Chapter 9 - Performance Measurement PDF

PERFORMANCE MEASURE CHAPTER 9  REPORTERS DELA CRUZ, REILLO, CHELLA VILLAGRACIA, VANESSA MAE JUANITO  PERFORMANCE MEASURE It is the process of quantifying action, where measurement means the process of quantification, and the performance of the o...

PERFORMANCE MEASURE CHAPTER 9  REPORTERS DELA CRUZ, REILLO, CHELLA VILLAGRACIA, VANESSA MAE JUANITO  PERFORMANCE MEASURE It is the process of quantifying action, where measurement means the process of quantification, and the performance of the operation is assumed to derived from actions taken by its management. DELA CRUZ FIVE OBJECTIVES OF PERFORMANCE MEASUREMENT DELA CRUZ QUALITY To satisfy customers by providing error-free goods and services which are “fit for their purpose” DELA CRUZ SPEED Minimizing the time between a customer asking for goods or services and the customer receiving them in full, thus increasing the availability of goods and services and giving customers a speed advantage. DELA CRUZ DEPENDABILITY To keep the delivery promises made to customers. DELA CRUZ FLEXABILITY To be able to vary or adapt the operation's activities to cope with unexpected circumstances or to give customer individual treatment. DELA CRUZ COST To produce goods and services at a cost that enables them to be priced appropriately for the market while still allowing for a return to the organization, or, in a not-for-profit organization, give good value to the taxpayers or whoever is funding the operation. DELA CRUZ  CRITERIA OF SELECTION MEASUREMENT 01 SIMPLE 04 RELEVANCE TO CUSTOMERS 02 FEW IN NUMBER 05 IMPROVEMENT 03 DEVELOPED BY USERS DELA CRUZ CRITERIA OF SELECTION MEASUREMENT 06 COST 09 ALIGNED 07 VISIBLE 10 RESULTS 08 TIMELY DELA CRUZ  MEASUREMENT STRATEGY It focuses on aligning performance metrics with strategic goals to drive business success. DELA CRUZ  PERFORMANCE MEASURE DESIGN The focus in performance measurement is now on achieving a balanced framework that addresses the issues described above. Examples of these new frameworks are Kaplan and Norton's Balanced Scorecard, Skandia's navigator model and the Performance Prism. Others recommend that the results sections of business excellence models should be used to generate a balanced set of performance measures. REILLO KEY HOW TO MEASURE CHALLENGES IN NON-FINANCIAL PERFORMANCE DESIGNING AN EFFECTIVE WHAT MEASURES TO CHOOSE AND WHY PERFORMANCE MEASUREMENT HOW TO USE THEM - SYSTEM WHAT TO DO WITH THE RESULTS REILLO KEY WHO SHOULD BE CHALLENGES IN RESPONSIBLE FOR USING THE RESULTS DESIGNING AN HOW AND TO WHOM, EFFECTIVE TO COMMUNICATE THE RESULTS PERFORMANCE MEASUREMENT THE RESOURCES NEEDED TO CONSIDER THE ABOVE SYSTEM AND DESIGN AND DEPLOY THE MEASUREMENT SYSTEM REILLO STEPS TO FIND THE RIGHT MEASURES REILLO STEP#1 Performance measures are objective BEGIN WITH THE END IN comparisons that offer proof of an MIND essential performance result. It is of the greatest meaning to make a decision which results are most worth following right now. As the initial step in choosing how to measure a result, write down what the result is, what the difference being tried to create (and thus desire to follow using a measure). Focus on one result at a time. REILLO STEP#2 Be sensory specific. When one has the conclusion in mind, he is ready to get a BE SENSORY SPECIFIC handle on what particularly about the result he will determine. This is where he takes care in his selection of words to express the result as concretely as feasible. Use sensory language which is the language that describes what the individual and others would see, hear, feel, do, taste or smell if the result was occurring now. Keep away from those lifeless words that are so often see in goal and objective statements, like efficient, effective, reliable, sustainable and quality. REILLO  Test the bigger picture for what could STEP#3 happen if one measures the result. CHECK THE BIGGER What intensity of control one has over PICTURE achieving it? What might the unplanned consequences of measuring the outcome both the affirmative and the pessimistic? What behavior would the measures make? Which other areas of performance might be disrupted or restricted? This is first opportunity to change one's mentality on what's most meaningful to measure. REILLO STEP#4 Now, search out for particularly specific WHAT'S THE EVIDENCE? and discover what the likely measures are that could let an individual and everyone discern that the result is being realized. For each of the sensory rich statements from step 2, what could one add up to tell the extent to which it is taking place? Which of these possible measures would be the most favorable balance between objectivity and viability? REILLO STEP#5 Naming performance measures NAME THE MEASURE marks the end at which one recognize accurately what should be measured. Be concise, informative and purposeful, as needed to be able to constantly and effortlessly categorize each measure as it moves through the steps of being brought to reality and being employed in decision making. REILLO PERFORMANCE BASED MANAGEMENT VILLAGRACIA  PERFORMANCE BASED MANAGEMENT Organizations tried so hard to realize a balanced method of performance management that offers a strategic and comprehensive context for decision- making. In order to center on vital areas of performance, and to highlight user value- added, a simple theoretical structure is necessary. For each goal/service