U6 Performance Measurement Concepts Flashcards
Theoretically, a performance measurement system might consist of three interrelated elements:
==individual measures which quantify the efficiency and effectiveness of actions
==a set of combined measures to assess the performance of an organization as a whole
==a supporting infrastructure which enables an association to acquire data which is later collected, sorted, analyzed, interpreted, and disseminated
The performance measurement system can be:
==the information system which is the key to
the performance management process.
==It also integrates all relevant information from all the other management systems.
It also integrates all relevant information from all the other management systems.
==formulate a strategy in order to determine what the objectives of the organization are and how the organization plans to achieve them.
manage the strategy implementation process by examining whether an intended strategy is being put into practice as planned
challenge assumptions by focusing not only on the implementation of an intended strategy but also on making sure that its content is still valid
check progress by looking at whether the expected performance results are being achieved
comply with non-negotiable parameters by making sure that the organization is securing its survival by achieving the minimum standards needed (e.g. legal requirements, environmental parameters, etc.)
communicate direction to the rest of the employees by passing on information about what the strategic goals are and how individuals are expected to achieve them
communicate with external stakeholders
provide feedback by reporting to employees how they, their group and the organization as a whole are performing in comparison to the expected goals
evaluate and reward behavior in order to focus employees’ attention on strategic priorities and motivate them to take action and make decisions that are consistent with organizational goals
benchmark the performance of different organizations, plants, departments, teams and individuals
inform managerial decision-making processes
encourage improvement and learning
The roles of the performance management system can be defined by three key categories:
Strategy:
Communication:
Motivation:
Strategy:
Comprises the roles of managing strategy implementation and challenging assumptions.
Communication:
Comprises the role of checking progress, complying with the non-negotiable parameters and the communicating direction as well as providing feedback and benchmarking.
Motivation:
Comprises the role of evaluating and rewarding behavior and encouraging improvement and learning.
Unlike a management control system, a performance management system is meant to?
be interactive, since its main goal is to facilitate the implementation of the organizational strategy and to challenge strategic assumptions.
In addition to the strategic purpose of the performance management system, its motivational purpose has also been stressed as?
a critical factor for its effectiveness.
A performance management system can be used as a motivational device when ?
it is integrated in the compensation system.
Traditionally, evaluation and reward programs have been linked exclusively to ?
organizational financial measures.
But more and more organizations are using different performance management models to
?
calculate their rewards.
The use of the scorecard framework helps ?
managers’ judgement
and also strengthens their focus on what is important.
It also helps to avoid information overload.
Theoretical research and practical experience suggest a number of processes which have been developed to?
design and implement performance measurement systems.
A large number of theoretical accounts have been proposed to?
support these processes.
The objective of such accounts is?
to help organizations to determine their performance in a way that objectives are reflected as well as to assess organizational performance appropriately.
A majority of the identified performance frameworks display certain characteristics which help an organization to identify an appropriate set of criteria against which the organization can assess and manage their performance:
A set of measures which provides a ‘balanced’ picture of the organizational activity. That set of measures should reflect financial and non-financial measures, internal and external measures, and efficiency and effectiveness measures.
A framework of measures which provides a succinct overview of the organization’s performance. For example, the simplicity and intuitive logic of the balanced scorecard has been a major contributor to its widespread adoption, as it is easily understood by users and applied to their organization.
A set of performance measures which is multi-dimensional. This reflects the need to measure all the areas of performance which are important to the organization’s success. However, there is no consensus on what the dimensions of performance are.
Check the book
For example, the EFQM model, which we will discuss later, provides the broadest indication of dimensions of performance to be measured.
All possible measures of an organization’s performance have to be mapped onto the applied theoretical account in order to identify where there are omissions or where there is a need for greater focus.
Check the book
For example, the performance measurement matrix (PMM) provides comprehensiveness. However, the performance measurement matrix provides little indication of the different dimensions of performance which should be measured.
Performance measures should be integrated both across the organization’s functions and through its hierarchy, encouraging congruence of goals and actions.
Results need to be measured in a way that the performance measurement system can provide data for monitoring past performance and planning future performance. This demonstrates the way in which measured internal processes and the respective results contribute to an organization’s planning (i.e. feed forward) and control (i.e. feedback) system.
The Balanced Scorecard
Traditionally, financial parameters get a lot of attention for?
determining the level of organizational performance.
Intensive research in the 1990’s created awareness that many companies focus too much on?
financial indicators such as return on investment (ROI)
or earning per share (EPS) in their performance measurement and reporting systems.
These measures can give misleading signals for?
continuous improvement and innovation as we discussed in connection with the economic value added and customer lifetime model and are ‘incomplete’ as shown when discussing the importance of intellectual capital.
