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AN INTEGRATED MODEL FOR PERFORMANCE MANAGEMENT BASED ON ISO 9000 AND BUSINESS

EXCELLENCE MODELS

Shannon Macey

Submitted in partial fulfhent of the requirements

for the degree of

MASTER OF APPLIED SCIENCE

Industrial Engineering at

DALHOUSIE UNIVERSITY

Halifax, Nova Scotia August, 2001

Copyright by Shannon Macey, 2001

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Table Of Contents

List of Figures ................... ..............................m....~.........em...........................~......... x

List of Abbreviations . . . . . - . m . . . . . m ~ . . . . m ~ m ~ * - ~ ~ ~ m - . ~ m m ~ ~ ~ m ~ ~ ~ ~ ~ ~ ~ ~ m ~ ~ o o o o o xi

1.0 Introduction ................... .......~.......o...~....~....ooo..~~~.e...............................~e...o...... 1

Performance Management ...... ..... . .......................................................................................... . ...... 1 Models for Performance Management . . .. . . , . . , .. ... . . . . . .. . .. . . . .. . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4 Performance Measurement ......................................... ... . ............................................. 5

Performance Management in R&D ............................. ,.. .... . ............. . ................... . ......... . 7

Case Study Organisation (CSO) ............................... ,. .......... . ................................... . . . 9

Ornanisation of the Thesis ............................................. . .................................... . . . . 1 0

2.0 Literature Review ............. ...............*................~o.....sm..........*.~*...........*........~... 12

2.1 Introduction ............................... ........ ............................ .......... ............... . ................ . . . . 12

2.2 Performance Management ................................ . ........... . . . . . . ................. . . ..............12 2.2.1 Models for Performance Management ..... ........................... ....................................... . 13 2.2.2 Performance Measurement . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . .. . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . -27

2 3 Performance Management in R&D .................................... ....... ........... ..................................... -46 2.3.1 Addressing Issues Unique to R&D ....................................................................................... 46 2.3.2 Benefits of Implernenting Quality Management in an R&D Environment ........................... 49 2.3.3 ISO 9000 in R&D .................................................................................................................. 51

Motivation for Proposed Research ...................... ... ............................................................... 52

Objectives of Proposed Researcb ................................................................................................ 53

An Integnted Mode1 For Perf~~nance Muiagemcnt ................................. 5 4

Introduction ................ ............. .. ...... .......................................................................................... 54

Development of the OPIM ................... ............ .......... .............w........9.9........ .......................... 54 3.2.1 Framework Development ...................................................................................................... 54 3.2.2 Criteria Development ............................................................................................................ 57 3.2.3 Development of the Assessment Questions .......................................................................... 66 3.2.4 Establishment of the Scoring Scheme ................................................................................... 66 3.2.5 Scoring Scheme Cornparison ................................................................................................ 73

3 3 Cbapter Summary ....................................................................................................................... 76

4.0 Seff Assessrnent .............................................................................................. 77

4.1 Introduction .................................................................................................................................. 77

....................................................................... 4.2 Self-Assessment at the Case Study Organisation 77 ................................................................................................................................ 4.2.1 Planning 78

4.2.2 Assessrnent ............................................................................................................................ 83 4.2.3 Final Score ............................................................................................................................ 89 4.2.4 Outcomes .............................................................................................................................. 90 4.2.5 Evaluation o f Assessrnent Process ........................................................................................ 93

5.0 Performance Measurernent ........e.................................................................... 96

5.1 Introduction .................................................................................................................................. 96

Cornparison of Assessrnent ResulW to Quriity ~ u d i t Results ..................... ... ...................... 96 Implications for Simultaneous Auditing and Assessrnent ................................................... 102

Result-based PerCormance Measurement ..................... ... ............. ...................................... -103 Review of Organisational Performance Measures ............................................................. 103 Review of the Performance Measures at Case Study Organisation .................................. 104

Self.assessment, Auditing and Result-based Performance Measuremeat ............................. 117 Comparing Self-Assessrnent and Result-Based Performance Measurement ....................... 117 The Roles of Self.Assessrnent, Quality Audits. and Result B a d Perfomance Measurement

in the Organisational Performance Masurement System ...................................................................... 119

........................................................................ ....................................... 5.5 Chapter Summary .. 120

6.0 Performance Management In R&D .............................................................. l

6.2 The R&D Environment at the CS0 ........................................................................................ 121

......................... 63 Modifying the OPIM for Use in an R&D Environment ......................... ... 122 .......................................................................................................................... 6.3.1 Framework 123

................................................................................................................................ 6.3.2 Criteria 125

................................................................................................................................ 6.3.3 Scoring 128 6.3.4 Addressing R&D Issues with the Modified OPIM .............................................................. 130

...................................................................................................................... Chapter Summary 131

Conclusions .................................................................................................. 132

................................................................................................... Contributions of the Research 132

.................................................................. Scope for Further Research ... ...... ..... ................. 134

References .................................................................................................... 136

Appendices ................................................................................................... 144

APPENDlX A . OPIM Questionnaire ............................................................................................. 1 4 5

APPENDIX B . Modified OPIM for R&D .................. -..... ................................................................. 160

APPENDIX C . Triiiium Results ...................... ..,............. ............................................................... 169

APPENDIX D - Cornparison of Performance Management Mode1 Criteria ...................................... 170

APPENDIX E - Approach. Deployment and Results Adapted from the EQA ................................... 175

List of Tables

....................................... Table 2-1: Channeristics of Performance Management Models -21 ...................... Table 2-2: Strengths and Weaknesses of Performuice Management Models 22 ..................... Table 2-3: A Cornparison of the S c o ~ g Schernes from the Quairy A w d 24

............................................................ Table 2-4: Selection of Self-Assessrnent Method -31 Table 2-5: Evaluation and Scoring Methods of the Performance Management Models ....... 33 Table 2-6: Description of Evaluation EIements Used in the EQA ..................................... 34 Table 2-7: Scoring Guidelines from the MBNQA ........................................................... -35

