Measurement Systems Development of Information l Information is

Measurement Systems

Development of Information l Information is necessary for both control and improvement l Information derives from analysis of data l Data, in turn, come from measurement

Process Flow Measurement Data Analysis Information

What Could Be Measurements for Personal Health?

Measurements for Personal Health l l l l Blood pressure Weight Heart rate Respiration Body fat percentage Blood chemistry Strength Flexibility

How Do People React to Measurements?

Questions Concerning Measurements l Why do we need them? l How will the measures be used? l Will they be used for punishments? If so, how? l Why is my performance measured? l What is in this for me? l Will we see the results?

How to Alleviate Fear of Measurements?

Effective Use of Measurements l Assign clear accountability/responsibility l Establish performance goals l Conduct regular review and analysis l Use information for better decision-making and improvement l Communicate performance information l Provide reward and recognition

Potential Problems with Measurement Systems l Too many measures l Short-term focused l Lack of detail for action or decision-making l Drives wrong performance l Measures courtesy versus competence l Measures behavior versus accomplishments

Characteristics of Effective Measures l Are meaningful l Respond to multiple organizational priorities l Encourage operational improvements l Provide a complete, accurate, and believable picture of performance l Blend leading and lagging indicators

Design of An Effective Measure l l l Purpose – is worth collecting to support decision making Validity – measures what it claims to measure Precision – returns consistent value with each measurement Accurate – matches the true value Cost effective – is not too costly to track and report

How to Design An Effective Measure?

Designing Measures (Metrics) – APQC (1 of 2) l Plan • How will you use the data? • Have you selected and defined your measure? l Collect • How will you collect the data?

Designing Measures (Metrics) – APQC (2 of 2) l l Analyze • How can you ensure that the data will be relevant and believable? • What does the data indicate? Adapt • How will you communicate your findings? • What kind of action should occur?

Types of Measures l Strategic Measures • Measure the effectiveness and appropriateness of strategies l Operational (Process-Level) Measures • Measure the effectiveness and efficiency of activities

Purpose of Strategic Measures Balanced Scorecard l Clarify and translate vision and strategies l Communicate and link strategic goals and measures l Plan, set targets, and align strategic initiatives l Evaluate and improve effectiveness of strategic initiatives

Balanced Scorecard (Kaplan & Norton) 1. Financial perspective 2. Customer perspective 3. Internal perspective 4. Innovation and learning perspective Leading measures Interlinking Lagging measures

Examples of Balanced Scorecard Measures l Customers – satisfaction, retention, acquisition, profitability l Financial – net income, return on equity, return on investment, growth, cash flow l Internal – productivity, quality l Innovation & Learning – employee development, retention, satisfaction

Balanced Scorecard for A Fast-Food Restaurant?

Balanced Scorecard for A Fast-Food Restaurant l l Customers • Satisfaction, frequency, retention, referral Financial • Net profit, sales growth Internal • Quality, timeliness, service experience Innovation & Learning • Experience, training, empowerment, accountability, employee satisfaction

Process-Level Measures l Does the measure support our mission? l Will the measure be used to manage change; that is, actionable? l Is it important to our customers? l Is it effective in measuring performance? l Is it effective in forecasting results? l Is it easy to understand simple?

Creating Effective Process–Level Measures l Identify all customers and their requirements and expectations (key performance factors) l Define work processes l Define value-adding activities and process outputs l Develop measures for each key process l Evaluate measures for their usefulness 23

Measures for Payroll Processes

Measures for Payroll Processes l Staff productivity (# of payroll forms processed each week) l Cycle time (time to complete an inquiry) l Operating costs (labor cost /payroll FTE) l Process efficiency (% of resources for payment processing vs. inquiries)