PERFORMANCE MEASURES GROUP 4

DEFINITION PERFORMANCE MEASURES. These are regular measurements of outcomes and results which generates reliable data on the effectiveness and efficiency of programs within an organisation

OBJECTIVES  To determine the processes to be improved.  To compare goals with the actual performance.  To indicate process gains and losses.  To provide information and make informed decisions.  To provide information for individual and team evaluation.  To establish baseline measures and reveal trends.  To determine the overall performance of the organization

ELEMENTS OF PERFORMANCE MEASUREMENT FRAMEWORK  Leadership and commitment.  Full ploy involvement.  Good planning.  Sound implementation strategy.  Measurement and evaluation.  Control and improvement.  Achieving and maintaining standards of excellence

TYPICAL MEASUREMENTS Some of the variables that can be measured across the different departments within an organization are; Human Resource: Customers Production Research and Development Suppliers Marketing/Sales Administration.

CONT’D However, In order for the true measures of effectiveness of Total Quality Management to be met, there are three components that require to be examined  human components  technical components  business components

STRATEGY FOR DEVELOPING PERFORMANCE MEASURES The quality council is responsible for the performance measures. It ensures that all measures are integrated within the system by obtaining appropriate information from all stakeholders. The quality council should meet each month to monitor current activities and plan on the future ones through the help of a report package consisting of:  Performance measures  System audits.

DEVELOPING THE SYSTEM Once the strategic measurement is developed, functional areas can develop their systems by involving their departments and work group. Steps involved in developing the system are  Determine which processes and sub processes are central to providing input for the strategic system.  Critical metrics are determined using the information given under basic concepts in step one.  Assign responsibility for the collection, analysis and dissemination of data.  Develop the improvement procedures.

MEASUREMENT It undergoes various stages of design, analysis, development, evaluation, implementation and review. It must be designed to measure progress. Progress is important in five main areas: Effectiveness -It is the percentage actual output over the expected output. It reflects whether the organization, group or process owner(s) are achieving the desired results, accomplishing the right things. Effectiveness=(Actual output/Expected output)*100% Efficiency It is concerned with the percentage resource actually used over the resources that were planned to be used. Efficiency= (Resources actually used/Resources planned to be used)*100

CONT’D Productivity This kind of measures may be developed for each combination of outputs and inputs, e.g. sales/ all employee costs. Productivity= Output/Inputs The above formula may be quoted expected or actual productivity: Expected Productivity= Expected Output/ Resources expected to be consumed Actual Productivity= Actual output/ Resources actually consumed

CONT’D Quality This measure should indicate positively whether we are doing a good job in terms of customer satisfaction, implementing the objectives, and whether the designs, systems, and solutions to problems area meeting the requirement Impact Should lead to key performance indicators for the business or organization, including monitoring improvement overtime e.g. Value-added measurement (VAM) and return on value added (ROVA). Value added= Volumes of Sale- Total input costs ROVA= (Net profits before tax/ Value added)*100%

PERFORMANCE MEASURES PRESENTATION. Time series graph.

Taguchi’s Loss Function. It combines target, cost and specifications into one measurement.

Control chart. A graphic that shows the degree by which processes vary from intended specifications.

Histogram

COSTS OF QUALITY Involves managing cost of achieving quality products & services, or doing a quality job. A competitive product or service based on a balance between quality and cost factors is the principal goal of responsible management and must be aided by a competent analysis of the costs of quality (COQ The analysis of quality related costs is a significant measurement tool that provides: o A method of assessing effectiveness of management tool of quality. o A means of determining problem areas, opportunities, savings, and action priorities.

CONT’D costs that aid in the development of the quality of a product are;  prevention costs these are associated with design, implementation and maintenance of quality management system.  appraisal costs These are costs associated with supplier’s and customer’s evaluation of purchased materials, processes, intermediates, products and services to assure conformance with specified requirements. They  failure costs They produce the ‘costs of getting it wrong’.  P-A-F model first presented by Feigenbaum

PERFORMANCE MEASUREMENT FRAMEWORK It is based on strategic planning and process management models and has four models namely; 1.Strategy development and goal deployment it involves identification of a set of critical factors and key performance outcomes should be developed from the mission statement and represent a mix of balanced stakeholders. 2.Process management it entails identification of customers’ requirements and translation of requirements and objectives into an integrated set of process performance measures. This is done through key performance indicators that include input, processes, output measures and management of internal and external relationships and use of management control systems

CONT’D 3) Individual performance this is the management of individuals through performance appraisal. Formal planned performance reviews and performance management. It is the responsibility of direct managers of the people who are to be appraised. 4) Review performance this is done through quality costing, self- assessment, benchmarking surveys ABC. They are used to identify improvement opportunities and to motivate improvement of performance. Techniques used in the review Quality costing using process costing methods Self-assessment Benchmarking Customer satisfaction surveys Activity based costing

CRITICAL FACTORS THAT LEAD TO THE SUCCESS OF PERFORMANCE MEASUREMENT SYSTEMS Support from the top level management for non-financial measurement systems Identification of the vital measures Involvement of all individuals in the development of the performance measurement Clear communication of the strategic objectives Inclusion of the suppliers and customers in the measurement process Identification of key drivers of performance

THE IMPLEMENTATION OF PERFORMANCE MEASURES Measurement should always start from the customer process owners should ensure that performance measures defined reflect customer’s requirements. The measure needs to be compared with the cost of producing it. All critical parts of the process must be measured it is often good to start with the simple measures and improve on them later. All employees must participate in the measurement processes this aids in reducing the resistance that may be brought about when the system is implemented in the organization.

REASONS WHY PERFORMANCE MEASUREMENT SYSTEMS FAIL  Lack of defining performance operationally  The performance is not related to the process  Boundaries of the performance are not defined  Measures are misunderstood, misused or measure wrong things.  Distinction is not made between control and improvement.  Fear of exposing poor and good performance  Many measurements are focused internally than externally  Fear of introduction of tighter management controls.

INTRODUCTION OF TQM-BASED PERFORMANCE MEASUREMENT planning 1. Identify the purpose of conducting the measurement. What is it for? It can be for Reporting, controlling, improving. 2.Choose right balance between individual measures which is task related or an activity and group measures 3.Plan to measure all key elements of performance 4.Measures should reflect the voice of internal and external customers. 5.Select measure that will establish standards of performance 6.Learning process should be allowed during the introduction of the new measurement system.

CONT’D Implementation 1.Ensure full participation by allowing the system to mould through participation in the introductory period. 2.Cost benefit analysis is carried out on the data generation to ensure measures that have a high leverage are selected. 3.Spread the measurement as widely as possible since effective decision, making is made possible by measures from all areas of business operation. 4.Use surrogate measures for subjective areas where quantification is difficult. Improvement in employees’ morale may be measured by the number of absenteeism.

CONT’D 5. The measurement systems should be as flexible as possible to allow changes in strategic direction and continual review. 6.Measures should reflect quality drive by showing small incremental in achievements and match the continuous improvement approach Measurements systems should always be designed, planned and implemented in such a way that the customers’ requirements are reflected, Give visibility to the processes and the progress made, communicate the total quality effort and engage in the continuous improvement cycle

THE END QUESTIONS