance
Forms (Constructs) and Shadows (Proxies)
Safety Tip: Watch for Measure Management
• "The more any quantitative social indicator (or even some qualitative indicator) is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor."
Campbell’s Law
• Improving the measure, rather than the performance the measure is intended to capture
Measure Management
• Distorting operations• Distorting reporting
Two common methods
Don’t forget the role of luck!
• I returned, and saw under the sun, that the race is not [always] to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.• Ecclesiastes 9:11
Choose Your Poison
• If you go light on incentives, will people work hard enough?
Low Motivation
• If you go heavy on incentives, you impose risk on your workers
Extra compensation
• You can tie incentives to better measures, but it isn’t free!
More detailed reporting
Choose Carefully Whether to Pay for Outputs or Outcomes
• The product or service provided
Output
• The intended result of the product or service
Outcome
Why Governments Care
“Bragging about how many new schools you’ve built counts for little until children start graduating with economically useful skill sets.
(Link)
FOCUS ON RESPONSIBILITY, NOT CREDIT AND BLAME
Authority, Responsibility, Accountability and Causal Attribution are all different
Authority is the right to make decisions
•Whose actions caused an outcome?•Hard even for solo actors—what about omitted variables and measurement error?
Credit/Blame is a causal attribution
•You are held accountable for performance if it determines your evaluation/pay
Accountability is a reward or penalty
Responsibility is a set of duties
• Knowing what is happening
• Explaining why it is happening
• Proposing responses
Some Final Tips
Decentralize authority to those with specific knowledge
The Hayekian Organization
If we…agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place….decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them. We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its orders. We must solve it by some form of decentralization (Hayek 1945, p. 524).”
Chesterton’s Fence
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Thank you for attending – Questions?
To contact Robert, please click the following link and provide your name and email address:
http://www.execunet.com/events?id=9381
Safety Tips and Best Practices in Managerial Reporting
Professor Robert BloomfieldJohnson Graduate School of
Management
Cornell University
