U3 Drivers of Operational Performance

Question 1

Whether a business thrives or fails is based on?

Answer 1

the companies’ ability to correctly and accurately identify, define, track, and influence their production efficiency and quality performance.

Question 2

All of these aspects are linked to ?

Answer 2

the operational activities of the organization.

Question 3

Executives and line-of-business management are under pressure to make?

Answer 3

more decisive and timely decisions in order to improve operational efficiencies and therefore improve the overall performance of the business and meet strategic goals.

Question 4

In this context, organizations are focusing on?

Answer 4

obtaining solutions which address specific business pressures that drive operational performance.

Question 5

These include the need to:

Answer 5

-Improve executive visibility to operational drivers.
-Replace ‘intuitive’ decisions with ‘fact-based’ decisions.
-Gain an understanding of operational performance drivers.

Question 6

Improve executive visibility to operational drivers.

Answer 6

There is no doubt that organizations can do better than just an entry-level of maturity. Companies are successful when operational data is applied within a time frame, since that can affect performance improvement.

Question 7

Replace ‘intuitive’ decisions with ‘fact-based’ decisions.

Answer 7

However, some studies have revealed that many operational decisions are still based on the so-called ‘gut-feel’ ap­­proach, since there is no immediate and relevant information after the occurrence of business events.

Question 8

Gain an understanding of operational performance drivers.

Answer 8

There are many opera­tional ‘moving parts’ within the organization.

Question 9

In this section we will learn how operational activities and process can be measured and how they can become part of an overall performance management framework. Additionally, we will touch on some practical aspects of performance measurement implementation.

Question 10

Operational managers are increasingly demanding ————————– into day-to-day metrics in order to align operational business activity with corporate objectives. This means they must————————————————–and act upon operational performance drivers which can ————————multiple times throughout the business day or week.

Answer 10

visibility

gather, track, analyze,

change

Question 11

The Five Operations Performance Objectives

A wealth of literature about operations management and its components exists. In order to?

Answer 11

help structure the different performance relevant aspects in the context of operational activities,

Question 12

five operations performance objectives are usually utilized:

Answer 12

quality
depend
ability
speed
cost
flexibility

Question 13

Although this provides a helpful initial framework to analyze the whole subject of?

Answer 13

performance measurement, there are several aspects about these five objectives to make note of. The first is that all of the objectives have supplemental goals and are multidimensional.

Question 14

For example,

Answer 14

‘quality’ does not simply refer to conforming to specifications.

Question 15

Quality also includes ?

Answer 15

a number of other dimensions, such as how well a product performs additional features next to its primary functions,

how reliable and technically durable it is, how easy it is to service the product,

how the look and feel of the product is perceived by the customers, and how the value for money viewpoint is.

Question 16

Likewise ‘speed’ can refer to?

Answer 16

the time taken to generate quotes, the time to answer quotes, the frequency with which deliveries can be made, the time to manufacture a product, or the time to develop and invent a new product.

Question 17

‘Dependability’ can mean the adherence to?

Answer 17

a plan or set schedule, but may also refer to the delivery performance (i.e. the question of whether the products are delivered in full and always on time).

Question 18

It can also include:

Answer 18

the general ability to meet promises.

Question 19

Probably the most multidimensional objective is ‘———————’; there are various definitions for what it is supposed to include. It can be distinguished between range flexibility and ————————-. ————-flexibility focuses on the ability to cope with a wide range of ——————.

Answer 19

flexibility

response flexibility
Range

requirements

Question 20

Response flexibility on the other hand means
?

Answer 20

the ability to adapt to changes quickly.

Question 21

In addition to these two general characteristics of flexibility, it can include?

Answer 21

the ability to cope with varying incoming materials, differences in output quality, the adaptability to new or modified products.

Question 22

With regards to production, it may also encompass?

Answer 22

adaptability to new delivery schedules, adjustments of output volume, and different product and\/or resource mixes.

Question 23

Without going into further detail, the following table provides :

Answer 23

an overview of the five operations performance objectives

and their sub-dimensions.

Question 24

Multiple Dimensions of the Five Operations Performance Objectives

Answer 24

table

Answer 25

table

Answer 26

table

Answer 27

table

Question 28

There are two additional points which add to?

Answer 28

the complexity and multidimensional nature of operational performance measures.

Question 29

The first point is that?

Answer 29

the five operations performance objectives trade off with one another,

but the extent of these trade-offs depends very much on context-specific characteristics and timing.