In summary, they lack strategic performance measurement component and are?
one-dimensional.
Additionally, increasing competition has created the need to develop a variety of?
other metrics in order to determine the status of additional areas of importance for business activity which could not be covered and reported by financial indicators.
Basic Idea of Balanced Scorecard
In an attempt to better align performance measures to?
a strategy Robert Kaplan and David Norton developed the balanced scorecard (BSC).
It is a framework which helps to develop a set of measures which gives?
the executive management a fast but comprehensive view of the business.
With a strategy-centric approach, it supports?
the translation of the organization’s mission and vision into multidimensional actionable goals and objective measures.
The balanced scorecard tries to link ?
strategic initiatives with operational activities.
It complements financial measures with ?
operational as well internal aspects.
Additionally, the balanced scorecard provides a basis for ?
describing,
communicating,
and managing the strategy in an explicit and consistent way.
The balanced scorecard approach is one of several highly popular theoretical accounts for performance measurement which suggests that financial indicators need to be?
accompanied by a measured view of operational status, customer perception, and capacity for innovation within the organization.
In the centre of the balanced scorecard is the vision of the organization’s future. This includes:
strategy, mission, and goals.
In order to achieve its objectives, the organization needs to satisfy ?
shareholders and customers and has to manage internal processes as well as innovation and learning.
The balanced scorecard tries to give all of these four perspectives?
the required attention
and aims to derive critical success factors and critical measures for each of these dimensions.
Figure 13: The Balanced Scorecard
Figure 13: The Balanced Scorecard
Figure 13: The Balanced Scorecard
Figure 13: The Balanced Scorecard
The Four Perspectives of the Balanced Scorecard
After discussing the basic idea of the balanced scorecard we want to look into the four perspectives in more detail. We will see that the balanced scorecard does not introduce new indicators, but tries to combine and ‘balance’ —————————————————–
existing performance measures.
The Four Perspectives of the Balanced Scorecard:
Financial perspectives (or shareholder value):
Customer perspective:
Internal perspective (or business process):
Innovation and learning perspective (or growth):
Financial perspectives (or shareholder value):
This perspective is supposed to address two questions: “What needs to be done to succeed financially?” and “How the organization needs to appear to shareholders?”.
It includes strategies for revenue growth and changes in the revenue mix or cost reduction and productivity improvement.
Asset utilization and investment strategies are also part of the financial perspective.
Additionally, the balanced scorecard is a :
communication tool which is used to tell how value is created for the organization.
It can show a logical step-by-step connection between strategic objectives in the form of a cause-and-effect chain.
Kaplan and Norton refer to a case where the Texas Eastman company used a daily estimated financial report to give tangibility to the quality of the company’s output.
This helped employees to understand the implications of reduced quality in output on a daily basis and that any interruption in output would be reflected in the financial report.
Typical financial perspectives include:
measures such as cash flow management, sales growth and profitability.
Other commonly used measures in this context are return on investment (ROI),
economic value added (EVA),
and return on capital employed (ROCE).
Customer perspective:
When choosing measures for the customer perspective, businesses need to answer two critical questions:
“Who are the target customers?”
and “What is the value proposition in serving them?”
Especially the second question on choosing an appropriate value proposition encompasses a fundamental strategic decision.
Management literature has identified three basic approaches in this context:
Operational excellence.
Product leadership.
Customer intimacy.
Operational excellence.
Businesses pursuing an operational excellence strategy focus on low price, convenience, and often a ‘no frills’ approach.
Wall-Mart, IKEA, McDonald’s, and Ryanair provide excellent examples of operationally excellent companies.
Product leadership.
Product leaders push the envelope of their company’s products.
Constantly innovating, they always strive to be ahead of the curve and offer the best products in the market.
The consumer electronics, fund management, automotive and pharmaceutical industries include many companies pursuing a strategy of product leadership.
Examples of such companies include Apple, Fidelity Investments, BMW, and Pfizer.
Customer intimacy.
Doing whatever it takes to provide solutions for unique customer requirements defines customer-intimate businesses.
Their focus is not high volume one-time transactions, but instead long-term relationships through deep knowledge of their customers’ needs.
Examples of companies who pursue this type of strategy include IBM, Lexus, Virgin Atlantic, and Amazon.
No matter what the overall strategic approach is, recent management philosophy has shown an increasing realization of the importance of ?
customer focus and customer satisfaction in any business.
These are leading indicators; if customers are not satisfied, they will eventually?
find other suppliers who will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.
In developing metrics for satisfaction, customers should be analyzed in terms of ?
various categories and according to the kinds of processes for which an organization is providing a product or service to those customer groups.
