Performance Measures Flashcards
how an organization uses its activities and resources to achieve its objectives (usually to ethically maximize financial value)
Strategy
the performance measures used to ensure hte strategy of the organization is being executed and to monitor perofrmance
Execution
Balanced scorecard perspective that focuses on return on investment and other supporting financial performance measures (ex. profitability, ROI, revenue growth)
Financial perspective
Balanced scorecard perspective that focusdes on performance in areas that are most critical to hte customer (ex. customer satisfaction, customer retention)
Customer perspective
Balanced scorecard perspective that focuses on operating effectively and efficiently and includes performance measures on cost, quality and time for processes that are critical to the customers (ex. #defects, cycle time)
Internal business processes perspective
Balanced scorecard perspective htat focuses on perofrmance measures relating ot employees, infrastructure, teaming and capabilities necessary for hte internal processes ot achieve customer and financial objectives (ex. employee satisfaction, training, IT expenditures/employee
Learning and growth perspective
The sequence of business processes in which usefulness is added to products/services of a company ahnd includes innovation, operations, and post-sales
value chain
Diagrams of the cause-and-effect relationships between strategic objectives
strategy maps
The use of only financial performance measures in a strategic management system (i.e. only those that add financial vlaue)
Value-based managment (VBM)
A Value-Based Managment performance measure that is based on the premise of “pay for performance” and is often used for incentive compensation, resource allocation, and investor relations
Economic Value Added (EVA)
Net income (income after taxes)- interest on investment
Residual income
The difference between ROI and the required interest rate (cost of capital)
Spread
A grapical way to look at the relationship between residual income and ROI
Residual Income profile
Accounting profit-cost of capital
Economic profit
The difference between “cash in” and “cash out”
Market value added (MVA)
The original cost of the investment
Gross book value
Original cost less accumulated depreciation
Net book value
measures hte percentage of each sales dollar remaining after payment for hte goods sold
Gross margin
measures the eprcentage of each sales dollar that remains after the payment of all costs and expenses except for interest and taxes
Operating profit margin
measures the dividend paid in relation to net earnings
Dividend payout ratio
Measures a firm’s ability to make contracual interest payments
Times interest earned
Evaluation of a firm’s ratios and trends over time
Horizontal analysis
Benchmarking a firms’ ratios against ratios of similar firms at a point in time
Cross-sectional analysis
Comparing similar operatiosn within idfferent units of the same organization
Internal benchmarking
Targeting processes and methods used by an organization’s direct competitors
Competitive benchmarking
Comparing similar functions within the same broad industry
Functional or Industry benchmarking
Comparting processes that are independent of industry
Gneric benchmarking
The best ways to perform a process
Best practices
A statistical measure expressing how close a product comes to its quality goal (3.4 defects/million)
Six sigma
A series of standards agreed upon by the International Organization for Standardization
ISO 9000 Series
ISO standard developed to control the impact of an org’s activities on the environment and focuses on reducing hte cost of waste managemnt, conserving energy and materials, and lowering distribution costs
ISO 14000
The japanese art of continuous improvment
Kaizen
Diagrams used to systematically list the different causes that can be attributed to a problem (or effect)
Cause-and-effect (fishbone or Ishikawa) diagrams
a bar graph that ranks cuases of process variations by the degree of impact on quality
Pareto chart
statistical plots derived from measuring facotry proceses
Control charts
a discipline for making designs “production proof” by building in tolerances for manufacturing variables that are known to be unavoidable
Robust design
involves making the workplace mistake-proof
Poka-yoke
methods used to maximize operating income when faced with some bottleneck operations; objective is to increase throughput contribution
Theory of constraints
Any resource or operation where the capacity is less than the demand placed upon it
Bottleneck resources
Revenue minus the direct materials COGS
Throughput contribution
Examines the overall flow of work to find ways to improve hte flow
Workflow analysis