.......................................................... Table 2-8: Sample Score Calculation for MBNQA 3 6 Table 2-9: Plan-Do-Check-Act Cirde of Audit and Self-Assessment Programs .................. 45 Table 3-1: Inma Caregories of the OPIM ........................................................................ 57 Table 3-2: Initial fit of Mode1 Giteria to OPIM Framework ............................................. 58 Table 3-3: Changes to the OPIM Categories ............................................................... 60

............................................................. Tabie 3-4: Application of Cnteria to Frarnework 6 1 Table 3-5: Final OPIM Framework with Comespondmg Critexia from Xntegrared Models .. 64 Table 3-6: Calculauon of Scores from Preferences ............................................................ 71

. . Table 3-7: OPIM Scoring Cntena .................................................................................... 72 Table 3-8: Distribution of Points Arnong Criteria of OPIM, MBNQA, and EQA ............. 74 Table 4-1: Sample from the Question Mauix ................................................................... 82

.................................................................. Table 4-2: Tirnelines for Self-Assessrnent 8 3 ................................................................................. Table 4-3: Final Score Calculauon 8 9

Table 4-4: Prioritising Areas for Improvement ................................................................ 90 Table 5- 1 : Comparing Outcomes from Self- Assessment and Q d t y Audit ....................... 96

.... Table 5-2: Recomrnendations, and Noncornpliance Issues and Areas for Improvement 98 Table 5-3: Comparison of CS0 Scores on Self-Assessmenr to Audit Findings ................ 101 Table 5-4: Results Categories from MBNQA and EQA ............................................... 103

....................................................... Table 5-5: Performance Measwes Used at the CSO 105 ................................. Table 5-6: Performance Measurement System Interview Questions 107

Table 5-7: Applying the BaLnced Scoreard to the Performance Measurtment Syscem of the Cs0 ..................................................................................................................... 110

Table 5-8: Performance Mea~ures According to QuiLry, TirrP, Cos, and Flexibility ........ 111 Table 5-9: Performance Arev Addresseci by the OPIM ................................................. 113 Table 5-10: Suggested Performance Measures to Add Relating to Resources ................... 115 Table 5-1 1: Suggested Pedomiance Meyures to Add Relating to Society ........................ 116 Table 5- 12: Suggested Perfonnuice Mevures to Add Relathg to Employees .................. 116 Table 5- 13: Characteristics of Perfoxmance Measurement Methods ................................. 117

................. Table 6-1: Chamteristics of QwLty Management Addressing Issues in R8rD 123 Table 6-2: Strategy Criteria Gom the OPIM ................................................................. 127 Table 6-3: Moditied Strategy Criteria fiom the OPIM ................................................... 128

................ Table 6-4: The Categories of the Modif1ed OPIM Addressing the R&D Issues 129 Table 6-5: Scoring Sdieme for the Modifieci OPIM ................................................... 130 Table 6 4 Modifieci OPIM Addressing R&D Pro blems ................................................. 131

List of Figines Figure 1- 1: P e r f o ~ c e Management ...................... ... ............................................... 1 Figure 1-2: Methods for Performance Improvemmt .......................................................... 3 Figure 1-3: The Relationship h e e n Performance Management and Performance

Measurement .......................................................................................................... 3 Figure 2- 1: Un-g Framewoxk for the Bddrige National QuaLF/ Award Model .......... 18 Figure 2-2: Enablen and Re& of the EQA ................................................................. 19 Figure 2-3: The Self-assessrnent Process ........ ............................. .................................... 2 9 Figure 2-4: Sehssessment Process Rrgour Versus Data Qua

List of Abbreviations

CS0 - Case Study Organisation TQM - Total QuaLty Management BEM - Business Exceilence M& MBNQA - Malcolm Baidnge National QuaLty Award EQA - European QuaLty Award DP - Deming Plize NPD - New Product Development OPIM - Organisational Performance Improvement M d C E 0 - Chef Executive Officer Go0 - Chief Operating Officer VP - Vice President QA - Qdity Asnirance PFM - Preference Function M o d e b g

Acknowledgement s

1 would like to thank my supervisor, Dr. St&v Karapevovic, for invithg me to take part in this research project and for all the guidance and support that he provideci throughout the process. His knowledge of and experience in rhis field proved Livduable and was a great source of inspiration.

1 wish to give thanks to the case study oqpkation for pamcipating in this project and for a i l the CO-opemion 1 received whik performing my research there. Without its fwcial support, this project would not have been possible. I would specifidy like to thank bot - Mark DeKoning and Max Jaffer for their involvement and advice. Their support was of great benefit to the successful completion of this project.

1 would Idce to thank Dr. John Blake for his valuable feedbadc and tirne spent reviewing rhis work and Dr. Eldon Gunn for his encouragement and support. Thanlu to both for serving as memben of my guiding comminee. Thank ou to Dr. Walter Wdbom for his Ume spent reviewuig some of the w o i in the thesis and for travelling to Halifax for my defence. Thanks also to Dr. Car1 Sandblom for seming as a member of my guidance cornmittee.

Thanks also to the Department of Industrial Engineering at Dalhousie University for providing funding as well as the opportunity to serve as a teaching assistant. Thanks to ail of the Industrial Engineering deparunent staff, especially to Cindi Slaunwhite and Linda Seamone for their cheer and fnendship.

1 would like to express my sincerest gratitude to Greg Delbndge for his inexhawible encouragement, patience and support throughout my d e s .

