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1
What Gets Measured Gets Undone
Dr. Jim Mirabella
Director of Institutional Research
Professor of Statistics
Florida Community College - Jacksonville (FCCJ)
J. Michael Adams
Corporate Manager, Quality Services
Florida Power & Light/ FPL Group, Inc.
Florida Sterling Conference
Wednesday, May 31, 2000
Disney World, Orlando, Florida
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What’s getting “undone” ?
• The desired outcome and supporting processes that the measure(s) intended to describe
• Why????– Poor measures drive poor performance!
3
Objectives of the workshop• Know good measurements from poor
measurements
• Distinguish the implications of good and poor measures on performance
• Balance an array of measures that favorably tracks a process’s outcome for planning, assessing performance, and analysis
• Assess attendees’ measures
• Any other expectation?
4
“Why” Measure at All?
• Measurement is the language of progress and comparison
• Provides a sense of where we are AND where we are going (planning)
• Can guide a steady advancement toward established goals (tracking)
• Can identify goal shortfalls, or over-achievement (analysis)
• Communicates to the work force what is important to the organization (behavioral)
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Good measures are born from SMART goals
• Specific
• Measurable
• Agreed upon
• Realistic
• Time-Bound
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The Challenge of Measuring• Workers might perceive it as a threat• Workers might disregard organizational goals,
customers, products and services• Workers might focus on obtaining favorable
measurements• Measuring items with no influence on organizational
success = waste of time – result is a bean-counting approach that focuses on irrelevant
details
• Expected to do something!
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The Challenges- examples
• “Apples and oranges”
• Impact on comparisons, benchmarking and performance
• turnover
• consistency
• defects vs. defectives
• commutes (measured in time or miles)
• school achievement
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“Where” are these measures
• Organizational
• Process
• Department/work unit
• Individual– Exercise
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Your measures Jot down your various
performance measures for you, your department, unit and organization. Indicate the purpose of the measure ( 1= planning, 2= tracking and analysis; 3: behavioral changes)
• Organization
• Process
• Department/ Unit
• Individual
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“What” Do We Measure?
• Quality• Delivery• Cycle Time• Waste• Cost
• Defects• Satisfaction• Complaints• Financials• Price
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Measurement Examples
Operations-related measures- reliability- timeliness of delivery- order processing time- errors / defects- product lead time- inventory turnover- cost of quality- employee
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Measurement Examples
Customer-related measures- customer satisfaction- customer complaints- customer retention
Financial measures- market share- sales per employee- return on assets- return on sales
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Baldrige/ Sterling: Results CategoryPrivate, Education, Health Care7.1: Customer Focus Results; Student
Performance, Patient and other Customer Focus
7.2: Financial and Market; Student and Stakeholder Focused Results,
7.3: Human Resource Result; Budgetary and Financial Results, Staff and Work
System7.4: Supplier and Partner Results; Faculty
and Staff Results7.5: Organizational Effectiveness
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Determining and Reviewing Measurements for Balance
BaldrigeResults 7.0
•Customer
•Financial
•Human Resources
•Supplier/ Partner
•Organizationalsupplier
dept
process
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Desired Outcomes- Airlinesoverall organization balance scorecard
• “Assumed Quality”- arrive safely
• Loyal Customers– Market differentiation, key value attributes:
• on-time arrival• baggage handling• customer complaints
• Profitability and Market share– Satisfied stakeholders (shareholders, partners)
• Employee growth and retention
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Airline Measurement System
• Individual measures for each flight process• Group measures for overall airline• If problems occur with a flight, who do you
blame -- the flight crew or the airline?• What measures do you affiliate with the
flight crew?• What measures do you affiliate with the
airline?• What is important to you for a satisfactory
flying experience?
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Review your measures
• Are the organization measures reflective of all Baldrige results items?
• Do the measures reward favorable behaviors?
• Is there alignment with the contributing departments and suppliers?
• Are the overall results managed as an outcome of a process?
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What’s the opportunity?• Many organizational measurement systems are
too short, too rigid, or used like a strict teacher’s ruler ... to whack rather than to motivate
• Need to replace these outdated measurement systems with more dynamic measurement system that motivates continuous improvement in customer satisfaction, flexibility, and productivity … SIMULTANEOUSLY
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Mis-measurement Systems
• Unless specifically tuned to flight plan, measurement systems may:– yield irrelevant / misleading information– provoke behavior not conducive to strategy
• Traditional measures ignore requirements & perspectives of customers (internal/external)
• Bottom-line measures (profitability) too late for mid-course correction / remedial action
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Mis-measurement Systems
• Many measurement systems overlook key non-financial performance indicators
• Measures often used for punishment rather than to promote learning
• Many measurement systems are inflexible and limited in what they can do
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What Should a Measurement System Do?
• Measures must link operations to strategic goals– departments should know how they contribute
separately and together toward strategic mission
• System has to integrate financial / non-financial info in a way usable by managers– managers need right info at right time
• Measurement system’s real value lies in its ability to focus all business activities on customer requirements
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What Should a Measurement System Do?
• Measure what is important to the customers
• Motivate operations to continually improve against customer expectations
• Identify and eliminate waste -- of both time and resources
• Help to accelerate organizational learning and build a consensus for change when customer expectations shift
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Measurement Mismanagement
In an effort to increase market share, a computer service bureau strategizes to improve the timeliness of its voicemail service. The goal is to provide new customer with service w/in 24 hours. To help speed the process, a program is developed to accept verbal phone orders. Most new customers were online w/in a day as promised, causing the company to celebrate their success. A later audit revealed 70% error rate in order entry, with 30% of customers disputing their bill and eventually canceling service..
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Measurement Mismanagement A Hi-Tech company sets objective to become highly
profitable by being a product leader. To measure the performance of its marketing and R&D functions, the number of new products developed is the most watched barometer. An internal review reveals that in a sample of 20 new product introductions, 80% were delivered over a month late, and significant waste piles up in production. Management cannot understand why the accountant’s ink is red – after all, their yardstick tells them they are developing new products at a record rate.
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Beware of ……..
Seemingly Simple Measures
• How satisfied are your customers?
• What is your employee turnover?• What is your client retention
rate?• Is the value of our service worth
the price?
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Beware of ……..
Treating customer perceptions as objective measures• Customer satisfaction product quality
• Customer satisfaction is a complex phenomenon
• A well-handled complaint results in higher customer satisfaction than does no complaint
• More reasons for complaint more dissatisfaction
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Beware of ……..
Non-specific measurements• Results are actionable
• Hard to improve what you cannot assess
Failing to measure adequately• Think BALANCED SCORECARD
• Don’t give employees an outlet for gaming success
• Identify all areas important to customers
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Beware of ……..
Using results incorrectly• Don’t tie results to employee pay
unless employees can directly influence results
• Don’t base employee pay on results that cannot be measured
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Recap of Objectives and Expectations
• Know good measurements from poor measurements
• Distinguish the implications of good and poor measures on performance
• Balance an array of measures that favorably tracks a process’s outcome for planning, assessing performance, and analysis
• Assess attendees measures