and/or program, analysts should consider three Rs in the form of a triangle (see Figure 10). VILLAGRACIA Resources are both the sum of time, money, and/or energy applied, and the kind of resources exploited. Kinds of resources consist of capital and labor, skill types, and core competencies necessary, besides the physical and spatial location of resources. It is imperative, then, to recognize the total resources devoted to a goal on top of the important characteristics of the resources. VILLAGRACIA  Reach is the breadth and depth of control over which management desires to stretch its resources. Physical reach is one aspect, in addition to the category of goals refers to the quantity and coverage of clients served. Michael Porter and other well- known theorists of the late 1970s and early 1980s started to move the collective business focus over to reach, which they named market share. As competitiveness developed into a rising issue, Porter-based analysis offered market share as the vital gauge of success. VILLAGRACIA  The result is the impact on the groups attained by the resources utilized. Preferred results generally comprise the realization of a most wanted mental or physical situation. There is a notion to be "value-added" when results are pleasing. When referring to clients, this means they are content and/or that they will enthusiastically conduct themselves in a preferred manner. Organizations globally have utilized great effort to develop a scorecard that describes performance in a balanced fashion. All sectors tend to place heavy distorted management concentration towards internal financial control, at the quantitative weight on financial resource outcomes and this sequentially has the expense of other areas. VILLAGRACIA ‘BLUEPRINT’ FOR PERFORMANC E REPORTING- BALANCING THE SCORECARD VILLAGRACIA THE BALANCED SCORECARD FOR MEASURING PERFORMANCE VILLAGRACIA  THE BALANCED SCORECARD It is a strategic planning and management system that is employed comprehensively in business and industry, government, and nonprofit organizations worldwide to support business activities to the vision and strategy of the organization, get better internal and external communications, and check organization performance against strategic goals. VILLAGRACIA Early 1990s: The term "Balanced Scorecard" was coined by Drs. Robert Kaplan and David Norton. 1950s: General Electric pioneered performance measurement reporting, contributing to the development of the Balanced Scorecard concept. Early 20th century: French process engineers introduced the "Tableau de Bord," a performance measurement dashboard, which influenced the Balanced Scorecard framework. VILLAGRACIA Created to provide a balanced view by adding non-financial metrics to traditional financial measures. Evolved from a performance measurement framework to a strategic management system. Helps turn strategic plans into actionable, daily directives for the organization. VILLAGRACIA  Kaplan and Norton illustrate the innovation of the balanced scorecard as follows: "The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial-age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age company must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation." VILLAGRACIA THE FOUR PERSPECTIVE OF THE BALANCED SCORECARD VILLAGRACIA  It emphasizes continuous employee THE development and a supportive LEARNING corporate culture, crucial for success in knowledge-driven organizations. As AND GROWTH rapid technological change demands PERSPECTIVE constant learning, this perspective highlights not only formal training but also mentorship, open communication, and effective use of VILLAGRACIA technology. These elements ensure that employees can easily access help and enhance their skills. Kaplan and Norton stress that this foundation is essential for driving organizational growth and long-term success.  This perspective refers to internal THE business processes. Metrics based on BUSINESS this perspective allow the managers PROCESS to know how well their business is running, and whether its products PERSPECTIVE and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes VILLAGRACIA most intimately; with the company's unique missions, these are not something that can be developed by outside consultants.  Recent management philosophy increasingly recognizes the THE importance of ‘customer focus and satisfaction’ as key indicators of CUSTOMER business success. When customers PERSPECTIVE are dissatisfied, they are likely to seek alternative suppliers, signaling potential future decline even if current financial performance VILLAGRACIA appears strong. Developing customer satisfaction metrics involves analyzing the types of customers and the specific processes used to deliver products or services to them, ensuring that their needs are met effectively.  Kaplan and Norton acknowledge the critical role of ‘financial data’, THE emphasizing that timely and accurate financial reporting will always be a FINANCIAL priority. However, they caution that PERSPECTIVE excessive focus on financial metrics can create an "unbalanced" approach, overlooking other key perspectives. While centralizing and automating financial data processing is beneficial, VILLAGRACIA they suggest that additional metrics like risk assessments and cost-benefit analyses might be needed to provide a more comprehensive financial view without neglecting broader strategic goals. THANK YOU