In today's global economy, o&tions mua ourperform &eir cornpetitors in order to survive. They must set goals and objectives chat will move them into leadership positions in their indusrries. To ensure that these goals are being me5 cornplnies are developing performance management systems to help them measure and improve the efficiency and effectiveness of theu activities. S e v d modek have been developed to assist organisations in these efforts. Some of these models, such as ISO 9001, provide the minimum requirements for a quality management system, while orhen, like the National Quality Awards, provide a broader set of criteria that extend the prinaples of management to al1 organisational activities. Companies natudy question which model is best suited for their performance management needs. It has been suggested that the model should be selected based on the qulity maturity level of the organisation. The ISO 9001 standard for quality management provides a necessaxy foundation for the journey towards business excellence- The Business Excellence Models can then be used to build onto this foundation.

In this paper, a model that integrates ISO 9001, the Malcolm Bddnge National Quai;ty Award, the European QuaLty Award, and the Deming Pxize is developed The Organisational Performance Improvernent Modei (OPM) is considered to be a combination of quality assurance standards that provide the minimum recpirernents for sU1i;ty improvement, and business excellence models that illustrate the opportunities for improvement.

Using a Canadian hi& technology Company as a case midy, a p h self-assessrnent is conduaed againn the OPIM. This self-assessrnent pmcess is then compared to the two other performance meanirement methods used within the organisation to cietennine its usefulness as a tool for p e r f o m c e irnprovement. Because the case study organisation is highly focused on its research and development activities, modifications were made to the OPIM to create a more appropriate model for application and use in an R&D environment.

The OPIM was developed specifically for the case study organisation (CSO) but can be easdy adapted to be used by other organisations. A comparry cm employ this model to evaluate its current quality management system against the minimum requirernents in the model and rhen apply the opportunities for improvement as a guide for continuous improvement. Self-assessrnent against this model wili be beneficial in enhancing the organisation's quality auditing program as well as its redt-based perfoxmance measurement system.

1.0 Introduction

1.1 Performance Management

The purpose of any organisation is to niccessfully achieve in gods and objectives. To remain cornpetitive, these goals need to be achieved in the most effiaent and effective manner possible. Effectiveness and effiaency constitute the two fundamend dimensions of performance (Neely et al, 1995). Effectiveness refers to the exrent to wbich goais are met, while efficiency is a m m of how economidly the h ' s resouras are udised to redise these goals. Organtations musr continually improve their processes and the use of th& resources to realise improved o v e d performance. Perfoxmance management is the overali process of managing aa organisation's effiaencyuid effectiveness in the adiievernent of its corporate and funaional strategies and objectives.

Performance management is a dosed loop process. Figure 1-1 illustrates this d e .

............................ 1 Audit ..................... Self-Assessrnent

Set Goais and Objectives 4

I lui for I.mprwemtnr I

Yes

As a firsr s e p in this process, the organisation musc set irs and objectives. These cm be baseci on benchmarking, standards or other such refemce aiteria.

Once goals and objectives are determineci, performance measurement is used to nadr the progress towards these goals. Performance measurement is the quantification of the effiuency and effectiveness of an action (Neeiy et ai, 1995).

To narrow the gap becween the m e n t lwel of perfomunce and rhe levels required to meet its objectives, an organisation must improve. Performance impmvement is the systematic process of idennfying and implementing changes to oqpisauonal processes in order to more efficiendy and e ffectively achieve set organisational objectives. Performance improvement can be achieved in two ways. The fvst is to elimioate problems or deficiencies. The second to initiate actions that Mn aaualky result in improved characterstics.

There are rwo ways in which companies can elimliate problems. These are corrective and preventative actions. Corrective actions are those which are taken to eliminate the cause of an existing non-conformity[the non-fuifilment of a requirement (ISO 9000: 20W)J or other undesirable situation (ISO 9000: 2000). Preventive actions are those taken to elMinate the cause of a potential nonconformiry or other potentially undesirable situation (ISO 9000: 2000).

Improved characteristics can be achieved through Kaizen or Quantum Leaps. Kaizen means smd incremental irnprovernents towards the achievement of objectives. Quantum Leaps or breakthroughs are larger irnprovements. Both of these reduce the average nurnber of defects or reduce variation.

Figure 1-2 illusvates the concept of performance irnprovement.

Quaiify = k d o m h m deficiencies ( 0 ) + imP'0ved characteristics (+)

ELIMINATE PROBLEMS GET BETTER

F e , once a goal or objective is reaiised, new goals should be set to continue the cycle. Both performance measurement and improvernent are essenria if an organisation wishes to sirndtaneous~ achieve its objectives and maintain its cornpetitive edge.

MANAGEMENT

The measurement synem un be seen, according to Bitichi et al. (1997), as the heart of the performance management qmem.

ACT +

PLAN + 4

l IMPROVEMENT v b DO MEASUREMENT

L

There are xveral wys in which an organisation can mevure its performance and plan for improvement. One such method is to compare its puformance to a given reference model. There are many such modek used by o ~ t i o n s today. Some of these models are focused on specific processes within the organisation such the ISO 9001: ZOOO standard for sUai;ty management. Others such as National QuaLty A w d often referred to ar; business excellence models (BEM) have a broader focus and uy to encompass all aspects of an organisation. All of these models address the main aspects of performance management: performance measurernent and performance improvement.

1.1.1.1 ISO 9000: 2000 Standards for Quli;ty Management

The ISO 9000 series of @ty management syste.cn standards is an international set of nanduds that provide the minimum requkements for an organisation's quality management system. The core standard of the series, ISO 9001, addresses the creation and implementation of a quaiity policy, the standardisation of procedures, the identification and elimination of defects, cor-ve and preventive action, and the management review of the quality management systea The standard is process onenteci, anu at customer satisfaction asniance, and focuses an organisation's attention on the effectiveness of its quaiiy management sysrem. It was conceived as a set of essential requirements for building a qualiy management synem that fits the company's ne& in relation to its products, services and customers.

1.1.1 -2 National Quaiity Awards

Q d y awards are models for business excellence. These models consist of viteria to which organisations can compare their activities and results. They have been developed based on the p ~ a p l e s of Total QwLty Management FQM). TQM is a quality-oried approach chat consisu of applymg quality management techniques t h r e o u t the organisation. The evhtion criteria provide puideluies to organisations to measure their progress in these efforts.