Internal perspective (or business process):
This perspective refers to internal business processes and identifies the key processes at which the organization must excel in order to add value for customers and shareholders.
The internal processes have a direct link to the customer strategy chosen. Each of the strategic approaches entails the efficient operation of specific internal processes in order to serve customers.
Metrics based on this perspective allow managers to get an idea of how well their organization is running and whether its products and services conform to customer requirements (i.e. the mission).
These metrics have to be carefully designed by those who know these processes most intimately. Service development and delivery are examples of items which may be represented in this perspective.
Innovation and learning perspective (or growth):
This perspective includes employee training and a corporate cultural attitude related to both individual and corporate self-improvement.
In a knowledge worker organization, people, the only repository of knowledge, are the main resource.
Hence, measures and activities in this perspective become the enablers of the other three perspectives.
In other words, the innovation and learning perspective is the foundation on which the other perspectives are built.
Initiatives for improvement identified from the customer and internal learning perspective will necessarily reveal gaps between ?
the current organizational infrastructure including employee skills, information systems and culture, and the level necessary to achieve the set goals.
In general, to improve performance in reaching the objectives found in?
the learning and growth perspective enables the organization to improve its internal process perspective objectives, which in turn enables the organization to create desirable results in the customer and financial perspectives.
In the current climate of rapid technological change, it is becoming paramount for knowledge workers to be?
in a continuous learning mode.
A mix of core outcome measures (lag measures) and performance drivers (lead measures) can be put into place to guide managers in focusing funds where they can help the most.
Employee skill level, employee satisfaction, and availability of information are metrics which have a place in this perspective.
These four perspectives demonstrate the need to?
balance financial and non-financial measures, internal and external measures, and leading and lagging measures as well as short and long-term measures.
This approach encourages managers to overcome the shortcomings of ?
traditional financial measurement and ensures that administrators include various indicators when assessing performance.
In a short period of time, the balanced scorecard has become?
common terminology among executives.
However, since its introduction, the concept has evolved. That evolution highlights some important issues regarding?
the management of organizational performance.
In the time of Kaplan and Norton, less emphasis was placed on?
the exact balance of measures.
There was a general desire to explicitly link desired performance results to ?
the motives and drivers which enable realization of those targets.
Since that time, the focus of the balanced scorecard has shifted from?
performance measurement to strategy development and strategic control (i.e. a broader performance management view).
A balance in the number of measures was no longer considered strictly ————————. In fact, ————————————— who developed the first scorecard, which Kaplan and Norton found in——————————————, argues that balance is actually harmful and that good scorecards will be ————————————————————————————————————————————————————————————————-.
necessary
Art Schneiderman
Analog Devices
unbalanced, containing mostly non-financial, internal, leading, short-term measures.
Within the framework of the balanced scorecard, Kaplan and Norton proposed?
the use of strategy maps (or success maps) to understand how the goals of performance affect the top-level objectives.
Figure 14: Corporate Strategy Map
Figure 14: Corporate Strategy Map
Figure 14: Corporate Strategy Map
Figure 14: Corporate Strategy Map
A success map (see above) clearly demonstrates:
non-financial,
internal,
leading,
short-term measures
and long-term measures
short-term measures such as?’
employee development or employee satisfaction and how they affect financial, external, lagging.
and long-term measures such as?
return on capital employed or profit growth.
On a single piece of paper, a success or strategy map provides?
a model of the performance of the organization which covers all aspects of the organization’s strategy.
To conclude this section on the theoretical description of the balanced scorecard, the following table gives an overview of the strength and weaknesses of this approach.
Table 7: Strengths and Weaknesses of Balanced Scorecard
Table 7: Strengths and Weaknesses of Balanced Scorecard
Table 7: Strengths and Weaknesses of Balanced Scorecard
Case Study on Balanced Scorecard
To illustrate the application of the balanced scorecard, we conclude this unit with a simple case study. The Fly High Airline Inc. plans to review its strategy as a regional airline.
After a workshop, the top management agrees to the following overarching mission and vision of the company:
Mission:
Vision:
Mission:
Dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit.
Vision:
Continue building on the unique position as the only short-haul, low-fare, high-frequency, point-to-point carrier in Central Europe.
The next step after formulating the mission statement and vision of the organization is to ?
build a strategy map.
The strategy map is supposed to identify the main drivers for?
increased profitability across the four perspectives of the balanced scorecard.
The strategy team identifies the following drivers and connections:
Increased profitability can be achieved by lower costs and higher revenues.
An internal study and comparison with competitors has shown that there is huge potential to lower costs by improving the turnaround time of landing and departure. This requires training and faster passenger processing by the ground crew.
