PERFORMANCE & STRATEGIC INFORMATION MANAGEMENT

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Performance Measurement and Strategic Information

Management

2© [email protected] June 2013

Performance Measurement and Strategic Information Management

A supply of consistent, accurate, and timely data across all functional areas of business provides real-time information for the evaluation, control, and improvement of processes, products, and services to meet both business objectives and rapidly changing customer needs.

KEY IDEAKEY IDEAKEY IDEAKEY IDEA



Information ManagementInformation Management

n If you don’t measure results, you can’t tell success from failure

n If you can’t see success, you can’t reward it – and if you can’t reward success, you are probably rewarding failure

n If you can’t recognize failure, you can’t correct it



CustomerRequirements

Measurements

Processes ResultsDesign

Control

Prediction

Validation

Use of Information and AnalysisUse of Information and Analysis

Measurement supports executive performance review and daily operations and decision making.



Measurement-managed companiesare more likely to be in the top third oftheir industry financially, completeorganizational changes moresuccessfully, reach clear agreementon strategy among senior managers,enjoy favorable levels of cooperationand teamwork among management,undertake greater self-monitoring ofperformance by employees, and havea greater willingness by employees totake risks.




Benefits of Information Management

n Understand customers and customer satisfaction

n Provide feedback to workers

n Establish a basis for reward/recognition

n Assess progress and the need for corrective action

n Reduce costs through better planning



Leading Practices (1 of 2)Leading Practices (1 of 2)

n Develop a set of performance indicators that reflect customer requirements and key business drivers

n Use comparative information and data to improve overall performance and competitive position

n Continually refine information sources and their uses within the organization

n Use sound analytical methods to conduct analyses and use the results to support strategic planning and daily decision making



Leading Practices (2 of 2)Leading Practices (2 of 2)

n Involve everyone in measurement activitiesand ensure that information is widely visible

n Ensure that data are accurate, reliable,timely, secure, and confidential

n Ensure that hardware and software systemsare reliable and user-friendly

n Systematically manage organizationalknowledge and identify and share bestpractices



To make decisions that further theoverall organizational goals of meeting,or exceeding, customer expectationsand making productive use of limitedresources, companies need good dataand information about customers andmarkets, human resource effectiveness,supplier performance, product andservice quality, and other key factors, inaddition to traditional financialperformance and accounting measures.




A good balanced scorecard containsboth leading and lagging measuresand indicators.

Lagging measures (outcomes) tellwhat has happened; leadingmeasures (performance drivers)predict what will happen.




Customer MeasuresCustomer Measures

n Customer satisfaction and dis-satisfaction

n Customer retentionn Gains and losses of customers

and customer accountsn Customer complaints and war-

ranty claims.n Perceived value, loyalty, positive

referral, and customer relation-ship building



Product and Service MeasuresProduct and Service Measuresn Internal quality measurements

n Field performance of products

n Defect levels

n Response times

n Data collected from customers or third parties on ease of use or other attributes

n Customer surveys on product and service performance



Human Resource MeasuresHuman Resource Measures

n Employee satisfaction

n Training and development

n Work system performance and effectiveness

n Safety

n Absenteeism

n Turnover



Organizational EffectivenessOrganizational Effectivenessn Cycle timesn Production flexibilityn Lead times and setup timesn Time to marketn Product/process yieldsn Delivery performancen Cost efficiencyn Productivity



Social Responsibility Measures Social Responsibility Measures n Organizational accountabilityn Stakeholder trustn Ethical behaviorn Regulatory/legal compliancen Financial and ethics review

resultsn Community servicen Management stock purchase

activity



Organizations need comparativedata, such as industry averages, bestcompetitor performance, and world-class benchmarks to gain anaccurate assessment of performanceand know where they stand relativeto competitors and best practices.




Purposes of PMSn Providing direction and support

for continuous improvement

n Identifying trends and progress

n Facilitating understanding of cause-and-effect relationships

n Allowing performance comparison to benchmarks

n Providing a perspective of the past, present, and future

Performance Management System



In designing a performance mea-surement system, organizations mustconsider how the measures willsupport senior executive perfor-mance review and organizationalplanning to address the overall healthof the organization, and how themeasures will support dailyoperations and decision making.




Practical GuidelinesPractical Guidelinesn Fewer is better. n Link to the key business drivers.n Include a mix of past, present, and future n Address the needs of all stakeholders.n Start at the top and flow down to all levels of

employeesn Combine multiple indexes into a single index n Change as the environment and strategy

changesn Have research-based targets or goals



Linkages to StrategyLinkages to Strategy

Key business drivers (key success factors)

Strategies and action plans

Measures and indicators



The things an organization needs todo well to accomplish its vision areoften called key business driversor key success factors.

They represent things that separatean organization from its competitionand define strengths to exploit orweaknesses to correct.




Process-Level MeasurementsProcess-Level Measurementsn Does the measurement support

our mission?n Will the measurement be used to

manage change?n Is it important to our customers?n Is it effective in measuring

performance?n Is it effective in forecasting

results?n Is it easy to understand and

simple?



Good measures and indicators are actionable; that is, they provide the basis for decisions at the level at which they are applied.




Creating Effective Performance Measures

n Identify all customers and their requirements and expectations

n Define work processes

n Define value-adding activities and process outputs

n Develop measures for each key process

n Evaluate measures for their usefulness



Analyzing and Using Data

n Analysis – an examination of facts and data to provide a basis for effective decisions.

n 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



Organizations need a process for transforming data, usually in some integrated fashion, into information that top management can understand and work with.




Interlinkingn Quantitative modeling of cause-

and-effect relationships betweenexternal and internalperformance measures

n Facilitated by data mining – theprocess of of searching largedatabases to find hiddenpatterns in data, using analyticalapproaches and technologiessuch as cluster analysis, neuralnetworks, and fuzzy logic



Managing Data and Informationn Validity – Does the indicator

measure what it says it does?

n Reliability – How well does an indicator consistently measure the “true value” of the characteristic?

n Accessibility – Do the right people have access to the data?



In many companies, business information is only accessible to top managers and others on a need-to-know basis.

In Total Quality -focused compa-nies, business information is accessible to everyone.




Knowledge Management

n 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.

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