1.1.1.3 Integration of ISO 9001 and the Business Exceknce Models

Bo& the ISO 9000 series and the quality mat& have been adopted by orgaaisations to measure and improve perfomiuice. Many oqpisations wonder whether one mode1 is better than another, and whether the choice of model should depend on the type of organisation. Many authors have mggesteci that both mo& are important to an organisation (van der W d e et ai, 2000; Dale, 1999; Karapetrovic and Wdborn, 2lB). The ISO 9001 standard is seen as providing the minimum reS;rements for a &ty management syaem or the basics to stan the joumey towards orgauisational exceilence. The quality awardr, provide guidance for the n a sep on this joumq..

Combining these modeis would provide an integrared set of criteria that codd help an organisation transition smooddy from its quaity management system t o w d the use of the business exceilence modek for improvernent. There are however, many differences between these models and as a resuh, they cannot simpiy be cur and pasteci together (Dale, 1999).

1.1.2 Performance Measwernent

To meet a company's organisational goals, performance measurement must be used to evaluate, control and improve organisational processes (Ghalayini and Noble, 1996). This process is used to interpret and descnbe quantitatively the criteria used to mesure the effectiveness of the organisation.

As noted previously, performance measurement can be defmed in terms of the rwo fundamental dimensions of performance. Performance measurement is thus the process of quanufyuig the efficiency and effectiveness of an action (Neely et al, 1995). ISO 9000 (2000) defmes effciency as the relationship bmeen results achieved and resources used and effecriveness as the extent to which planned aaivities are realised and planned results acheved

Three main performance mevurcment methods are used byo+tions today: self- assessment, auditing and renilr-based performculce rneasurement.

As organisations srrive to implement perfomunce management models, there is a redting need to meanire progress and improvemenc of the impIementation efforts. Self-assessrnent involves the regular assessment and monitoring of organisational activities to determine what is working well, what needs to be improved, and what is missing (Dale and Bunney, 1999). Instead of compliance with the criteria of the business excelience model, self-assessment idendes an organisation's strengths and opportunities for improvement in each area of a predefmed set of criteria. Self-assessrnenu ask "how doesthe organisation meet the criteria?" and whether this approach is used consistendy (Le. well deployed) throughout the enterprise.

Self-assessrnent using am-ard models is focused on finding impmvement opportuniries and new ways in which to drive the organisation down the road of business excellence (van der Weile et al., 1995).

The performance meanirement merhod used to evaiuate an organisation's qUa;ty management system is the quaiity audit. The audit is used to evaluate the compliance of the system widi the criteria of the ISO 9001 standard. The outcome is either compliance or non-cornpliance. Audits are designed to provide independent, objective and documenteci evaluation of the evidence that the quality system &S.

Quaity au& are used to measure the effectveness of an organisation's quahqr system against the selected ISO 9000 model. Audits do not however, meanire the efiaency of the system and therefore miss one essentd aspect of perfomance.

The audits used with ISO 9000 series registration look for noncornpliance and assess whether the quJiry mern and its undeliying procedures are king followed. In other words, +ty audits ask 'if the organisation meeu the deria", wheeas self-assessrnena ask 'how, and how well, does the organisation meet the criteria".

1.1.2.3 Result-based performance measurement

Result-based performance measurernent is another method organisations use ro meanire the effuency and effectiveness of their processes. This involves the collection of information and data to analyse process performance uid/or input and output characteristics (ISO 9000: 2000). To do this, companies design or adopt performance measures that ~rovi& valuable information about the current performance lwels of organisational activities. Performance measwes are meuics used to quanafv performance.

The set of performance measures used by an organisation fomis the performance measurement system. Firms m m carefully select these m e m e s to provide a view of key performance areas to control and improve performance lwels. It is the seleaion of this set of meanires that has proved chailenging.

1.2 Performance Management in R&D

Research and development (R&D) is an area in which there is much variability and uncenainty. The ability to innitute systematic decision-making continuous improvement, experimentation with new ideas, and tearnwork are cntical elements of the TQM philosophy that have been found to be important for a success ful RBrD work environment (Gamin, 1993, Kiella and Golhar, 1997). This area of research however has been found to be weak as, for the most part, the lirerature deals with the manufamiring and service sectors.

Due to the l w tangibildy and repetiuon found in R m &pmnents, manufamiring-based quality practices when applied to R&D my prove dislsrrorrr (Kumar and Boyle, 2001). There are several issues, specific to an R&D organisation, t&at shoulcf be considered.

Individuai achievement, as opposeci to teamwork, has been recognised and awarded in the R&D envkonments fostering a very inciividualiswc workethic. The goals and objectives of the R&D funaion are often emphasised over the o v d company goals, leadhg to a system rhat is not f d y conducive to the achievement of these organisational goals. In todn/s competitive marketplace, companies are faced with the prospect of introducing new products at a fnghtening Pace in order to survive. In a shon-sighted effort to remain competitive, companies reduce the number of resources avaiiable. The R&D department is often the fim target. The expectation is that researchers will continue to perform at the same level with fewer resources. W1th increased cornpetition, organisations must recognise that R8rD/new product development is one of the moa important sources of competitive advanrage for a f m aayawama and Pearson, 200 1). The emergence of new technology gready impacts the R8d) environment. R%D mus view technology and scientific advances as tools to assin the organisation in meeting company goals (McLaughhn, 1995). Its responsiveness to and influence on changing customer needs musr drive the R8rD organisation.

The company used as a case study (case mi+ organisation) for the research in this thesis is very mu& f a e d on its research and development efforts to maintain its competirive position in the marketplace. Many of the issues lined above apply to the R&D departments in this organisation. The n a section provides an overview of the case study organisation.

1.3 Case Study Organisation (CSO) The companyused for this work, which we wiU caiI the case study organisation (CSO) is a Cinadian hrgh technology company which desigm, manufactures and markets eleamnic components, p@ &con integrated circuits (ICs) and thick-film hybrid circuits, for specialised applications.