An improved turnaround time also aims at more on-time flights making the airline more attractive for business travelers and, in turn, increasing the revenues.
Some of the savings from the improved turnaround time can be passed on to the customers by lower prices. Lower prices will attract more customers which will increase revenue.
Once the main drivers are identified, a strategy map can be drawn, which involves ?
assigning the main drivers to their corresponding perspective.
The next step includes deriving appropriate performance measures and targets per perspective.
=Financial perspective:
=Customer perspective:
=Internal perspective:
=Internal perspective:
Financial perspective:
The objective of increasing the organization’s profitability is consistent with the performance measure and overall goal of increasing the company’s market value. An increase in revenues can be measured by seat revenue. Since plane lease costs are the main cost driver, this is an appropriate measure to lower costs.
Customer perspective:
The degree of on-time flights can be measured on time arrival ratings provided by airline industry associations (benchmarking). Additionally, customer ratings help to identify customer satisfaction. The number of customers measures the goal of serving more customers.
Internal perspective:
The main target of this perspective is to improve turnaround time. The success can be measured by on-ground time and percentage of on-time departure.
Learning perspective:
The alignment with the strategy and the identification with the company can be measured by the percentage of the ground crew who are holding stocks. The progress of the training initiative can simply be measured by the percentage of the ground crew trained.
Once performance measures and target values are put in place, specific initiatives can be?
identified that support achieving the organization’s goals.
This final step makes strategic objectives actionable and creates the important link between ?
strategy and operations.
In our example potential initiatives and projects are:
Financial perspective:
Customer perspective:
Internal perspective:
Learning perspective:
Financial perspective:
optimizations of routes and standardized planes
Customer perspective:
quality management and customer loyalty programs (e.g. frequent flyer program)
Internal perspective:
cycle time optimization program
Learning perspective:
stock ownership plan and ground crew training
The following table summarizes the different steps and shows the balanced scorecard and strategy map of ?
the Fly High Airline Inc.
Figure 15: Fly High Airline Inc. Balanced Scorecard and Strategy Map
Figure 15: Fly High Airline Inc. Balanced Scorecard and Strategy Map
Figure 15: Fly High Airline Inc. Balanced Scorecard and Strategy Map
Performance Prism and SMART Pyramid
As mentioned in the previous section, one of the important requirements of performance management is a clear link between?
performance measures at the different hierarchical levels in an organization in order to ensure that each function and department moves towards the same goals.
Additionally, as the balanced scorecard approach has shown, there is an increasing need to balance?
the interests of shareholders with the interests of other claimants.
Claimants or stakeholder categories which help to form a holistic view in this context are:
–investors (including shareholders, banks, and other capital providers)
–customers and intermediaries
–employees (including labor unions)
–suppliers and partners
–regulators
–pressure groups, communities, and the media
Two theoretical schemes which link performance measures with different ?
hierarchical levels and foster a stakeholder view of the corporation are the performance pyramid (or the SMART system) proposed by Cross and Lynch and the performance prism introduced by Neely.
Performance Prism
The performance prism suggests that ?
-measurements of stakeholder satisfaction,
-stakeholder contribution,
- strategies,
- processes,
-and capabilities of the organization are taken into account when developing the company’s strategy.
These new areas of consideration can give managers a more holistic report of ?
the company’s performance and can allow them to plan for wider improvements across the company.
These improvements are usually beyond the view of?
mere financial measures.
However, it must be noted that there is no definitive evidence which suggests that ?
there needs to be an equal weighting of importance in these areas of measurement.
Figure 16: The Performance Prism
In the performance prism, stakeholder satisfaction is the first viewpoint on
————————-. Furthermore, an organization’s strategies, processes, and capabilities have to be ———————————–with one another if the organization is to be best positioned and therefore capable of delivering
——————————-to all of its stakeholders.
performance
aligned and integrated
real value
In addition, organizations and their stakeholders have to recognize that?
their relationships are reciprocal.
The performance prism approach helps build a?
stakeholder-focused measurement and management system.
This measurement framework is built around five interrelated perspectives on performance which pose specific key questions:
Stakeholder satisfaction:
Stakeholder contribution:
Strategies:
Processes:
Capabilities:
Stakeholder satisfaction:
Who are the key stakeholders and what do they want and need?
Stakeholder contribution:
What is wanted and needed from the stakeholders on a mutual basis?
Strategies:
What strategies need to be put in place to satisfy these twin sets of wants and needs?
Processes:
What processes need to be put in place to enable the execution of the strategies?
Capabilities:
What capabilities need to be put in place to allow the company to operate and improve these processes?
The performance prism cannot be used as?
a prescriptive measurement framework.
