1. M A N A G E M E N T M A N A G E M E N T 1 st E D I T I O N 1 st E D I T I O N Gulati | Mayo | Nohria Gulati | Mayo | Nohria Chapter 10 Chapter 10 PERFORMANCE PERFORMANCE MANAGEMENT MANAGEMENT ©South-Western, a part of Cengage Learning PowerPoint Presentation by Charlie Cook ORGANIZATIONAL PERSPECTIVE

2. Learning Objectives Describe the four stages of the control cycle and how the control cycle is used to assess the performance of a firmDescribe the four stages of the control cycle and how the control cycle is used to assess the performance of a firm Explain how the balanced scorecard and its associated components are used in performance management systemsExplain how the balanced scorecard and its associated components are used in performance management systems Outline the various ways in which a firm can set performance targetsOutline the various ways in which a firm can set performance targets Describe how a firm can monitor and measure its performanceDescribe how a firm can monitor and measure its performance Explain the corrective actions that managers make to improve organizational performanceExplain the corrective actions that managers make to improve organizational performance © South-Western, a part of Cengage Learning10–2

3. 10–3 Figure 11.1 -The Control Cycle

4. Identifying Measures © South-Western, a part of Cengage Learning10–4 The actions and decisions of individual employees Behavior The products and/or services that an organization produces Outputs The method created to help businesses translate strategy into action by identifying the most critical measures to drive business success and linking long-term strategic goals with short-term operational actions; it uses four perspectives of business (financial, customer, business process, and learning and growth) Balanced scorecard

5. Financial Perspective © South-Western, a part of Cengage Learning10–5 The framework for choosing the financial measurements that are most important for reaching strategic goals The accounting system used to assess the specific cost components of producing a product or service Activity-based costing (ABC)

6. Product Life-Cycle Stages © South-Western, a part of Cengage Learning10–6 The stage at the beginning of the business cycle that is marked by high investment activity Growth stage The stage of business where the company is investing and extracting money, trying to maximize its return on investment Sustain stage The end of a business life cycle, where a company attempts to extract as much money as possible from business activity Harvest stage

7. Customer and Business Process Perspectives © South-Western, a part of Cengage Learning10–7 The framework that links key customer-based metrics such as market share and retention to the financial performance of a firm Customer perspective The framework that focuses on measurements that will improve a company’s ability to serve its customers and deliver value propositions to its customers Business process perspective Business process perspective Quantitative and qualitative things that customers value most Value propositions

8. Learning and Growth Perspective © South-Western, a part of Cengage Learning10–8 A set of quantitative and qualitative measurements that are related and mutually reinforcing Cause-effect relationships A simple and effective way of analyzing cause- effect relationships If-then statements The framework that identifies the infrastructure and skills needed to carry out business processes, interact with customers, and achieve long-term financial growth; it also helps to identify gaps in capabilities or resources

9. Setting Performance Targets © South-Western, a part of Cengage Learning10–9 The process for allocating financial resources, planning forecasts, and measuring expected quantitative and qualitative outcomes of a firm The process for allocating financial resources, planning forecasts, and measuring expected quantitative and qualitative outcomes of a firm Budgeting process Process of collecting data from the industry’s best players and using their numbers as a goal or guideline for evaluating company performance Benchmarking

10. Monitoring and Measuring Performance © South-Western, a part of Cengage Learning10–10 The process of evaluating behaviors and outputs to see whether standards have been met or objectives have been obtained Measurement The amount of time required to develop and deliver products and services to the customer Total cycle time

11. Total Cycle Time and TQM © South-Western, a part of Cengage Learning10–11 Decreases labor and overhead costs, cuts inventories, and reduces rework Reveals deficiencies in materials and processes provides more opportunities to improve quality Reduces the number of steps involved from production to delivery, thereby reducing chances for mistakes How reducing cycle time improves quality

12. Monitoring and Measuring Performance © South-Western, a part of Cengage Learning10–12 Total Quality Management The satisfaction of customer needs through a set of four reinforcing principles: customer focus, process focus, teamwork and participation, and continuous improvement Six Sigma A disciplined, quantitative approach to improve cycle time, reduce costs, and eliminate waste with a technical goal of 3.4 defects per million (six standard deviations from the mean) DMAIC Define, Measure, Analyze, Improve, and Control ISO 9000 An international control mechanism that pursues high-quality products by ensuring high-quality production processes

13. Taking Corrective Action © South-Western, a part of Cengage Learning10–13 The process of recalibrating or confirming a firm’s strategy in light of changes in the external environment Strategic control Systems that promote communication between the strategists and those implementing the strategy, ensuring that performance is constantly monitored and that a business stays on course Interactive control systems

14. KEY TERMS © South-Western, a part of Cengage Learning10–14 Activity-based costing (ABC) Balanced scorecard BehaviorBenchmarking Budgeting process Business process perspective Cause-effect relationships Control cycle Customer perspective Drivers Economic value added (EVA) Financial perspective Growth stage Harvest stage If-then statements Interactive control systems Learning and growth perspective Management by objectives MeasurementOutcomesOutputs Strategic control Sustain stage Total cycle time Value propositions