Question 30

For example,

Answer 30

high quality has to be weighed against potential additional costs and tighter delivery is only possible when investing in additional resources.

Question 31

Operations managers constantly try to improve?

Answer 31

the five operations performance objects and constantly have to mitigate the trade-offs between the different perspectives.

Question 32

The second point deals with the fact that?

Answer 32

there are internal as well external reasons for the operations performance objectives.

Question 33

Speed includes?

Answer 33

a quicker response to customer needs and capital being tied up for a shorter period of time in the form of inventories and work in progress.

Question 34

Like a big jigsaw puzzle, the challenge for operations managers is to decide on?

Answer 34

which of the five objectives they wish to focus their main attention to and how changing this dimension will affect the other dimensions.

Question 34

The second point deals with the fact that?

Answer 34

there are internal as well external reasons for the operations performance objectives.

Question 35

For example,

Answer 35

higher quality may result in fewer mistakes, hence less rework, higher customer satisfaction, and ultimately less costs.

Question 35

After introducing the main five operations performance objectives and the challenges which come with them, we will now focus on?

Answer 35

how operational performance drivers can be analyzed and how this could be implemented in an organization.

We will also learn about how operational performance measures can be linked to overall performance targets.

Question 36

Performance drivers will generally include:

Answer 36

==A leading indicator or early warning system which reports existing situations will lead to a poor result if not addressed accordingly.

==A performance metric which is associated with a preceding step in a value stream.

==A metric which directly contributes to a key performance indicator. This metric could well be a helpful component when calculating the key performance indicator. For example, a gross margin key performance indicator could be calculated in the following way: sales units multiplied by list price, minus discounts and minus cost-of-good-sold.

Question 37

A leading indicator or early warning system which reports existing situations will lead to a poor result if not addressed accordingly. For example, ?

Answer 37

customer satisfaction is as a leading indicator for customer retention.

Question 38

A performance metric which is associated with a preceding step in a value stream. For example,?

Answer 38

if the key performance indicator is on-time-in-full shipments then a performance driver may be manufacturing lead time which impacts the flexibility to respond to customer orders.

Question 39

iA metric which directly contributes to a key performance indicator. This metric could well be a helpful component when calculating the key performance indicator. For example,?

Answer 39

a gross margin key performance indicator could be calculated in the following way: sales units multiplied by list price, minus discounts and minus cost-of-good-sold.

Question 40

This calculation is based on the fact that each of these components contributes to gross margin and is also one of its drivers:

Answer 40

image

Question 41

By definition, performance metrics measure aspects of?

Answer 41

the business process or value stream which directly affect results or outcomes.

Question 42

For example, ?

Answer 42

if actionable performance drivers are monitored in a timely manner, they can be used to make operational decisions.

Question 43

Therefore, they will be the driving force for ?

Answer 43

actions which can positively impact business outcomes in the current reporting period.

Question 44

The following graph shows how?

Answer 44

leading indicators and operational KPIs can be linked with performance metrics.

Question 45

image

Question 46

image

Question 47

image

Question 48

The creation, management, and continuous review of a performance measurement system (PMS) can be?

Answer 48

a difficult process, particularly when large, complex data volumes are combined with rapidly changing business dynamics.

Question 49

For example,

Answer 49

projects often involve the integration of data from disparate sources. Furthermore, complex calculations to derive accurate indicators, as well as a host of infrastructure requirements, are needed to deliver the information in a meaningful format (e.g. reports\/dashboards, scorecards, alerts, etc.) and via an effective medium (e.g. desktop PC, website, remote access, email, PDAs, mobile devices, etc.).

Question 50

A bulk of business and commerce activities and projects are focused on?

Answer 50

the desire to improve customer service, expense management, and sales operations performance.

Question 51

Therefore, operational performance is rapidly becoming a top priority for?

Answer 51

business intelligence and performance management projects.

Question 52

As this reflects key business areas, executives are struggling to gain insight into ?

Answer 52

the operational performance driving the business.

Question 53

This drive towards deeper insight is an ——————————————————– which directly addresses the next most pressing business concern-replacing ———— decisions with ———————- decisions.

Answer 53

internally-focused pressure

‘intuitive’

‘fact-based’

Question 54

In order to accomplish this, organizations clearly must have?

Answer 54

a firm grip on the actual opera­tional performance drivers as well as the definition and calculation of operational performance measures which will inevitably produce the desired insight and transparency.