Instead, the performance prism is a tool which helps?
management teams to answer key questions which they want to address when seeking to design their performance measures and measurement systems.
This approach can combine both ?
the resource-based theory of the organization (i.e. what resources form the organization) and the resource dependency view (i.e. what resources are critical to obtain).
By using this approach organizations can explicitly link ?
the processes which they undertake to the wants and needs of their stakeholders.
At this level it is possible to make decisions about priorities and objectives for ?
individual activities and processes and understand how actions at that level will affect stakeholders and their level of satisfaction.
To conclude this section on the theoretical description of the performance prism, the following table gives an overview of the strength and weaknesses of this approach.
Table 8: Strengths and Weaknesses of Performance Prism
Table 8: Strengths and Weaknesses of Performance Prism
SMART Pyramid
The strategic measurement and reporting technique (SMART) pyramid facilitates the need for?
the inclusion of measures which are focused internally and externally.
The purpose of this performance pyramid is to connect?
an organization’s strategy to its operation levels by remitting objectives from the top down (based on customer priorities) and transmitting measures from the bottom up.
This framework encourages executives to pay more attention to?
the horizontal flows of materials and information within the organization, i.e. the business processes.
The SMART system includes four levels of ?
objectives which address the organization’s external effectiveness (at the bottom of the left side of the pyramid) and its internal efficiency (at the bottom of the right side of the pyramid).
The development of an organization’s SMART pyramid begins with defining an?
overall corporate vision at the first horizontal level, which is then translated into individual business unit objectives.
The second-level business units are set ?
short-term targets of cash flow and profitability
and long-term goals of growth and market position (e.g. market, financial, etc.).
The third horizontal level, i.e. ?
business operating system, bridges the gap between top-level and day-to-day operational measures.
Here, targets include?
customer satisfaction, flexibility and productivity.
Finally, four key performance measures such as?
quality, delivery, cycle time, and waste are used at departments and work centers on a daily basis.
One of the main aspects of the SMART approach is that it defines?
strategy and strategic objectives based on the stakeholder’s perspective and expectations.
The central question is:
How can stakeholders help to realize the strategy and as a result achieve organizational objectives?
Figure 17: SMART Pyramid
Figure 17: SMART Pyramid
Theoretically, the main strength of the SMART pyramid is ?
its attempt to integrate corporate objectives with operational performance indicators.
However, this approach does not provide any practical mechanisms to identify?
key performance indicators, nor does it explicitly inte-grate the concept of continuous improvement.
To conclude this section on the theoretical description of the SMART performance pyramid, the following table gives an overview of the strength and weaknesses of this approach.
Table 9: Strengths and Weaknesses of SMART Performance Pyramid
Table 9: Strengths and Weaknesses of SMART Performance Pyramid
Summary and Comparison with Balanced Scorecard
First of all, a ‘good scorecard’ refers to?
the existence of strategy or success-map, regardless of whether the balanced scorecard (using its four perspectives), the performance prism, the SMART pyramid, or any other theoretical measurement account has been used to develop it.
The main idea behind any performance measurement system is?
to decide which measures to select, and just as importantly, which measures to ignore.
In this sense, the key principles of the balanced scorecard and its success maps, as well as the performance prism and SMART pyramid, are?
to limit the number of measures which are actually needed and therefore reach clarity on what the organization is trying to achieve.
In other words, the right performance measures are determined by ?
selecting the key objectives which the organization needs to improve on and designing appropriate measures to track this improvement.
It should also be noted that the above-mentioned theoretical accounts such as the balanced scorecard, the performance prism, and the SMART pyramid are ?
very good communication tools both within the management team and for communicating the objectives by demonstrating how the actions of employees throughout the organization contribute to its overall objectives.
———————————————————————————————who dedicated themselves to improving Japanese productivity and performance efficiency.
theoreticians, engineers, and government representatives
This concept aggregates a process of statistical quality control with extensive statistical training in order to?
improve the level of quality of Japanese enterprises.
The success of this concept in Japan caused American companies to take note and experiment with —————————————.
the adoption of TQM
The successful results experienced by American companies such as——————————————————————spawned a new interest in performance measurement.
Ford, Xerox, and Motorola
In short, total quality management can be considered as?
a management system for a customer-focused organization which involves all employees in continual improvement of all aspects of the organization.
TQM uses strategy, data, and effective communication to integrate the quality principles into?
the culture and activities of the organization.
As an enhanced management system TQM helps organizations to?
refine and improve their internal processes and increase customer satisfaction.
When it is properly implemented, this style of management can lead to?
decreased costs related to corrective or preventative maintenance,
better overall performance,
and an increased number of satisfied and loyal customers.
