Performance Measurement

Data & Information

Selecting measures
Measuring performance
Managing performance
 Performance Measurement
• 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

“ the data will set you free”

 Measurement
• The supply of consistent accurate and timely data across all functional
areas of the business provides real-time information on the evaluation,
control and improvement of processes, products and services to meet
both business objectives and changing customer needs.

• Measurement: the act of quantifying the

performance or quality dimensions of products
• Data: representations of facts that come from the process
of measurement

• Analysis: an examination of facts and data to provide a

basis for effective decisions

• Information: derived form the analysis of the data

and measurements and expressed in the context of
the business
 Organizations need good measures to:
• Lead the entire organization in a particular direction to drive
strategies and organizational development
• To manage resources to that are used to meet strategic goals
and to evaluate achievement, and
• To operate the processes that make the organization work and
continually improve
Federal Express - “We measure everything. Ritz-Carlton Hotels - “We only measure what
Then…we prioritize what processes are key to we must. But, we make sure that what we
the company” by automated data collection measure is important to our customers” using
systems that use internal measures that are a mix of data 50% marketing and financial
predictors for external measures. data; 50% quality-related productivity data.
 Performance measurement in the organization

Sets company
Broad Strategic Overall Organizational
direction and
Measures Strategy
objectives

Functional Market Operational Financial

Measures Strategic Strategic Measures Strategic
Measures Measures

Operational Customer Quality Process Cost

Measures Satisfaction Improvement

Process Level • Customer • Defects per • Delivery time • Machine Frequently

Measures complaints unit • Cycle time efficiency measured and
• Scrap-waste • Transaction used for
levels costs improvement
Measures allow us to understand process performance
Process Performance Objective Measure
Process Quality • Defects per unit
• Customer complaints
• Warranty claims
• Customer satisfaction score
Process Speed • Order lead time
• Cycle time
• Delivery time
Process Dependability • % of late orders
• Proportion in stock
• Deviation from target arrival
Process Costs • Cost per production hour
• Budget variance
• Efficiency and Productivity measures
 Performance Tools: the Balanced Scorecard
• To make decisions that further the overall organizational goals of meeting or
exceeding customer expectations and making productive use of limited
resources, organizations need good data and information.
• This data includes information about customers and markets, human
resources effectiveness, supplier performance, product and service quality,
and other key factors, in addition to traditional financial performance and
accounting measures.
• A good scorecard uses Lagging (tell us what has happened – outcomes or
long-term results) and Leading (predicting what will happen - performance
drivers or indicators of the strategic long-term results) measures.

WATCH: QUALITY SYSTEMS, MODELS AND THEORIES - BALANCED SCORECARD METRICS

https://www.youtube.com/watch?v=LkxFd7PlSz0
 BSC Performance Measures
Financial
measures:
• Profitability,
• ROI,
• Revenue growth, and
• Shareholder value

Internal process Customer

measures: measures:
• Quality levels (defects, dpmo levels), Overall Strategic • Market share,
• Cycle times, Objectives • Service levels,
• Costs per unit, and • Satisfaction ratings, and
• Delivery times • Customer loyalty (returns)

Learning and Growth

measures;
• Staff turnover,
• Employee satisfaction, and
• Training and skills development
 Group Case Study
• In groups read the Wainwright - Baptist Hospital performance
measures case study.
• Discuss the business and identify their performance
measures.
• What are some of the indicators that are being used?
• Using the BSC diagram, arrange the indicators for each
organization into the diagram’s four categories.
• Which of these could be considered:
– Lagging (used to assess long term performance), or
– Leading (used to predict short-term performance).
 Feedback
Wainright (Products) Baptist Hospital (Services)
• Delivering products of unequaled quality • 2 hospitals and ambulatory care units with
with craftsmanship, teamwork & a focus on continuous improvement.
innovation is its • Determines customer needs through
• Customer critical factors = price, defects, surveys and customer value analysis in a
delivery and business performance. CRM database.
• 5 strategic indicators: • Integrates data from different systems:
• Safety, • Clinical,
• Internal customer satisfaction, external • Employees,
customer satisfaction
• Defect rate, and • Patients
• Complaints • Finances
• Indicators & goals: • Decision support and
– External Customers • Physicians
• Satisfaction index, • Uses CARE & BAR reports that aggregate
• Number of complaints and compare
– Business performance • Clinical quality improvement
• Sales, • Customer satisfaction
• Capital exp,
• Financial results
• Market share
• Trends
• Engaged workforce implantation of
improvement ideas • Reports support organizational
performance and learning, clinical
• Outward focused, uses comparative data outcomes, team activities and continuous
improvement.
 Feedback
Financial measures:

Internal process measures: Customer measures:

Overall Strategic
Objectives

Learning and Growth measures;

 Financial measures:
• Sales, Capital expenditures,
Market share data
• Financial results and trends

Internal process measures: Customer measures:

• Internal customer
• Safety, Defect rates
Overall Strategic satisfaction, external
• Clinical quality improvement Objectives customer satisfaction and
and outcomes Complaints
• Customer satisfaction
results
Learning and Growth measures;
• Satisfaction index, improvement
idea implementations
• Patient survey and improvement
data in reports
 Summary
• Performance measurement and the data it develops is crucial for optimizing
business strategy and meeting organizational goals.
• Managers use Information (contextualized and analyzed data) to make decisions,
support strategies and innovate to meet customers needs.
• Measures and indicators must be relevant to strategy and contain customer
requirements.
• Benefits include strong industry performance, successful change, employee
empowerment and innovation.
• Measures can consist of Customer satisfaction, Financial and market
performance, Human resource, Supplier and partner performance and company
specific measures.
• Measurement can be made at the individual level, process level and
organizational level
Designing Performance Measurement Systems
• Provide a perspective of past, present and future.
• Identify trends and progress.
• Facilitate the understanding of cause and effect relationships,
• Provide direction for continuous improvement, and
• Allow performance comparisons for benchmarking.
• Performance Systems must be Understandable, Supportive of learning and Define
appropriate measures.
• May use Quality Policy or Quality Manuals that contain details regarding:
• Contract management, design control and purchasing
• Process control, inspection and testing
• Corrective actions and continuous improvement
• Controlling inspection, measuring and test equipment (metrology, measurement system
analysis and calibration)
• Records, documentation and audits
Measures & their Indicators
 Selecting measures and indicators
• Organizations must consider how the measures will support senior executive
performance reviews and organization planning and how they support daily
operations and decision making.
• Regular review of measures and their contribution, particularly that are truly
useful, in particular;
• fewer is better,
• linked to factors for success,
• mix of past future and present,
• based on needs of customers, shareholders and stakeholders,
• start at top and flow through organization, and
• be able to be adjusted to reflect change
• Inappropriate measures lead to actions that undermine the organisation’s
strategy . If not linked to business drivers they are unlikely to support sound
business decision making.
SHORT CASE: MANAGING PERFORMANCE AT KENNETH W. MONFORT COLLEGE OF BUSINESS (MCB)
 Baldrige Measurement, Analysis and Improvement Criteria
Baldrige Measurement, Analysis and
MONFORT COLLEGE OF BUSINESS
Improvement criteria;
(a) How it gathers and integrates data and
information for daily operations and
decision making,
(b) How it selects and uses comparative
data and information
(c) How the performance measurement
system meets changing business needs
and directions
(d) How analysis results are translated
into the organization’s improvement
objectives.

Baldrige Measurement, Analysis and
Improvement criteria;
(a) How it gathers and integrates data and Mission-driven key success measures, collected by the Educational Testing
information for daily operations and
decision making,
(b) How it selects and uses comparative
data and information
(c) How the performance measurement
system meets changing business needs
and directions
(d) How analysis results are translated
into the organization’s improvement
objectives.
Feedback
MONFORT COLLEGE OF BUSINESS
Service and Educational Benchmarking, Inc. and survey feedback, on the
key measures of recruitment, curriculum, technology, financial resources,
program reputation, and faculty and student performance.
External comparisons of the AACSB accreditation process, student
satisfaction factors measured on the 2001 Business Exit Survey and student
scores on Field Achievement Test.
Has key partners in the community and views them as critical to providing a
quality education and commitment to continuous improvement.
Through a regular cycle of program review and evaluation and through a
framework of data monitoring that encourages development of a student-
centered process, the availability of emerging and existing technologies,
the encouragement and support from university leadership.
 Selecting process measures
• A systematic process of measure selection will contain:
• Identify all customers and be able to determine their expectations
• Define the work processes that provides product or services
• Define value adding activities and outputs that comprise the process
• Develop specific performance measures or indicators
• Evaluate the performance measures to ensure their effectiveness
• These measures can be presented in summary form by dashboards.
• Dashboards provide quick summaries of process performance using
charts, graphs and other visual aids, and are regularly reviewed at all
levels to check on performance progress and monitoring.
Performance Management