Question 55

There are four key performance metrics which are often used to determine excellent performance:

Answer 55

1Customer satisfaction:
2Customer issue resolution capability:
3Conversion of inquiries to sales leads:
4Sales forecast-to-plan performance:

Question 56

Customer satisfaction:

Answer 56

This involves collecting data reflecting annual changes in cus­tomer satisfaction.

It usually measures the percentage of total customers, whose reported experience with a company, its products, or its services exceeded specified goals.

Sometimes a scoring and rating model is applied to measure customer satisfaction.

Question 57

Customer issue resolution capability:

Answer 57

This involves collecting data reflecting the average time in which customer issues are resolved. This data also needs to reflect the performance throughout an entire year.

Question 58

Conversion of inquiries to sales leads:

Answer 58

This involves collecting data reflecting annual changes in the rate at which inquiries are converted to leads. Usually, it is calculated as percentage of sales leads per inquiries.

Question 59

Sales forecast-to-plan performance:

Answer 59

This involves collecting data reflecting annual changes in the accuracy of sales forecast-to-plan measurement.

Question 60

This strategy is of utmost importance and happens to be ?

Answer 60

a prime concern of executives when addressing their operational performance initiatives.

Question 61

Unlike typical strategic business, intelligence initiatives focus on?

Answer 61

trend data which is captured over time (i.e. weeks, months, years) whereas operational performance initiatives relate to areas of the business which experience multiple changes throughout the business day.

Question 62

However, above all, successful companies are focusing on business ———————. This pertains to the ability to ——————————- activity and performance to the successful attainment of ———————————.

Answer 62

alignment

tie operational

corporate goals

Question 62

This requires the ability to ?

Answer 62

access,
capture,
integrate,
and analyze operational data quickly.

Question 63

Process

Successful operational performance and performance management system initiatives depend on?

Answer 63

a combination of specific capabilities and technology enablers.

Question 64

There are several capabilities which lead companies to achieve?
operational performance excellence.

Question 65

As business dynamics change, performance management systems must also be?

Answer 65

realigned.

Question 66

There are several capabilities which lead companies to achieve?

Answer 66

operational performance excellence.

Question 66

This can be done by?

Answer 66

regularly employing a method for

identifying, incorporating,
and reviewing the performance management system

and framework with relation to operational performance.

Question 67

The process of updating a performance management system on a continuous basis is extremely important, especially in respect to?

Answer 67

operational performance.

Question 68

Data required by performance management systems becomes obsolete?

Answer 68

very quickly.

Question 69

For example,

Answer 69

an online retail company which is presenting a new product-line on its website may set some performance indicators which are initially based on past performance of similar products.

Question 70

However, after the first few days of activity, results may indicate the need for ?

Answer 70

a new method of presentation or a new sales-approach to be introduced.

Question 71

Therefore, the performance management system indicators used to measure performance need to be?

Answer 71

altered as well.

Question 72

Organizations

In addition to having a process for updating the performance management system related to operational performance, organizational aspects are relevant as well. This also includes?

Answer 72

adopting a process in which the Key Performance Indicators suitable for the respective organization are defined.

Question 73

In some companies committees are established to handle?

Answer 73

this aspect.

Question 74

A formal committee enables an organization to develop specialized key performance indicators which address the performance of?

Answer 74

multiple areas of the business.

Question 75

The most successful committees include a ?

Answer 75

cross-discipline team which encompasses IT, business executives,
and business end users.

Question 76

More often than not, the key performance indicators associated with operational performance involve?

Answer 76

complex mathematics and formulas integrating information from multiple data sources.

Question 77

Thus, success can depend on the existence of a formal committee dedicated to ?

Answer 77

understanding this information as well as applying the necessary business rules and metrics to create appropriate key performance indicators.

Question 78

A formal committee charged with developing and monitoring key performance indicators will look into the following aspects:

Answer 78

1Knowledge management
2Performance management

Question 79

Knowledge management

To establish a set of operational key performance indicators and a performance-driven culture, —————————————————————————-is required.

Answer 79

clear and effective corporate communication

Question 80

In addition, information about —————————–performance will help to guide the performance ———————-which should be pursued.

Answer 80

industry-wide

thresholds

Question 81

Gathering this information should be based on?

Answer 81

peer and competitor performance.

Question 82

Finally, any performance measurement capability should be accompanied by?