However, TQM should not be considered as ?
a modernized software solution only which helps organizations to quickly start implementing a quality management system.
TQM is an?
underlying philosophy which the organization must integrate throughout every department of the organization and at every level of management.
Total Quality Management is comprised of?
ten fundamental principles underlying specific technique that lead to achieving excellence in performance:
Be customer focused:
Ensure total employee involvement:
Process centered:
Integrated system:
Strategic and systematic approach:
Continual improvement:
Fact based decision making:
Quality must be measurable:
Quality is a long-term investment:
Communication:
Be customer focused:
Whatever you do for quality improvement, remember that ONLY customers determine the level of quality. Whatever you do to foster quality improvement, training employees, integrating quality into processes management-ONLY customers determine whether your efforts were worthwhile.
Ensure total employee involvement:
You must remove fear from the workplace, empower employees, and provide them with the appropriate environment.
Process centered:
A fundamental part of TQM is to focus on process improvement. The act of implementation should be designed and targeted at the desired effect.
Integrated system:
All employees must know the organization mission and vision. Set up goals for the future and ensure that every department is working towards the same result. An integrated business system may be modeled by different frameworks such as ISO 9000.
Strategic and systematic approach:
An effective strategic plan must integrate quality as a core component.
Continual improvement:
Use analytical quality tools and creative thinking to become more efficient and effective. Real improvements must occur frequently and continually in order to increase customer satisfaction and loyalty.
Fact based decision making:
Decision making must only be based on facts and data, not on personal or situational factors.
Quality must be measurable:
Set up a quality management system which quantifies the results.
Quality is a long-term investment:
Managing quality is not a quick fix, the real results will not occur immediately. The total quality management is a long-term investment which is designed to achieve long-term success.
Communication:
Communication strategy, method and timeliness must be well defined.
Thus, TQM is ?
more a set of principles rather than a set of specific instructions.
Consequently the implementation needs to be tailored to?
the individual circumstances and needs of each organization.
Given this background, TQM implementation approaches can be generalized in the following order:
Train top management on TQM principles.
Assess culture, customer satisfaction, and quality management system.
Top management determines the core values and principles and communicates them.
Develop a TQM master plan based on the first three steps.
Identify and prioritize customer needs and determine products or services to meet those needs.
Determine the critical processes which produce customer quality products or services.
Create process improvement teams.
Managers support the efforts by planning, training, and providing resources to the team.
Management integrates changes for improvement in daily process management. After improvements come into effect, the process of standardization takes place.
Evaluate progress against plan and adjust as needed.
Provide constant employee awareness and feedback. Establish an employee reward\/recognition process.
One of the most successful modifications of total quality management is known as ?
the EFQM model which was initially developed in 1988 by the European Foundation for Quality Management (EFQM).
EFQM is the most widely-used business excellence framework in?
Europe
with over 30,000 businesses using the excellence model
to improve performance and increase their bottom-line.
This model encourages organizations to move from disciplined corporate cultures to?
agile ones which are better suited to the challenges of today’s global economic environment.
The ‘European Foundation for Quality Management Excellence Model’ is based upon the fundamental concepts of excellence described below:
1-Adding value for customers:
2-Creating a sustainable future:
3-Developing organizational capability:
4-Harnessing creativity and innovation:
5-Leading with vision, inspiration, and integrity:
6-Managing with agility:
7-Succeeding through the talent of people:
8-Sustaining outstanding results:
Adding value for customers:
Excellent organizations consistently add value for customers by understanding, anticipating and fulfilling needs as well as expectations and opportunities.
Creating a sustainable future:
It is vital to have a positive impact on the surrounding environment by enhancing performance whilst simultaneously advancing the economic, environmental, and social conditions within the communities they touch.
Developing organizational capability:
Outstanding organizations enhance their capabilities by effectively managing change within and beyond the organizational boundaries.
Harnessing creativity and innovation:
Exceptional organizations generate increased value and levels of performance through continual improvement and systematic innovation by harnessing the creativity of their stakeholders.
Leading with vision, inspiration, and integrity:
High goals can only be achieved by leaders who shape the future and make it happen, acting as role models for a company’s values and ethics.
Managing with agility:
Excellent organizations are widely recognized for their ability to identify and respond effectively and efficiently to opportunities and threats.
Succeeding through the talent of people:
A responsible association values its people and creates a culture of empowerment for the achievement of both organizational and personal goals.
Sustaining outstanding results:
First class organizations achieve sustained and outstanding results which meet both the short and long-term needs of all their stakeholders within the context of their operating environment.
Achieving excellence requires?
leadership commitment and acceptance of these concepts by all who are involved.