The use of performance

measures
 Analysis
• Effective analysis capabilities ensure that managers can understand the
meaning of data, particularly cause and effect linkages between
external lagging results and internal leading indicators.
• Simple or sophisticated tools may be used effectively to analyze data
and provide information for managers, such as;
• Trends and changes using charts and graphs
• Calculations such as means, proportions and std deviations
• Using sophisticated statistical analysis such as correlation and regression
• Comparing results with other business units or external benchmarks
• Excel spreadsheets provide the ability to make simple but effective
analysis on data groups.
• Other forms of graphic analysis use matrix or 2x2 charts
 Alignment
• Organizational information needs to be transformed and integrated into forms
that are meaningful to the different levels of managers.
• One powerful method of analysis is interlinking – the quantitative modeling of
cause-and-effect relationships between external and internal performance
measures e.g. 91% of contract renewals come from customers who rate their
satisfaction as high or very high – an outcome that links renewal targets with
customer satisfaction data.
• Data mining also provides a means of understanding relationships and patterns
in data.
• ERP – Enterprise Resource Planning – systems provide an infrastructure for
managing information across the enterprise. Software packages such as SAP,
Oracle and PeopleSoft provide integrated data management and quality
management modules.
 Performance Measurement Alignment
• Alignment of work
processes with longer
term goals is vital for
organizational
performance.

• Alignment is tied
to performance
goals that are
measured at
appropriate levels
using relevant data
and indicators.

• Production data
can be used for daily
control, but also used
at a higher level to
support process
improvement.
Importance-Performance Matrix
Improvement priorities:
• Appropriate – considered
to be satisfactory
performance
• Improve – below
expectations and should be
improved
• Urgent action – important
to customers so should be
acted on immediately
• Excess – high performance,
but not considered
important by customer.
SHORT CASE: RAYDALE CONFERENCE CENTER
Feedback
Alan needs to address:
1. Flexibility (7:1) Urgent
2. Billing errors (6:5) Improve

And review;
1. Price (4:3) low Appropriate
2. Discounts (8:6) Low
appropriate
3. Size of menu (2:8) Excess
 Managing service performance problems
• Effective customer relation processes assist to change
dissatisfaction to loyalty. The service a customer receives
throughout their interactions with the company is key to
maintaining strong customer relationships and performance.
• Complaints are an opportunity to learn about the service and
customer.
• Service recovery is the process of listening, empathizing and
then describing the corrective action to win back customer
loyalty.
WATCH: SERVICE RECOVERY EXAMPLE
 Service recovery is a 4 step process
We’re sorry
you had a
Acknowledge problem
the problem Thanks for
letting us We’re sorry you had a
know about problem
it
Accept the Here’s what
complaint we’re going to
do about it

Describe corrective
We’d appreciate
action clearly
you giving us
another chance
Appeal to
loyalty

WATCH: SERVICE RECOVERY STORY

 Actions in the service recovery process
Step Actions
Acknowledge Listen carefully
Respond empathetically
Apologize for inconvenience
Accept Accept problem has occurred
Ask clarifying questions
Describe Describe solutions
Solve problem quickly in partnership with customer
Appeal Keep the promise
Follow-up

SHORT CASE: BETTER LATE AND HAPPY THAN JUST LATE

 Feedback
Step Actions
Acknowledge • As soon as the problem was known, passengers were informed and efforts made to make
them comfortable during the wait.
• Passengers were kept on the plane to avoid discomfort and stress.
• When longer delay occurred passengers were informed and moved to waiting lounge.
Accept • Staff answered passenger queries and problems.
• Airline kept people informed throughout the delay period.
Describe • Waiting was described to be better for passengers in airport lounge.
• Individual passenger problems were resolved as they occurred.
• Group solutions, such as meal vouchers and making sure people had food and comfort.
• Airline announced departure as soon as they knew.
• Solutions at arrival were given solutions that met their needs and circumstances.
Appeal • Cabin crew answered questions on delays and other flights the passengers may have.
• Captain personally thanked people for their patience and apologised.
• Some people were given hotels to stay in and cars for transport.
• The airline focussed on keeping the customers loyal as part of their procedures.
 Summary
• Performance measurement data is critical for optimizing business strategy and
meeting organizational goals.
• Measurement systems must be related to cause and effect so improvement can
be monitored and corrective actions taken.
• Measures and indicators must be relevant to the organization’s strategy and meet
customer requirements.
• Management of the data requires the selection of relevant measures that are key
to the processes and also which support monitoring strategic improvements.
• Measures can be used to indicate performance or competitive gaps and allows
managers to address these problems.
• Measures can be taken at the individual level, process level and organizational
level, but it is the decisions that are taken from them that drive organizational
performance.
• Complaints data and measures will assist to identify key measures and to design
service recovery procedures and processes.