1. Performance Measurement and Strategic Information Management
Chapter 8
Performance
Measurement
and Strategic
Information
Management

2. Information Management
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

3. Process Flow
Measures and Indicators
Data
Analysis
Information

4. Benefits of Information Management
Understand customers and customer satisfaction
Provide feedback to workers
Establish a basis for reward/recognition
Assess progress and the need for corrective action
Reduce costs through better planning

5. Three Levels of Quality Info.
Individual level
Control
Process level
Diagnosis
Organizational level
Planning

6. Leading Practices (1 of 2)
Develop a set of performance indicators that reflect customer requirements and key business drivers
Use comparative information and data to improve overall performance and competitive position
Continually refine information sources and their uses within the organization
Use sound analytical methods to conduct analyses and use the results to support strategic planning and daily decision making

7. Leading Practices (2 of 2)
Involve everyone in measurement activities and ensure that information is widely visible
Ensure that data are accurate, reliable, timely, secure, and confidential
Ensure that hardware and software systems are reliable and user-friendly
Systematically manage organizational knowledge and identify and share best practices

8. The Dashboard of Old Performance Measures
Costs
Capital
Expendi-
tures
Cash flow
Sales
Assets
Profitability
Debt
Liabilities

9. The Dashboard of New Performance Measures
Training
Costs
Profitability
Defect
Rates
Sales
Customer
Retention
Assets
Cycle
Time
Cash-
flow
Employee
Retention
Debt
Quality
Customer
Satisfac-
tion
Referral
Rates
Capital
Expendi-
tures
Liabilities

10. Balanced Scorecard Financial perspective
Internal (processes) perspective
Customer perspective
Innovation and learning perspective

11. Key Idea The Balanced Scorecard
A good balanced scorecard contains both leading and lagging measures and indicators. Lagging measures (outcomes) tell what has happened; leading measures (performance drivers) predict what will happen.

12. Baldrige Classification of Performance Measures
Customer
Product and service
Financial and market
Human resource
Organizational effectiveness
Governance and social responsibility

13. Customer Measures Customer satisfaction and dissatisfaction
Customer retention
Gains and losses of customers and customer accounts
Customer complaints and warranty claims.
Perceived value, loyalty, positive referral, and customer relationship building

14. Product and Service Measures
Internal quality measurements
Field performance of products
Defect levels
Response times
Data collected from customers or third parties on ease of use or other attributes
Customer surveys on product and service performance

15. Financial and Market Measures
Revenue
Return on equity
Return on investment
Operating profit
Pretax profit margin
Asset utilization
Earnings per share

16. Human Resource Measures
Employee satisfaction
Training and development
Work system performance and effectiveness
Safety
Absenteeism
Turnover

17. Organizational Effectiveness Measures
Cycle times
Production flexibility
Lead times and setup times
Time to market
Product/process yields
Delivery performance
Cost efficiency
Productivity

18. Governance and Social Responsibility Measures
Organizational accountability
Stakeholder trust
Ethical behavior
Regulatory/legal compliance
Financial and ethics review results
Community service
Management stock purchase activity

19. Key Idea The Role of Comparative Data
Organizations need comparative data, such as industry averages, best competitor performance, and world-class benchmarks to gain an accurate assessment of performance and know where they stand relative to competitors and best practices.

20. Key Idea Designing Effective PM Systems
In designing a performance measurement system, organizations must consider how the measures will support senior executive performance review and organizational planning to address the overall health of the organization, and how the measures will support daily operations and decision making.

21. Practical Guidelines Fewer is better—measure vital few.
Link to the key business drivers.
Include a mix of past, present, and future
Address the needs of all stakeholders.
Start at the top and flow down to all levels of employees
Combine multiple indexes into a single index
Change as the environment and strategy changes
Have research-based targets or goals

22. Linkages to Strategy Measures and indicators
Key business drivers (key success factors)
Strategies and action plans
Measures and indicators

23. Key Idea Linking Measures to Strategy
The things an organization needs to do well to accomplish its vision are often called key business drivers or key success factors. They represent things that separate an organization from its competition and define strengths to exploit or weaknesses to correct.

24. Effective Measures
Simple
Measurable
Actionable
Related
Timely

25. Common Process Quality Measures
Nonconformities (defects) per unit
Errors per opportunity
Dpmo – defects per million opportunities

26. Identifying and Selecting Process Measures
Identify all customers and their requirements and expectations
Define work processes
Define value-adding activities and process outputs
Develop measures for each key process
Evaluate measures for their usefulness

27. Analyzing and Using Data
Analysis – an examination of facts and data to provide a basis for effective decisions.
Examples
Examining trends and changes in key performance indicators
Making comparisons relative to other business units, competitor performance, or best-in-class benchmarks
Calculating means, standard deviations, and other statistical measures
Seeking to understand relationships among different performance indicators using sophisticated statistical tools such as correlation and regression analysis

28. Key Idea Analyzing and Using Performance Data
Organizations need a process for transforming data, usually in some integrated fashion, into information that top management can understand and work with.

29. Interlinking
Quantitative modeling of cause-and-effect relationships between external and internal performance measures
Facilitated by data mining – the process of of searching large databases to find hidden patterns in data, using analytical approaches and technologies such as cluster analysis, neural networks, and fuzzy logic

30. Managing Data and Information
Validity – Does the indicator measure what it says it does?
Reliability – How well does an indicator consistently measure the “true value” of the characteristic?
Accessibility – Do the right people have access to the data?

31. Key Idea Data Accessibility and Security
In many companies, business information is only accessible to top managers and others on a need-to-know basis. In TQ-focused companies, business information is accessible to everyone.

32. Knowledge Management
The process of identifying, capturing, organizing, and using knowledge assets to create and sustain competitive advantage
Explicit knowledge includes information stored in documents or other forms of media.
Tacit knowledge is information that is formed around intangible factors resulting from an individual’s experience, and is personal and content-specific.

33. Key Idea Knowledge Management
Knowledge assets refer to the accumulated intellectual resources that an organization possesses, including information, ideas, learning, understanding, memory, insights, cognitive and technical skills, and capabilities.

34. Knowledge Management
Knowledge management involves the process of identifying, capturing, organizing, and using knowledge assets to create and sustain competitive advantage.
Knowledge management differs from information management

35. Internal Benchmarking
The ability to identify and transfer best practices within the organization
Process:
Identify and collect internal knowledge and best practices
Share and understand those practices
Adapt and apply them to new situations and bringing them up to best-practice performance levels.

36. Measurement and Information Management in the Baldrige Award Criteria
The Measurement, Analysis, and Knowledge Management Category examines an organization’s information management and performance measurement systems and how the organization analyzes performance data and information.
4.1 Measurement and Analysis of Organizational Performance
a. Performance Measurement
b. Performance Analysis
4.2 Information and Knowledge Management
a. Data and Information Availability
b. Organizational Knowledge