The organisation has rwo faciliaes with total plant space of 70,000 square feet, encompassing all aspects of integrated circuit development, muiufacnviag and marketing. Revenue exceeds f 107 million per year. The CS0 employs ahost 500 people.

The company bas recendy reorganised into rhree divisions. The divisions are based on produa families and each indu&s marketin& sales, R&D, and manufacturing functions.

The CSO recognises that in today's fast-changing economy; initiative and ingenuity are essenal elements of success. In 2000, it renewed its focus on RSrD, ramping up spending to approximately 17 percent of des.

The organisation is dedicated to quality. To ennue hi& quality produas and services, the organisation's Quality Program is registered to ISO-900 1-94 and is constantiy evaluated through interna and extemal audits. The quai~ty system is currendy being updated to meet the ISO 900 1: 2000 standard for quality management.

W e the quality synem is being rnaitained in accordance with the ISO 9001-94 standard, the CS0 is aware that these efforts are no longer adequate to maintain their cornpetitive advantage. The company needs to continue its quality journey and expand its continuous improvement efforts. Several National Quality A . suggest cnteria that should move the CS0 into this nez phase of excellence.

1.4 Organisation of the Thesis

The remainder of this thesis is organised as follows.

Chapter Two is a nwqr of existing iitennire to develop a background for the problems addressed in this thesis. These top& indude:

Performance Management

Performance Management in R&D Issues Uniqye to R&D ISO 9001 in R&D

It dso indudes an o v e ~ e w of the motivation for and objectives of the research in this thesis.

Chapter Three describes the development of an integrated model for performance management based on the ISO 9001: 2000 Standard for QwLty Management and severai business exceilence models.

Chapter Four subsequendy reports on a pilot self-assessrnent performed in a business division at the case study organisation. This self-assessment was conducteci against the proposed model for performance management.

Chapter Five compares diree me&& of perfomance measurement used by the CSO. These include the self-assessment, the p h t y audithg prognm, and the result-based performance measurement system.

Chapter Six describes the modification of the OPIM to be more appropriate for use in an R&D environment.

Chapter Seven condudes the thesis with a nimmary of r e d a and convibutions of the work. The scope for htrther research is also discussed.

2.0 Literature Review 2.1 Introduction

A nwqr of existing literature has been conducted to review the foliowing aspects of performance management:

the main elemenu of performance management iaduding mewrement and improvemenr;

existing frarneworks and modeis for organisationai performance management; the integdon of the minimum requirements for a quality management synem with die cntexia frorn the more holinic national @ty awards;

three organisational performance measurement methob: self-assessment, audiring, and redt-based performance measurement; performance management in a research and devdopment environment;

Performance Management

Success of an organisation's business depends on its ability to set svafegy and objectives and then plan for the resources and activities necessary to achieve them To ensure that these pluuied activities acnially occur and lead to the fulfhent of the set objectives, the organisation needs to msnage and improve its performance. Perfomiance management is "the process by which the Company manages its performance in line wirh irs corponte and functional strategies and objectivesn (Bititci et al., 1997). Performance management is essentiai to the successful operation of the enterprise. It has become a key business process. The performance management process is a dosed loop deployment and feedback ryaem that sans with the company's vision, broken down into business objectives and strategic goals. Action plans are created based on the achievement of these goals and objectives. To monitor the progress towuds the accompiishment of these goals and objectives, performance measurement is used to collect information, indicating where the nirrent performance gaps exist. This information is then fed into the performance improvement

process, which narrows the perfomunce gaps and then feeds information back into the process. In SV, the main elements of performance management are:

establishment of goals and objectives pertonnance measurement

performance Unprovernent

These interdependent processes, hctioning hannoniousiy, usix~g various resources to achieve goals related to the effiaency and effeaiveness of organisational processes, make up the performance management system. (Karapetrovic and Wi11born, 1998A)

There are numerous rnodels for performance management. The next section reviews several of these.

2.2.1 Models for Performance Management

This section outlines the frameworks and models used by organisations today to design, implement, maintain, and improve their performance management systems. These range from models of the basic requirements for a quaRy management system such as the ISO 9000 standard for q d t y management to more holistic models for business excellence. The latter includes the Malcolm Baldnge National Q d t y Awad, the European Q d r y Award, and the Deming Prize.

2.2.1.1 ISO 9000: 2000 Standard for Quality Management

Customen in today's marketplace require assurance of the quaiity of the products or services that they are buying. To provide this assurance, organisations look to the ISO 9000 series of standards for q d c y management to provide guiciance in the planning, implementation and maintenance of an appropriate quality system.

A @ty system is a set of interdependent processes tbat h & o n hamoniody, using various resources, to achieve the objectives relateci to quality (Karapeuovic and Wiibom, 1998A). The quai~ty qmem is a sub-system of the business system of an organisation.

The ISO 9000 senes of standards was developed in 1987 as a set of models that stipdated the requirements upon which an e x t e d pany could assess an organisation's quality system. The senes consisted of guidance nandvds and conformance standards. The guidance standards ISO 8402, ISO 9000, and ISO 9004, provideci interpretations for using the conforniance standards. The conformance standards ISO 9001, ISO 9002, and ISO 9003 represented three distinct f o m of funaional capability suitable for extemai qyality assurance purposes. Companies applied the applicable standard to their organisation to assure their customers of the @ty of their products and senices and to make their quality efforts more uaasparent.

The original ISO 9000 senes was revised in 1994. The ISO 9001 standard in this version of the model consisted of 20 elements that addressed all aspects of a q d t y srjem. This sysem induded the organisation, allocation of responsibilities, procedures, processes, and resources that joindy led to the provision of goods and seMces in accordance with the firrn's quality policy and objectives (PG, 1995).

