Performance Measures & Management Techniques

Question 1

Balanced scorecards

Answer 1

attempt to translate an organization’s goals into specific measures with four perspectives

Question 2

Balanced Score Card 4 Perspectives

Answer 2

1. Financial—Return on investment and related financial measures
2. Customer—Nonfinancial measures of customer satisfaction and retention
3. Internal business processes—Measures of operating effectiveness and efficiency
   including financial measures, such as cost variances, and nonfinancial measures, such as
   number of defects in production
4. Learning and growth—Measures of employee satisfaction, training, and advancement

Question 3

Value-based management

Answer 3

examines all aspects of a company with the intention of identifying the
amount of economic value added (EVA) by different activities. In effect, it attempts to translate all
activities into their financial value to the firm, and is comparable to a financial scorecard focus.

Question 4

components of a balanced scorecard

Answer 4

• Strategic objectives—A statement of the goals of the firm and necessary elements
• Performance measures—Identification of quantitative methods that can be used to track
success in fulfilling the strategic objectives
• Baseline performance—The current level of performance for each measure
• Targets—The level or improvement in performance being sought
• Strategic initiatives—Programs that will help achieve the targets and objectives

Question 5

Cause-and-effect linkages

Answer 5

identify which performance measures are performance drivers (leading indicators) and which are outcome performance measures (lagging indicators). This
allows the firm to focus on those drivers that are critical to strategic objectives.

Question 6

Strategy maps

Answer 6

diagrams that identify cause-and-effect linkages

Question 7

Cost of Quality 4 Types

Answer 7

The costs related to quality rise the later in the process the firm deals with it.

Question 8

CQ Type 1 - Prevention costs

Answer 8

Prevent product failure
• Use high-quality materials
• Inspect production process
• Train employees
• Maintain machines

Question 9

CQ Type 2 - Appraisal or detection costs

Answer 9

Detect product failure before production is complete
• Inspect samples of finished goods
• Obtain information from customers

Question 10

CQ Type 3 - Internal failure costs

Answer 10

Detect product failure after production but before shipment to
customer
• Scrap resulting from wasted materials
• Reworking units to correct defects
• Reinspection and retesting after rework

Question 11

CQ Type 4 - External failure costs

Answer 11

Defective product sent to customer
• Warranty costs
• Dealing with customer complaints
• Product liability
• Marketing to improve image
• Lost sales

Question 12

A project is

Answer 12

a series of activities and tasks that
• Have specific definable objectives
• Have defined start and end dates
• Are subject to funding constraints
• Consume resources, people, equipment, etc.
• Cut across various functional areas of the organization

Question 13

Effective project management: Four basic elements

Answer 13

1. Resources
2. Time
3. Money
4. Scope

Question 14

Effective project management: Five processes/cycles

Answer 14

1. Project initiation
   a. Support of management
   b. Project manager with authority
   c. Project charter
2. Project planning
   a. Define scope
   b. Identify resources needed
   c. Schedule tasks
   d. Identify risks
3. Project execution
   a. Managing work
   b. Directing team
4. Project monitoring and control
   a. Tracking progress
   b. Comparing actual outcomes to predicted outcomes (variances)
5. Project closure

Question 15

Project Management Tools

Answer 15

1. Life-cycle approach: Define and assess each phase of project
2. Gantt chart—bar chart that illustrates the scheduled start and finish of elements of a project
   over time
3. Program Evaluation and Review Technique (PERT): Focus on the interdependency of
   activities
   and the time required to complete an activity to schedule and control the project
   a. Critical path: The shortest amount of time necessary to accomplish the project.
   1) Optimistic
   2) Most likely
   3) Pessimistic
4. PERT used where there is a high variability of completion time, such as R&D
5. ABC analysis: Categorize tasks into three groups:
   a. Tasks that are perceived as being urgent and important
   b. Tasks that are important but not urgent
   c. Tasks that are neither urgent nor important