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PERFORMANCE MANAGEMENT
Is a fundamental building block of Total Quality Management and a total quality organization
Effective information systems provide the right information to the right people at the right time. As a result individual in manufacturing can have input on product design and sales; designers can obtain immediate feedback about manufacturing and financial implications of decisions; and everyone can share information for solving problems. Empowered individuals with the right information can make more timely decisions and can take action to better serve customers
Traditionally, most organizations have relied on performance data based almost solely on financial or accounting-based factory productivity considerations, such as return on investment, earnings per share, direct labor efficiency and machine utilization To achieve a high level of performance, excellence requires a much broader set of performance measures that are aligned to an organizations strategy.
Organizations need to know what is happening now and what might happen in the future. For example, customer survey results about recent transactions might be a leading indicator for customer retention (a lagginh undicatr); employee satisfaction might be a leading indicator for turnover, and so on.
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.
Leading and lagging measures and indicators can help to establish cause-and-ef fect relationships across perspectives. The Malcolm Baldrige Criteria for Performance Excellence Resls category groups performance measures into six sets: Product Outcomes Customer-focused Outcomes Financial and Market Outcomes Workforce-focused Outcomes Process Effective Outcomes Leadership Outcomes
CUSTOMER-FOCUSED OUTCOMES
Relevant measures and indicators of an organizations performance as viewed by customers include direct of customer satisfaction and dissatisfaction, customer retention, gains and losses of customers and customer accounts, customer complaints, and warranty claims, perceived value, loyalty, positive dimensions. Service quality measures often revolve around the dimensions of reliability assurance, tangibles, empathy and responsiveness.
A useful financial performance indicator is the cost of quality, which managers use to prioritize improvement projects and gauge the effectiveness of total quality efforts.
Marketplace performance indicators could include market share, measures of business growth, new product and geographic markets entered, and percentage of new product sales as appropriate.
WORKFORCE-FOCUSED OUTCOMES
Workforce-focused outcomes show how well the organization has created and maintained a productive, engaging and caring work environment.
PROCESS-EFFECTIVENESS OUTCOMES
Measures and indicators of process effectiveness and efficiency might include work system performance that demonstrates improved cost savings or higher productivity by using internal or external resources.
LEADERSHIP OUTCOMES
With an increased focus on issues of governance, ethics, and leadership accountability, it is important for organizations to practice and demonstrate high standards of overall conduct. Relevant performance measures can help organizations monitor these issues.
Mark Graham Brown suggests some practical guidelines for designing a per formance measurement system : Fewer is better. Concentrate on measuring the vital few key variables rather than the trivial many. Measures should be inked to the factors needed for success, namely, the key business drivers. Measures should include a mix of past, present, and future to ensure that the organization is concerned with all three perspectives. Measures should be based around the needs of customers, shareholders, and other key stakeholder Measures should start at the top and flow down to all levels of employees in the organization. Measures should be changed or at least adjusted as the environment and strategy changes.
PROCESS-LEVEL MEASUREMENTS
Process measures should also clearly align with customer requirements. At the process level, product and service quality measures focus on the outcomes of manufacturing and service processes.
Six Sigma began by stressing a common measure for quality In Six Sigma terminology, a defect is any mistake or error that is passed on to the customer. A unit of work is the output of a process or an individual process step. A measure of output quality is defects per unit.
DPU tends to focus on the final product, not the process that produce the product.
Data Mining is the process of searching large databases to find hidden patterns in data, using analytical approaches and technologies such as cluster analysis, neutral networks, nad fuzzy logic
PERFORMANCE REVIEW
The analysis of data provides the foundation for management review Managers review performance results for several reasons:
To assess organizational success and performance relative to competitors To understand how well progress on strategic objectives and action plans is being achieved To identify priorities for improvement and opportunities for innovation for products, services and processes
Data summaries are integrated and reported to appropriate committees, company leadership and physicians
Cost of Quality approaches have numerous objectives, but the most important one is to translate quality problems into the language of upper management the language of money
To establish a cost of quality approach, one must identify the activities that generate cost, measure them in a way that is meaningful to managers.