The standards emphasised the asniance of quaiity of products and services through: clarification of management poiicies and cornmiunent identifilcation of roles, responsi bility and authority (Elmuti, 1996) establishment of clear instructions to ali personnel affecting qualiry development of precise procedures and instructions in al1 areas of operationai activity to enwe consistenq and uniformity (kadi et ai., 1996)

This model has been used extensively by organisations 1 over the world since its incepuon. Today, over 400,000 companies world-wide are registered. There have been however, severai criticisms made of the model:

tao much emphvis is piaced on documentation, creating bureauctacy in convol rnechanisms and bodenecks when documents need to be c h g e d or updated (Karapeuovk, 1999; Dale, 1999) la& of emphasis on impmvement (Chin et al., 1995; Pun, 1998; Najmi and Kehoe, 2000) la& of a suong focus on nistomer satisfaction @odinson, 1991) frequendy mistaken as a guarantee for produa quahty (Bum, 1990)

In December 20d0, the ISO 9000 senes was updated for the second time. The 1994 version, which emphasised +ty assurance, has now been replaced by ISO 9001:2000 that was developed to assis organisations implement and operate effective quality management systems. The sUa;ty asnuance standard provided confidence that the requirements for quaiity will be met (Karapetrovic and Wilibom, 1998A) through quality planning and conuol. The new series adds the process of qwLty impmvement into a broader model emphasising quality management. Q d t y management is the combination of quality planning, q d t y conuol, and quaiity impmvement. This new emphasis on improvement renilted in a section of the ISO 9001 standard devoted to measurement, an+ and improvemenr processes.

The changes manifest themselves in the underiymg p ~ c i p l e s of the model. Ir is based on eight q d t y management principles.

1. Customer focused organisation 2. Leadership 3. Involvement of people 4. Process approach S. System approach to management 6. Continual impmvement 7. F a d approach to decision making 8. M u e beneficial supplier relationships

By connecting the prinaples of qu+ management to organisational processes, the 2000 version of ISO 9 provides a greater orientation tawvds continual improvement and customer satisfaction, thus widening the scope and the use of the standard

The ISO 9000 senes now consists of a pair of quality management system standards: ISO 9001 and ISO 9004.

ISOSM)I ISO 9001 s p d e s requiremerits for a qu?lity managrment system that c m be used for infernal application by oqpnktions, or for cdca t i on , or for contracnui purposes. It focuses on the effectiveness of the qu;Jity management system in meeting customer qukments. (ISO 9004:2000)

ISO 9004 gives guidance on a wider range of objectives of a qu;ility management system than does ISO 9001, particulariy for the continuai impmvement of an organisation's o v d performance and efficiency, as wd as its effectiveness. ISO 9004 is recommended as a guide for o ~ a t i o n s whose top management wishes to move beyond the requirements of ISO 9001 in punuit of continual impmvement of performance. However, it is not intendecl for certification or for c o n d purposes. (ISO 9004:2000)

These IWO standards can be used alone or a complementaxy models for an organisation's quality management system ISO 9001 sets the essenrial requirernents and ISO 9004 shows the way for future developments. To maintain registration status, an organisation mus perform intemal and extemal audits against the ISO 9001 model to show that it has met these requirements. It can however, enhance the audit process by performing self- assessments againn the ISO 9004 model. This process can help identify strengths and areas for irnprovement in the quaiity management system in texms of its efficiency as well as its effectiveness. If the issues identified in the self-assessrnent are addresseci, the results of the next quality audit should show irnprovement.

While the ISO 9004 standard is a model for improving the efficiency and effectiveness of the quality management system, other models have been ke loped that address an even broader set of organisationai activities. These are the National QuaLty Awarb or Business Excellence Models (BEM) as they are often referred to.

2.2.1.2 National Quality Awardc

QuaLty awards are modeis of business excellence consking of uitexia to whidi organisations cm compare their activities and resuits. This compvison process, r e f e d to as self-assessment, involves the regular assessrnent and monitoring of organisational activiries (Dale and Bunney, 1999). hstead of cornpliance with the criteria of a business excellence model (BEM), these assessments idenrify an organisation's suengrhs, weaknesses, and oppormnities for impravement in each area of the criteria.

Three of the most pop& q d t y awards are the Malcolm Baldnge National Qua;ty Award, the European Qua;ty Award and the Deming Prize. Each of these a w d has its own focus, famework, mteria and scoring method

This award is named for Malcolm Baldrige, who served as Secretary of Commerce from 198 1 und 1987. His managerial excellence conuibuted to long-term irnprovement in e fficiency and effectiveness of goverment (NIST, 200 1)

Organisations that aim at k ing world-class focus on insrilling core values such as good leadership, amorner focus, respect for employees, and continuous improvement (Pannirselvam and Ferguson, 2001). These form the basis of the MBNQAaiteria. The model embodies these essential values in a framework of seven main categones. 1. Leadership 2. Strategic P l k g 3. Customer and Market Focus 4. Information and Anaiysis 5. Human Resource Focus 6. Process Management 7. Business Results

There are two key assumptions thax devin the modeL The fim is that the leadership provided by top management is the primvy driver of the business. Top management m e s organisational values and goals and direcrs orp.aiutional improvement. The second is that the basic goal of the slUi;ty process is the delivery of mer-impruving q d t y and d u e to customers (Malcolm Baldnge National Quatty Awad, 2000). Figure 2-1 provides the framework comecting and integrating the categories.

4 Information and Adysis

Organisations are evduated against a given set of criteria and a maximum total of 1000 points are allocated among seven award criteria Each critenon curies a different number of points in accordance with its relative value within the a w d

The European Quality Award (EQM) was introduced in 1991 by the European Foundation for Quality Management (EFQM).