The concept of organizational excellence is also about?
a mentality of excellence-not simply to reach a certain level of performance, but to build up a culture of continuous improvement.
——————————, the European Quality Award was launched. Its intention is to serve as a way of identifying———————————- of excellence and giving recognition for demonstrating that Europe could be
—————————-.
In 1991
‘role models’
competitive
In order to support the award process, a set of
————–criteria defining excellence was developed against which applicants for the award were to be ——————–.
nine
assessed
These criteria were designed to ?
track how far applicants for the Award had travelled along the road to excellence.
The process included requirements for?
‘best in class’ benchmark comparisons and urged competitors to provide a degree of confidence that their success would be sustainable.
This framework became what is commonly known as?
the EFQM Excellence Model.
The EFQM excellence model is depicted by?
key nine criteria-five enablers
and four results-which lay ground for a holistic view of an organization and,
when used as a diagnostic tool, it allows an organization to assess its strengths and define areas for improvement in detail across nine key areas.
There is an overarching philosophy of continuous improvement which is applicable to all sectors:
Figure 18: EFQM Excellence Model
Figure 18: EFQM Excellence Model
The EFQM model discerns diversity of approaches to achieve?
sustainable excellence in all aspects of performance.
Its guiding postulate is based on the belief that:
“Excellency results which include performance, customer, people and society are achieved through policies and strategies driven by strong leadership.
Results are delivered by people, partnership, resources, and process.”
The model criteria suggest that:
-Leaders
-Policy and strategy
-People resources
-Partnership and resources
-Processes
-Customer, people, and society results
-Key performance results
Leaders
guide development of the mission, vision, values, and ethic of organizations. They are the role model of a culture of excellence. Leaders are personally involved in ensuring that the organizational management system is developed, implemented, and continuously improved. Leaders identify and champion organizational change.
Policy and strategy
are based on the present and future needs as well as on the expectations of the stakeholders. It is built upon information from performance measurement, research, learning, and activities related to external circumstances. Policy and strategy are communicated and deployed through a framework of key processes
People resources
are planned, managed, and improved. An excellent organization manages, develops, and releases the full potential of its employees at an individual, team and organizational level. It promotes fairness and equality, involves and empowers its staff. It cares for, communicates, rewards, and recognizes people in a way that motivates them and builds commitment to use their skills and knowledge for the benefits of the organization.
Partnership
and resources are managed. An excellent organization plans and manages external partnerships, suppliers, and internal resources in order to support policy, strategy and effective operation of processes. During planning and whilst managing partnership and resources, it balances the current and future needs of itself, the community, and the environment.
Processes
Processes are systematically designed, managed, and improved in order to fully satisfy customers and stakeholders as well as to generate increasing value for them.
Customer, people, and society results
results need to be comprehensively measured and perception measures and performance indicators are determined and maintained.
Key performance results
are measured by the introduction of performance outcomes with respect to the key element of organizational policy and strategy.
At the heart of the model lies?
the RADAR management logic, which is another set of guiding principles.
At the highest level, RADAR logic states that:
–Results need to be determined and should be achieved as part of an organizational strategy.
–Approaches have to be planned and developed as an integrated set of directives to deliver the required results both now and in the future.
—Deploy the approaches in a systematic way to ensure implementation.
–Assess and refine the deployed approaches based on monitoring and analysis of the results achieved and on-going learning activities.
The elements of approach, deployment, assessment, and review are used when ?
assessing ‘enabler’ criteria and the ‘results’ elements are applied to assess ‘result’ criteria.
The excellence model is a non-prescriptive framework which allows for?
enough flexibility to be adapted to any type of organization, regardless of size or sector.
In addition, the excellence model is considered to be an over-arching framework which can be ?
used alongside other tools and standards such as the balanced scorecard.
A key feature of the model is that it can be used as a diagnostic tool for ?
self-assessment,
where organizations grade themselves against a set of detailed criteria under each of the nine headings.
The overall score acts as a European benchmark and helps?
organizations identify areas to be improved.
It is then possible to develop and implement improvement plans which deliver?
sustainable growth and enhanced performance for the organization.
EFQM is not to be understood as a ‘——————’. It is a framework or a—————————— tool. Nonetheless, there are various recognition schemes based on the ———————— model.
standard
practical diagnostic
excellence
These recognition schemes, known as levels of excellence, are standards designed not only to determine success but also to?
allow benchmarking of the organization’s performance against the best in Europe.
One of the recommended strategies within the EFQM Model for improving performance is?
the adoption of the process of self-assessment.
Self-assessment is a comprehensive, systematic and regular review of an organization’s activities and results?
referenced against the EFQM excellence model.