Answer 82

an internal training program which helps all stakeholders to understand and participate in the program.

Question 83

Numerous organizations are trying to improve efficiency and performance of many day-to-day operational activities, such as ?

Answer 83

customer interactions,
finance and accounting processes, transportation,
sales activity,
manufacturing,
inventory management,
and marketing.

Question 84

Empirical research shows that most successful companies are improving their time-to-information with the help of?

Answer 84

technologies and services which enable faster delivery of mission-critical information.

Question 85

Performance management

As stated earlier, business pressure is driving organizations to focus on ?

Answer 85

operational performance with the desire to elevate insight on operational performance to executives.

Question 86

Hence, many organizations are not only establishing key performance indicators to?

Answer 86

measure the company’s operational performance over time,

but also to obtain comparative capabilities which ensure that performance measures are in alignment across the organization and with its strategy and overall performance metrics.

Question 87

However, it is not enough to simply define key performance indicators and track them over time. They also need to be?

Answer 87

clearly communicated throughout the organization in order to enable all levels of staff to understand how the indicators relate to performance goals of the group, the company, and how this performance compares to that of competitors’.

Question 88

This is achieved through the involvement of ?

Answer 88

industry trade associations

and integrating data from industry aggregators

as well as obtaining data from government agencies.

Question 89

Successful organizations are also more likely to establish ?

Answer 89

KPIs across a wide range of operational areas of the association.

Question 90

The more operational areas are involved, the more—————————————————————————————————-

Answer 90

improvement will be achieved across all areas of the business.

Question 91

Based on the previous sections, a focus of operational performance metrics across a variety of operational business areas might include:

Answer 91

=Customer performance:
=Service performance:
=Sales operations:
=Sales plan:

Question 92

Customer performance:

Answer 92

This includes metrics for customer satisfaction, customer issue resolution speed, customer issue resolution accuracy, and customer retention rate.

Question 93

Service performance:

Answer 93

This includes metrics for service, such as first-call resolution rates, renewal rates, service level agreement-compliance rates, delivery performance to customers, and product-return rates.

Question 94

Sales operations:

Answer 94

This includes metrics for new accounts, meetings secured, conversion of enquiries to leads, and calls completed per hour, shift, and day.

Question 95

Sales plan:

Answer 95

This includes metrics for price-to-purchase order accuracy, purchase order fulfillment ratio, quantity earned (where revenue can be recognized), forecast-to-plan ratio, and total closed contracts (which is cumulative).

Question 96

Technologies

The time, effort, and resources required to?

Answer 96

generate operational reports and analytic capabilities,

as well as delivering them to the right end users at the right time, is a major factor that inhibits operational performance improvement.

Question 97

This can come as an unwelcome surprise as business intelligence implementations begin to?

Answer 97

grow in scope from pilot projects to full-production applications encompassing large data sets, and complex calculations and algorithms, as well as diverse, non-technical business users.

Question 98

Technical ability, or the lack of it among users, naturally pushes the job of report generation to ———————————————-.

Answer 98

the IT department

Question 99

This does not only lead to additional costs in terms of?
but also?

Answer 99

IT resource utilization,

but also drives up the headcount required to meet the increasing demand for reports and the requests for analytical views.

Question 100

Automation of data integration, report generation, and alerting can improve?

Answer 100

the speed and ease with which information can be collected, assembled, and delivered to end-users.

Question 101

Operational performance management capabilities depend on technological disciplines including:

Answer 101

–data management, data integration, and data cleansing
–data modelling and development of business rules
–scorecarding with an eye toward easy access and making information available to a variety of technical and non-technical business stakeholders
–automated alerting to enable stakeholders to learn about performance changes while they occur

Question 102

At the top list of priorities should be?

Answer 102

‘ease of use for end-users’

and ‘integration capabilities with other applications’.

Question 103

To achieve excellent quality performance, organizations must prioritize the areas of the business which will ?

Answer 103

benefit most from operational performance management initiatives.

Question 104

We now understand the concept of performance drivers and what components they consist of. By using ?

Answer 104

performance drivers and metrics we can replace ‘gut-feel’ decisions with ‘fact-based’ ones.

Question 105

Four key performance metrics were presented in detail, all of them having the customer view in focus:

Answer 105

==customer satisfaction and how it changes over a period of time
==customer issue resolution, which gives an idea of the speed with which customer issues are resolved
==conversion of inquires to sales leads
==sales-forecast-to-plan performance