The EFQM Excellence moQl is based on a set of fundamental concepts that formulare the definition of excellence (European Quality Award, 1999). These are:

results orientation amorner focus leadership and consistency of purpose management by processes and facrs people dwelopment & involvement continuous leaming innovation & improvement partnership development public responsibility

The mode1 incorporates these Fundamend Concepts in a set of nine criteria; five of which are 'enablers', four of which are 'redts'. The 'enablers' criteria address what an organisation does while the 'renilrs' cover what an organiution achieves. Figure 2-2 ilhwates the model with the 'enablers' and 'results'.

1 Enablers Results

Leadership Processes

& Resources u=LJ People

Key Performance

R e d t s

Innovation and Leaming I

organisations are evaluated agaian a given set of criteria and a maximum total of 1000 points are allocated among nine awd criteria. Each mterion carries ii different number of points in accordance 4 t h its relative value withiu the a w d

The Deming Prize was established, in honour of Dr. W. Edwards Deming, by the Board of Directon of the Japanese Union of Saentists and Engineers W E ) in 1951. Dr. Deming, one of the fathen of quaiity, is best known for his work in Japan, d e r e from 1950 onwad, he taught top management and engineen' methob for the management of qualiry. The impact of Dr. Deming's teachings on American manufacturing and semice organisations has been profound

The orignal objective of this prize was to assess a company's use and application of statisticd method (Dale and Bunney, 1999).

The prize consins of a cheddisr with ten major categories. These are: 1. Policies 2. The organisation and its operation 3. Assembhg and disserninating information 4. Standardisation 5. Human resources 6. Quaiiry asnirance 7. Mallitenance 8. Improvement 9. Effects 10. Future plans

Each pricnary category has six sub-categories (except for q d t y assurance, which has twelve). The cheddist expiiady identifies the factors and procedures that constitute the Company-Wide Q d t y Convol and Totai QwLty Control (CWQCrTQC) process.

Because it names specific techniques and appm&es, the ch& Y inherendy presuiptive. There are no pre-designateci points allocarad to the individd sukategories.

The Dmimg PNc ir not b d on an udaiying fmmework linking concepts, aaiwies, processes and resuits together. Furthemiore!, it does not assume an undcrtying causality. It si.& ~rovides a lisr of desirable or good gu;ility-orieted management pncticcs. Its focus is on poliaes and plans; implement;iOon of p h ; information collection, a d + ;md control; resulrs flowing frorn the implemenmtion of poliaes and thtir effects; and fuwc improverncnt p h .

(Ghobadian and Woo, 1994)

2.2.1.3 Comparing the Models

Each of these rnodels har its own focus, scope, approach to evaluarion, and improvement strate W. Table 2- 1 illusvates these major differences.

Responsibility for F spnwlists and top management Idmufication of conformance and non- conformances, resulting in a pasdfd verdia

ISO 9000 Conformanu (CO p r o c h and CO speafi&ons) Qu&y assurance

Identification of the existence of -ch dement through an auditing process

MBNQA Iniprovan~~t (of rmthods and of o v e d business d u ) ExeCUfive

EQA lmprovanenc (of mcthods a d of o v d business r d t s ) ExCCutive

nruigths and oppominiria for improvemcnt, and scom i n d i h g the m;inuity of the

Deming Rizc Statisud Mcrhods (prevaition of @ty ~ m b l m ) Executive

svcngths uid oppomuiitics for improvanent, and scores indiaring the cnanuity of the

Design and production processes, and dimdy- associateci support activities

managunmt v a n nie entire management synem, includlig ludcrstiip, pluuung and the use of infornucion and meuurunuits, the dorelopmenr and management of people, the mcrhods used for understanding clrstomcr and market rtquirrmenrs, and the management of kcy inuiness proceSKs.

managemcnt syscem The entire managanent system, induding leadership, people, policy and nntegv, puuiuships, mourccs, proceses, and the management of key business processes

Process orientcd nrong emphasis on proces management

Giteria confmed to the application of p r o ~ e ~ &, statisticd methoch and q d t y c i d a

1 ISO 9000 Fnmcwodc I Baseci on the vroccss

nonconformanccs and to pxwent m>ccurrrnce of pmblans

MBNQA B a 4 on an undcrjuig fnmework linlunp conceps, mkkks, processes and rrnihs togerher

Appendix D provides a detailed cornpuison of the elemems covered by the ISO 9001

EQA Based on an mdatying fnmervorklinlung concepts, &es, proceses and re& togtthff

CoaunlKnlS ilxpvmmfuung PIAN-DO- CHECK-ACI' cyde.

standard, the MBNQA, the EQA and the Deming Prize, in each of their cntena Table 2-2

DrmingPrizt Does not unime anun- u d t y , u m p I y provides a list of &sirable or good quality-oricnted management pncrices ( G h o b a b and Woo, 1996) Quality lmpmvemcnt t h r w g h d d conml

presents an overview of the svengths and weaknesses of each model.

Model

1- 9001

MBNQA

Stmlgths M i n focus is on the processes wnhia the quality management system Quaiity system model is prescriptive and therefore the way forward is clear and unambiguous End point (achieving registration) is weii defineci and externay valiated (Najmi and Kehoe, 2000) Constinites an integrai pan of an organisation's o v e d management systern (Pun et ai, 1999) Addresses the identification and provision of resources with a focus on idkanmm, the work environment and the conml of documents Forces an organisation to describe its key processes and make thern more transparent (van der Wde et al., 2 0 )

Broad model addressing an organisation's o v e d activities, not oniy those relateci to the quality management system Asks how the organisation meeu the criteria Focused on cunomer management

~

--

we;ikncsscs Weak in the area of humui

Provides ody the minimum requirements for the quaiity management system Does not specificafy address technology or financiai resources Primanlyadress iimited areas of the enabler si& of the BEM's Little emphasis on areas that directly impact on business or organisational effectiveness (Poner and Tanner, 1996) Process criteria goes into less depth than the ISO 9001 stanard Does not spetlftcalty ddress the use of resources in its cnteria

s t m l g t h s B d modei ;iddrcssing an orginisuion's o v d activitics, not ody those r c i a d to the qu;ility management sysrem Asks h m the oqpimion meets the criteria Addresses the efficient and effective use of resourres within the o ~ s i o n Focused on the relations with the cornmunity, and customer's and ernployee's satisfaaion