It is recognized that self-assessment against all nine criteria of the EFQM excellence model is ?
both desirable and accepted as good management practice.
For example,
organizations which apply for the European Quality Award need to demonstrate evidence in each of the measured part areas. The primary objective of self-assessment, however, is to identify an organization’s strengths and areas for improvement and to develop action plans to improve organizational performance.
There are a number of methods of self-assessment against the excellence model which can be used. However, it needs to be noted that?
each one can deliver different benefits and involve different resources and risks.
The five key self-assessment methods are:
questionnaire
matrix chart
workshop
pro-forma
award simulation
Before choosing a method, it is important to consider what the organization is hoping to achieve from using?
the EFQM excellence model.
Different organizations can choose any or all of the five self-assessment methods and their choice will depend upon?
various factors.
One of them is to be clear on whether they have already achieved a certain degree of improvement with the application of ?
quality concepts and frameworks, whether they are just starting the journey or somewhere in between the two.
Some methods require much more effort than others. The choice of method is therefore also dependent on ?
the availability of resources within the organization, particularly those relating to commitment, time, energy, information, and finance.
The different methods also vary in terms of requirement of?
resource,
skill,
and outcome of the process undertaken.
The chart below indicates some of these differences. Although all are subject to change in case the assessment processes are:
enhanced,
developed,
or combined in any way.
Table 10: Maturity of Organization vs. Effort Required for Self-Assessment
Table 10: Maturity of Organization vs. Effort Required for Self-Assessment
Table 10: Maturity of Organization vs. Effort Required for Self-Assessment
It is crucial that self-assessment is viewed as an integral part of achieving excellence, rather than?
a stand-alone exercise. In the first instance, self-assessment can be categorized as a ‘health check’, while an initial analysis against the model provides information and evidence from which improvements can be made.
It is crucial that self-assessment is viewed as ?
an integral part of achieving excellence, rather than a stand-alone exercise.
In the first instance, self-assessment can be categorized as a ————————— while an —————————————–against the model provides information and evidence from which improvements can be made.
‘health check’,
initial analysis
As learning and understanding progresses, use of the model becomes more integrated in?
the way of working.
Irrespective of the method chosen, there are?
eight generic steps for carrying out a self-assessment.
These steps are shown below:
Figure 19: Eight Generic Steps for Carrying Out a Self-Assessment
Figure 19: Eight Generic Steps for Carrying Out a Self-Assessment
Figure 19: Eight Generic Steps for Carrying Out a Self-Assessment
Figure 19: Eight Generic Steps for Carrying Out a Self-Assessment
Although they are shown as sequential, some activities may ———————————-.
overlap others
There is no prescribed way of developing the appropriate self-assessment process. Activities might include:
educating and training staff to give them the knowledge and skills necessary to fulfill their role
scheduling self-assessments
developing action plans resulting from self-assessments
planning review meetings
embedding the self-assessment process into the regular business planning cycle
maintaining commitment to activity plans by supporting improvement activities
As previously mentioned, the EFQM excellence model is non-prescriptive in its nature except for?
two exceptions.
The first is in its sub-criteria, which are ———-in total. Any organization applying for the award is expected to ———————– each of these sub-criteria. When an association is using the model for self-assessment, it can obviously choose to
—————- certain sub-criteria.
32
address
ignore
Since all the 32 sub-criteria reflect upon good management practice, it is advisable to?
take all of them into account.
The second dispositive element relates to the fundamental concepts of excellence on which:
the model is based.
These above-listed eight concepts underline the philosophy of?
the model and any organization adopting the excellence model must appreciate that it is also effectively signing onto these concepts.
To conclude this section on the theoretical description of the EFQM excellence model, the following table gives an overview of?
the strengths and weaknesses of this approach.
Table 11: Strengths and Weaknesses of EFQM Excellence Model
Table 11: Strengths and Weaknesses of EFQM Excellence Model
Table 11: Strengths and Weaknesses of EFQM Excellence Model
Table 11: Strengths and Weaknesses of EFQM Excellence Model
We now know that multiple factors make performance measurement a complicated process. In order to design a performance measurement system, the first step is to?
identify strategic objectives from which strategic metrics and performance targets can be derived.
The balanced scorecard method highlights the fact that financial indicators need to be?
accompanied by a view of the operational status, the customer perception,
and the capability for innovation within the organization.
Quality management is an important aspect in ?
a customer-focused organization.
The idea of total quality management was developed in———————–. The goal was to continually ——————all aspects of the organization. The European answer to this initiative was the ———————————————————————————————.
Japan
improve
European Foundation for Quality Management
One of the latest additions to performance measurement systems is?
the SMART system, which was introduced in 1992.
