process performance measures chapter 7. process performance measures facts are the most important...

Process Performance Measures

Chapter 7


Facts are the most important thing in business. Study facts and do more than is

expected of you.Frederick Hudson Ecker

Chairman Metropolitan Life Insurance


I’ve always been able to make erroneous decisions very quickly.

Herb KelleherFounder, Southwest Airlines


Knowledge is what we get by evaluating vast quantities of information…and adding something a little extra-creativity, judgment,

experience, and thought.Dominic Tarantino

Former chairman, Price Waterhouse World Firm


Information is only as valuable as its source.


You can’t improve what you don’t measure


Organizations measure what matters.


Our view was, if we could measure it, we could manage it.

Don EnglandCEO, C.R. England, Inc.


Organizations measure what they value

What does our organization value?

What does the organization measure?What measures does the organization

use to make decisions and take action?


Measures create a link between philosophy and action.

What does the organization measure, record, analyses, reports, shares throughout the

organization, and takes action on.


How do we know what is important?

How do we do what we do?

How will we do what we said we would do?

How do we know we did what we said we would do?


What role does information play in creating an effective organization?

How does the analysis of information support customer satisfaction?

How does the analysis of information support a healthy bottom line?


Information enables you to make appropriate decisions.

Inter-departmental relationships can be integrated through the use of information.


Integrating Customer information, processes and decision-making:

use data collection and analysis todefine the customer requirements

within the identified market segment.


Translate requirements into major design parameters to develop, produce, deliver, and service the product that meets the customer

requirements.Complement these primary processes with

support activities such as finance, accounting, personnel, etc.

Design the information requirements necessary to manage each process and to integrate all

processes.


Measures of Performance answer the question:

How do we know?


Performance measures enable an organization to answer the following

questions:How well is something performing its intended

purpose?Is the organization able to measure the impact

of the changes being made?How does the organization know that it has

allocated its assets correctly?


An effective measurement system enables an organization to:

determine if the activities occurring within the company support the achievement of company goals and

objectives

determine whether or not those goals and objectives move the organization closer to the stated vision

see where the organization is and where it is going.


An effective measurement system links actions and plans to the goals

and objectives.


Results (Outcome) measures Results are the objectives the organization

wants to achieve.

Results are what customers hope to obtain by doing business with the organization.

Process measures Process measures monitor operational

activities.


The Balanced ScorecardUsing measurements from four areas integrates

the key business measures into a few manageable indicators of performance so that

management is able to quickly access the short and long-term health of the organization from

several points of view. Kaplan and Kaplan


The Balanced Scorecard (Kaplan and Kaplan)

FOUR areas of focus :Customer Focus

Internal Processes

Learning and Growth

Financial Analysis


Barriers to Installing Measurement SystemsLack of leadership

Individuals are fearful of having specific, measurable objectives to achieve

Lack of focus on what’s important to the organization.


Determine what needs to be measured

and why it needs to be measured

before designing a measure of performance.

PUBLISH definitions

for each metric!


For Effective Measurement Systems:Leaders must demonstrate their commitment by

holding people accountable for measuresLeaders must show persistence and

perseverance to work through data integrity issues.

Real life advice - How about a metric that measures the accuracy

of the metrics?


When developing measures consider:What do we need to know?

What are we measuring now?How does what the organization needs to know

compare with what it is currently measuring?How is this information being captured?

Is the information currently being captured useful and actually being used?


When developing measures consider (Con’t) :

6. Are these measurements being captured over time?Do the identified, selected, and measured factors reflect

what the customers need, require, and expect?Can these selected factors be acted upon within the

organization?Can the impact of the changes made be measured?

Have the organization’s assets been allocated appropriately?


Measurement Systems allow effective organizations to:

Determine that a gap exists between desired and actual performance

Determine the root cause of the gapDetermine the necessary corrective action to eliminate

the root cause of the gapDetermine whether the corrective actions eliminated the root cause and closed the gap between the actual and

desired performance.


HOW MANY METRICS ?

Balanced Scorecard method using METRICS =

about 10 metrics for your Business Unit, 5 for your group and 5 for

individuals

Any more than that, your focus gets lost!