performance measures

CHAPTER 7PERFORMANCE

MEASURESMarc Lester Jose

Laureana Veronika S. Vicedo

Performance Measures (PM)• The sixth and final concept of Total Quality

Management• It plays an important part in the overall

success or failure of a business organization.

• Performance measures quantitatively tell us something important about our products, services, and the processes that produce them.

• They are a tool to help us understand, manage, and improve what our organizations do.

Performance measures let us know:

how well we are doing

if we are meeting our goals

if our customers are satisfied

if our processes are in statistical control

if and where improvements are necessary.

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As a process, performance measurement is not simply concerned with collecting data associated with a predefined performance goal or standard. Performance measurement is better thought of as an overall management system involving prevention and detection aimed at achieving conformance of the work product or service to your customer's requirements. Additionally, it is concerned with process optimization through increased efficiency and effectiveness of the process or product. These actions occur in a continuous cycle, allowing options for expansion and improvement of the work process or product as better techniques are discovered and implemented.

• Production activities uses measures such as defects per million, inventory turns, and on time delivery.

• Service activities uses measures such as billing errors, sales per square feet, engineering changes, and activity time.

Number

• gives a magnitude (how much)

Unit • gives the

number a meaning (what)

“Managing a business organization without performance measures is like a captain of a ship navigating in the middle of the ocean without any instrumentation. The captain of would most likely end up travelling circle without a port of destination, as would a business organization.”

Essential Elements of Performance Measures (by Ray F. Boedecker)

1. Objectives

2. Typical measurement

3. Criteria

4. Characteristics

1. Objectives- Performance measurements as used to

achieve one or more of the following six objectives:

a. Establish baseline measures and reveal trends

b. Determine which processes need to be improved

c. Indicate process gains and lossesd. Compare goals with actual performancee. provide information for individual and team

evaluationf. Manage by fact rather than gut felling

2.Typical Measurement- What should be measured is frequently

asked by managers and teams.

a. Human resourcesb. Customersc. Productiond. Research developmente. Suppliersf. Marketing/Salesg. Administration

3.Criteria - All business organizations have

some measurements in place that can be adopted for TQM. In order to evaluate the existing measures or add new ones, there are seven criteria to be followed:

a. Simpleb. Few in number

c. Developed by usersd. Relevance to customere. Improvementf. Costg. Visible

4. Characteristics - One of the seven basic

characteristics is used to measure the performance of a particular process or function.

a. Quantity – most common measures; refers to how many units a production or business produces

b. Cost – amount of resources required to produce a given output

c. Time

d. Accuracy – number of non-

conformances in the output

e. Function

f. Aesthetics – how the product looks,

feels, sounds, tastes, or smells and

is quite subjective

g. Service – service activity

Why do we need

to measure?

Control: - Measurements help to reduce variation

Self-Assessment: - Measurements can be used to assess how well a process is doing, including improvements that have been madeContinuous Improvement:- Measurements can be used to identify defect sources, process trends, and defect prevention, and to determine process efficiency and effectiveness, as well as opportunities for improvementManagement Assessment: - Without measurements there is no way to be certain we are meeting value-added objectives or that we are being effective and efficient

Why do we need to measure?

• The basic concept of performance measurement involves:

(a)planning and meeting established operating goals/standards;

(b) detecting deviations from planned levels of performance; and

(c) restoring performance to the planned levels or achieving new levels of performance.

Benefits of Measurement• To identify whether the company is

meeting customer requirements. How do we know that we are providing the services/products that our customers require?

• To help us understand the company’s processes. To confirm what we know or reveal what we don‘t know. Do we know where the problems are?

• To ensure decisions are based on fact, not on emotion. Are our decisions based upon well documented facts and figures or on intuition and gut feelings?

• To show where improvements need to be made. Where can we do better? How can we improve?

• To show if improvements actually happened. Do we have a clear picture?

• To reveal problems that bias, emotion, and longevity cover up. If we have been doing our job for a long time without measurements, we might assume incorrectly that things are going well. (They may or may not be, but without measurements there is no way to tell.)

• To identify whether suppliers are meeting the company’s requirements. Do our suppliers know if our requirements are being met?

Malcolm Baldrige National Quality Award (MBNQA)• It is an award that recognizes organizations

in business, health care, education, and non-profit sectors for excellence in performance.

• The award promotes awareness of performance excellence as an increasingly important element in competitiveness and information sharing of successful performance strategies and the benefits derived from using these strategies.

• The Baldrige National Quality Program and the associated award were established after President Reagan signed into law the Malcolm Baldrige National Quality Improvement Act of 1987 (Public Law 100-107)

• The program and award were named for Malcolm Baldrige who served as United States Secretary of Commerce during the Reagan Administration from 1981 up to his death in 1987 in a rodeo accident.

• The Award is the only formal recognition for the performance excellence of U.S. organizations given by the President of the United States.

• Another is the Ron Brown Award for Corporate Leadership that recognize companies "for the exemplary quality of their relationships with employees and communities". It is presented to companies that "have demonstrated a deep commitment to innovative initiatives that not only empower employees and communities but also advance strategic business interests".

2. Strategic Planning

3. Customer

Focus

4. Measurement, Analysis

and Knowledge manageme

nt5. Work-force Focus

6. Process Manage-

ment

7. Results

1. Leader-ship

BaldrigeCriteria

1. Leadership (120pts) • Examines HOW your organization’s

senior leaders’ personal actions guide and sustain your organization’s governance system and HOW your organization fulfils its legal, ethical, and societal responsibilities and supports its KEY communities.

2. Strategic Planning (85 pts)

• Examines HOW your organization develops strategic objectives and action plans. Also, it examines HOW your chosen strategic objectives and action plans are deployed and changed if circumstances require, and HOW progress is measured.

3. Customer Focus (85 pts)• Examines HOW your organization

engages its customer for long-term marketplace success. This engagement strategy includes how your organization builds a customer-focused culture. Also, it examines is how your organization listens to the voice of its customer and uses this information to improve and identify opportunities for innovation.

4. Measurement, Analysis and Knowledge Management (90 pts)

• Examines how your organization selects, gathers, analyzes, manages, and improves its data, information, and knowledge, assets, and how it manages its information technology. This also includes the examination of how your organization reviews and uses reviews to improve its performance.

5. Workforce Focus (85 pts)• Examines how your organization

engages, manages, and develops your workforce to utilize its full potential in alignment with your organization’s overall mission, strategy, and action plans. The category examines your ability to assess workforce capability and capacity needs and to build a workforce environment conducive to high performance.

6. Process Management (85 pts)

• Examines how your organization designs its work systems and how it designs, manages, and improves its key processes fro implementing those work systems to deliver customer value and achieve organizational success and sustainability. Also examine your readiness for emergencies.

7. Results (450 pts)• Examines how your organization’s

performance and improvement in all key areas – product outcomes, customer-focused outcomes, financial and market outcomes, workforce-focused outcomes, process effectiveness outcomes, and leadership outcomes. Performance levels are examined relative to those of competitors and other organizations with similar product offerings.

THANK YOU AND GOD BLESS !