Quality Management Measures of Organizational Success Chapter 9

Achieving Organizational Success

Measures of Organizational Success 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

Measures of Organizational Success I’ve always been able to make erroneous decisions very quickly. Herb Kelleher Founder, Southwest Airlines

Measures of Organizational Success 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

Measures of Organizational Success 1 Leadership 2 Strategic Planning ‘leadership triad’ 3 Customer and Market Focus 4 Measurement, Analysis, and Knowledge Management 5 Workforce Focus 6 Process Management ‘results triad’ 7 Results

Measures of Organizational Success 4.0 Measurement, Analysis, and Knowledge Management 4.1 Measurement, Analysis, and Improvement of Organizational Performance Describe how your organization measures, analyzes, aligns, reviews and improves its performance data and information at all levels and in all parts of your organization.

Measures of Organizational Success 4.0 Measurement, Analysis, and Knowledge Management 4.2 Management of Information, Information Technology, and Knowledge Describe how your organization ensures the quality and availability of needed data and information for employees, suppliers, partners, collaborators, and customers. Describe how your organization builds and manages its knowledge assets.

Measures of Organizational Success Information is only as valuable as its source.

Measures of Organizational Success Can’t improve what you don’t measure

Process Measures

Measures of Organizational Success Organizations measure what matters.

Measures of Organizational Success Our view was, if we could measure it, we could manage it. Don England CEO, C.R. England, Inc.

Measures of Organizational Success 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?

Organizational Results Performance Measures Focused on Strategic Intent

Measures of Organizational Success Measures create a link between philosophy and action. What does the organization measure, record, analyses, reports, shares throughout the organization, and takes action on.

Traditional and Broader Performance Measures

Measures of Performance - Production

Measures of Organizational Success 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?

The Iceberg of Quality Costs

Examples of Quality Costs

Increases in Costs as Faulty Product Reaches Consumer

Categories of Quality Costs

Cost of Quality versus Profit When an organization is able to reduce quality costs – particularly prevention costs and internal failures and external failures – the gains will show up in the profit line.

Measures of Organizational Success 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?

Measures of Organizational Success Information enables you to make appropriate decisions. Inter-departmental relationships can be integrated through the use of information.

Measures of Organizational Success Integrating Customer information, processes and decision-making: use data collection and analysis to define the customer requirements within the identified market segment.

Measures of Organizational Success 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 Organizational Success Measures of Performance answer the question: How do we know?

Measures and Their Relationship to Strategic Planning

Measures of Performance

Measures of Organizational Success 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?

Measures of Organizational Success 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.

Measures of Organizational Success An effective measurement system links actions and plans to the goals and objectives.

Measures of Organizational Success 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.

Measures of Organizational Success The Balanced Scorecard Using 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

Measures of Organizational Success The Balanced Scorecard (Kaplan and Kaplan) FOUR areas of focus : Customer Focus Internal Processes Learning and Growth Financial Analysis

Measures of Organizational Success Barriers to Installing Measurement Systems Lack of leadership Individuals are fearful of having specific, measurable objectives to achieve Lack of focus on what’s important to the organization.

Measures of Organizational Success Determine what needs to be measured and why it needs to be measured before designing a measure of performance. PUBLISH definitions for each metric!

Measures of Organizational Success For Effective Measurement Systems: Leaders must demonstrate their commitment by holding people accountable for measures Leaders 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?

Measures of Organizational Success 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?

Measures of Organizational Success 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?

Measures of Organizational Success Measurement Systems allow effective organizations to: Determine that a gap exists between desired and actual performance Determine the root cause of the gap Determine the necessary corrective action to eliminate the root cause of the gap Determine whether the corrective actions eliminated the root cause and closed the gap between the actual and desired performance.

Measures of Organizational Success 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!

Measures of Organizational Success How? - Leadership How does leadership analyze and use information? Are our leaders converting information into appropriate policies and actions?

Measures of Organizational Success How? - Strategic Plan How does our strategic plan analyze and use information? How does our strategic plan react to new information?

Measures of Organizational Success How? - Customer and Market Focus Are we communicating useful customer and market information to our employees in a manner that improves their job performance and enhances customer service?

Measures of Organizational Success How? - Measurement, Analysis, and Knowledge Management How are our employees gathering, analyzing, disseminating and using information related to our key processes? Does the organization have communication systems in place that enhance employees ability to obtain analyze and use information?

Measures of Organizational Success How? - Measurement, Analysis, and Knowledge Management (con’t). How does your organization ensures the quality and availability of needed data and information for employees, suppliers and partners, and customers? How does your organization builds and manages its knowledge assets?

Measures of Organizational Success How? - Workforce Focus Do our employee policies and reward systems support the use and analysis of information related to our key processes during day-to-day activities? Do our employee policies and reward systems support the use and analysis of information during continuous improvement activities?

Measures of Organizational Success How? - Process Management Have the key processes supporting the analysis and use of information been identified and/or improved? Are we gathering appropriate information concerning our key processes? Is the information gathered being used to support appropriate improvement efforts?

Measures of Organizational Success How? - Results Do the business results associated with our key processes reflect the judicious analysis and use of information? Is the successful integration of customer and market information into our strategic plan shown by our business results?