Summers: Quality Management, 2 nd. ed.© 2009 Pearson Education, Upper Saddle River, NJ 07458. All...

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.All rights reserved

Quality ManagementMeasures of Organizational

SuccessChapter 9


Achieving Organizational Success


Measures of Organizational Success

• Facts are the most important thing in business. Study facts and do more than is expected of you.– Frederick Hudson Ecker

• Chairman Metropolitan Life Insurance



• I’ve always been able to make erroneous decisions very quickly.– Herb Kelleher

• Founder, Southwest Airlines



• Knowledge is what we get by evaluating vast quantities of information…and adding something a little extra-creativity, judgment, experience, and thought.– Dominic Tarantino

• Former chairman, Price Waterhouse World Firm



• 1 Leadership• 2 Strategic Planning ‘leadership

triad’ • 3 Customer and Market Focus• 4 Measurement, Analysis, and Knowledge

Management• 5 Workforce Focus• 6 Process Management ‘results

triad’ • 7 Results



• 4.0 Measurement, Analysis, and Knowledge Management– 4.1 Measurement, Analysis, and Improvement

of Organizational Performance• Describe how your organization measures, analyzes, aligns, reviews and improves its performance data and information at all levels and in

all parts of your organization.



• 4.0 Measurement, Analysis, and Knowledge Management– 4.2 Management of Information, Information

Technology, and Knowledge • Describe how your organization ensures the quality and

availability of needed data and information for employees, suppliers, partners, collaborators, and customers.

• Describe how your organization builds and manages its knowledge assets.



• Information is only as valuable as its source.



• Can’t improve what you don’t measure


Process Measures



• Organizations measure what matters.



• Our view was, if we could measure it, we could manage it.– Don England

• CEO, C.R. England, Inc.



• Organizations measure what they value– What does our organization value?– What does the organization measure?– What measures does the organization use to make decisions and take action?


Organizational Results Performance Measures Focused on Strategic Intent



• Measures create a link between philosophy and action.– What does the organization measure, record,

analyses, reports, shares throughout the organization, and takes action on.


Traditional and Broader Performance Measures


Measures of Performance - Production



• How do we know what is important?

• How do we do what we do?

• How will we do what we said we would do?

• How do we know we did what we said we would do?


The Iceberg of Quality Costs


Examples of Quality Costs


Increases in Costs as Faulty Product Reaches Consumer


Categories of Quality Costs


Cost of Quality versus Profit



• What role does information play in creating an effective organization?

• How does the analysis of information support customer satisfaction?

• How does the analysis of information support a healthy bottom line?



• Information enables you to make appropriate decisions.

• Inter-departmental relationships can be integrated through the use of information.



• Integrating Customer information, processes and decision-making:

– use data collection and analysis todefine the customer requirements within the identified market segment.



– Translate requirements into major design parameters to develop, produce, deliver, and service the product that meets the customer requirements.

– Complement these primary processes with support activities such as finance, accounting, personnel, etc.

– Design the information requirements necessary to manage each process and to integrate all processes.



• Measures of Performance answer the question:

–How do we know?


Measures and Their Relationship to Strategic Planning


Measures of Performance



• Performance measures enable an organization to answer the following questions:– How well is something performing its intended

purpose?– Is the organization able to measure the

impact of the changes being made?– How does the organization know that it has

allocated its assets correctly?



• An effective measurement system enables an organization to:– determine if the activities occurring within the

company support the achievement of company goals and objectives

– determine whether or not those goals and objectives move the organization closer to the stated vision

– see where the organization is and where it is going.



• An effective measurement system links actions and plans to the goals and objectives.



• Results (Outcome) measures – Results are the objectives the organization

wants to achieve.– Results are what customers hope to obtain by

doing business with the organization.

• Process measures – Process measures monitor operational

activities.



• The Balanced Scorecard– Using measurements from four areas

integrates the key business measures into a few manageable indicators of performance so that management is able to quickly access the short and long-term health of the organization from several points of view.

• Kaplan and Kaplan



• The Balanced Scorecard • (Kaplan and Kaplan)

• FOUR areas of focus :1. Customer Focus

2. Internal Processes

3. Learning and Growth

4. Financial Analysis



• Barriers to Installing Measurement Systems– Lack of leadership– Individuals are fearful of having specific,

measurable objectives to achieve– Lack of focus on what’s important to the

organization.



• Determine – what needs to be measured – and why it needs to be measured – before designing a measure of performance.

• PUBLISH definitions

for each metric!



• For Effective Measurement Systems:– Leaders must demonstrate their commitment

by holding people accountable for measures– Leaders must show persistence and

perseverance to work through data integrity issues.

– Real life advice - How about a metric that measures the accuracy of the metrics?



• When developing measures consider:1. What do we need to know?2. What are we measuring now?3. How does what the organization needs to

know compare with what it is currently measuring?

4. How is this information being captured?5. Is the information currently being captured

useful and actually being used?



• When developing measures consider (Con’t) :6. Are these measurements being captured over time?7. Do the identified, selected, and measured factors

reflect what the customers need, require, and expect?

8. Can these selected factors be acted upon within the organization?

9. Can the impact of the changes made be measured?10.Have the organization’s assets been allocated

appropriately?



• Measurement Systems allow effective organizations to:– Determine that a gap exists between desired and

actual performance– Determine the root cause of the gap– Determine the necessary corrective action to

eliminate the root cause of the gap– Determine whether the corrective actions eliminated

the root cause and closed the gap between the actual and desired performance.



• HOW MANY METRICS ?

- Balanced Scorecard method using METRICS =

- about 10 metrics for your Business Unit, 5 for your group and 5 for individuals

Any more than that, your focus gets lost!



• How?- Leadership

• How does leadership analyze and use information?

• Are our leaders converting information into appropriate policies and actions?



• How?- Strategic Plan

• How does our strategic plan analyze and use information?

• How does our strategic plan react to new information?



• How?

- Customer and Market Focus• Are we communicating useful customer

and market information to our employees in a manner that improves their job performance and enhances customer service?



• How?- Measurement, Analysis, and

Knowledge Management• How are our employees gathering, analyzing,

disseminating and using information related to our key processes?

• Does the organization have communication systems in place that enhance employees ability to obtain analyze and use information?



• How?- Measurement, Analysis, and

Knowledge Management (con’t).• How does your organization ensures the quality

and availability of needed data and information for employees, suppliers and partners, and customers?

• How does your organization builds and manages its knowledge assets?



• How?- Workforce Focus

• Do our employee policies and reward systems support the use and analysis of information related to our key processes during day-to-day activities?

• Do our employee policies and reward systems support the use and analysis of information during continuous improvement activities?



• How?- Process Management

• Have the key processes supporting the analysis and use of information been identified and/or improved?

• Are we gathering appropriate information concerning our key processes?

• Is the information gathered being used to support appropriate improvement efforts?



• How?

- Results• Do the business results associated with our key

processes reflect the judicious analysis and use of information?

• Is the successful integration of customer and market information into our strategic plan shown by our business results?

Summers: Quality Management, 2 nd. ed.© 2009 Pearson Education, Upper Saddle River, NJ 07458. All...

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Transcript of Summers: Quality Management, 2 nd. ed.© 2009 Pearson Education, Upper Saddle River, NJ 07458. All...