Measurement Systems

Development of Information

Information is necessary for both control

and improvement

Information derives from analysis of data

Data, in turn, come from measurement

Process Flow

Measurement

Data

Analysis

Information

What Could Be Measurements for Personal Health?

Measurements for Personal Health

Blood pressure Weight Heart rate Respiration Body fat percentage Blood chemistry Strength Flexibility

How Do People React to Measurements?

Questions Concerning Measurements

Why do we need them? How will the measures be used? Will they be used for punishments? If so,

how? Why is my performance measured? What is in this for me? Will we see the results?

How to Alleviate Fear of Measurements?

Effective Use of Measurements

Assign clear accountability/responsibility Establish performance goals Conduct regular review and analysis Use information for better decision-making

and improvement Communicate performance information Provide reward and recognition

Potential Problems with Measurement Systems

Too many measures

Short-term focused

Lack of detail for action or decision-making

Drives wrong performance

Measures courtesy versus competence

Measures behavior versus accomplishments

Characteristics of Effective Measures

Are meaningful

Respond to multiple organizational priorities

Encourage operational improvements

Provide a complete, accurate, and

believable picture of performance

Blend leading and lagging indicators

Design of An Effective Measure Purpose – is worth collecting to support

decision making Validity – measures what it claims to measure Precision – returns consistent value with each

measurement Accurate – matches the true value Cost effective – is not too costly to track and

report

How to Design An Effective Measure?

Designing Measures (Metrics) – APQC (1 of 2)

Plan

• How will you use the data?

• Have you selected and defined your

measure?

Collect

• How will you collect the data?

Designing Measures (Metrics) – APQC (2 of 2)

Analyze

• How can you ensure that the data will be relevant and believable?

• What does the data indicate? Adapt

• How will you communicate your findings?

• What kind of action should occur?

Types of Measures

Strategic Measures

• Measure the effectiveness and

appropriateness of strategies

Operational (Process-Level) Measures

• Measure the effectiveness and efficiency of

activities

Purpose of Strategic Measures - Balanced Scorecard

Clarify and translate vision and strategies Communicate and link strategic goals and

measures Plan, set targets, and align strategic

initiatives Evaluate and improve effectiveness of

strategic initiatives

Balanced Scorecard(Kaplan & Norton)

1. Financial perspective

2. Customer perspective

3. Internal perspective

4. Innovation and learning perspective

Leading measures

Lagging measuresInterlinking

Examples of Balanced Scorecard Measures

Customers – satisfaction, retention, acquisition, profitability

Financial – net income, return on equity, return on investment, growth, cash flow

Internal – productivity, quality

Innovation & Learning – employee development, retention, satisfaction

Balanced Scorecard for A Fast-Food Restaurant?

Balanced Scorecard for A Fast-Food Restaurant

Customers

• Satisfaction, frequency, retention, referral Financial

• Net profit, sales growth Internal

• Quality, timeliness, service experience Innovation & Learning

• Experience, training, empowerment, accountability, employee satisfaction

Process-Level Measures

Does the measure support our mission? Will the measure be used to manage

change; that is, actionable? Is it important to our customers? Is it effective in measuring performance? Is it effective in forecasting results? Is it easy to understand and simple?

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Creating Effective Process–Level Measures

Identify all customers and their requirements and expectations (key performance factors)

Define work processes Define value-adding activities and process

outputs Develop measures for each key process Evaluate measures for their usefulness

Measures for Payroll Processes

Measures for Payroll Processes

Staff productivity (# of payroll forms

processed each week)

Cycle time (time to complete an inquiry)

Operating costs (labor cost /payroll FTE)

Process efficiency (% of resources for

payment processing vs. inquiries)