Focused on q d t y control Focuseci on compuiy wide qu?lay efforts, conMwus improvement Provides a List of desirable or good qu;ilisr- onented management pnctices

Weaknesscs Process critaia ~ o e s into less dephrbrnthefs09001 stvldvd Does not &as how the orguiis;ition manages customer rehionships and satisfacrion or how it contribuus to socieiy and miaimises environmentai impact Gter ia are confined to the application of process an&&, mtisticd methob and q d t y d e s Crimia such as Company poiicy and p h m g d t s , or future p h are p- concenieci with qulity wmce activiries and q d t y resuits Not b d o n a n u n d e r j i n g h e w o r k linking concepts, aaivities, processes and d f s t ogether

The major points arisiig from this cornparison process are: The ISO 9000 standard provides oniy the minimum requkmeno for the q d t y management sysrem but is seen as the foundation of an organisation's total &ty efforts.

The MBNQA is a broad model addressing an organisation's overaii activities, not ody those related to the quality management system. It does not specifiulh/ address the organisation's use of resoumes.

The EQA is also a broad model for business excelience. Ir does not address customer management in the same detail as the MBNQA. The Deming PNe is a model focused on quality conaol. The criteria is not as broad as those in the MBNQA or the EQA but provides some important pieces conceming the use of quaiity control in a company's continuous impmvement efforts.

Table 2-3 provides a cornparison of the major categories addressed by Bdi of the qudity award models as weli as th& respective point values.

MBNQA 1 I (%)

Ladership 12.5 Leadership 10

Strategic Planning Customer and Market Focus Information and

Human Resource Focus

1 1

8.5 Policy and Stntegy 8

8.5 People 9 1

Partnenhips and 9 Resources

Process 8.5 Processes 14 Manaeement

Business Results 7 Custorner Resuits jf society People resuits Resulu Key Perfomiance Results

Deming Rue

Orpiution and iu '1 Assembling and

information Qu;ility-= Miatenuice 10 Standardisation 10

Irnprovement Future Plans

Ir is evident that each of the awards places emphasis on different areas of their criteria. Both the EQA and the MBNQA however, assign the most points to the Results sections of their model. The Deming Prize does not single this category out as being the most important in rems of its scoring xheme (each is valwd at 10%). The MBNQA assigns 12.5% of its points to Leadership and distributes the ren of its points among Strategic Planning, Cusromer and Market Focus, Infornuon and Analysis, and Human Resource Focus

assigning 8.5% for each. The EQA however, wip ody 10% to Leadership d e givhg Processes 14%. The People category is worth 9%, ody slghrh/ higher thao in the MBNQA.

This cornparison process has rwealed that each of the performance management madels have muiy nrengths. Each one could compensate for aaother's weaknesses. The next section examines, in further detail, the research that has been done conceming their

2.2.1.4 Integration of ISO 9001 and the Business Exceilence Models

The ISO 9001 standard for quality management is seen by many as a requed foundation for a company's @ry and performance improvement efforts (van der Weile et al., 1997, Dde, 1999, Karapmvic and Willborn, 20O1B, Russell, 2000, Meegan and Taylor, 1997). For exampie, van der Weile et al (1997) make the following comment:

Continuous improvment ody m;ikes sense if an organisation h m what is going on in reiation to the processes, which are undedying the things that need to be improved. The ISO 9000 series forces an organisation to desaibe the key processes and make them more transparent.

Once the requirements for rhis standard have been met however, companies need to b d d on these foundations to extend the principles learned to ail organisational activities and not just to the activities relating to the quaiity management *en This means irnproving a quality synern beyond the level of simply meeting spec&cations to creation of the proper conditions for business excellence.

The synem required for accreditation WU outline the organisationai structure, responsibilities, procedures, processes, and resources needed to knplement quaiity management. The m i t i o n zone [beyond ISO 90001 begins then at the intersection b e e n the operationai and management infrastnrctures (Meegan, 1997)

The transition from quaiity management to business excellence need not involve leaving ISO 9000 behind to move on to somRhing supenor (Meegan, 1997). To facilitate the movement from ISO 9001 quaiity management to the o v e d business excelience embodied in the quality awards, researdien niggest that these models be integrated (Mann and Voss, 2000, Tonk, 2000, Dale, 1999, van der Wkle et al., 2000, Pun et al., 1999).

Pun et al. (1999), describe a self-assessed qual~ty management sysrem using the framework of the Baldnge M d for the integrarion of ISO 9000: 1994, ISO 14000, and the Baldrige criteria. In a case stuciy, the assessrnent against rhis f r a m e d d l consisted of the regukr auditkg and performance assessments performed by the organisation.

When there is a co11ection of afk systems or stan- fiam different ueu, efficiency is difficult and misconcepuoas and coafurion often occur. It is &us ben to elimbae possible confusion and sub-optimisation from the outset by establishing and maintaining a t o d systems approach. (Puri et 4 1999)

Finai conclusions from Sun (2000), suggea that TQM and ISO 9000 srandards musr be completely and systematically implemented and in tegrad Researchers must detemine a method of c o m b i i g ISO 9000 and TQM, and bridging the gap bnween the two.

Mann and Voss (2000) present an innovative approach used by one company IO integrare its ISO 9000-certified management system with the Baldrige model. The company concemed developed its ISO 9000 qmem to address al l elements of the Baldnge criteria. Of parti& note is its process improvement approach that prioritises improvemenr projects based on their expected impact on the company's Baldnge score.

Companies, who are ar present working for an "integrated quality management sysremw where ISO is a major contributor, go beyond the requirements of the standard ro M e r irnprove the performance of the organisation in various dimensions. The ISO standard is thus the comerstone of TQM and, as such, presents both oppotrunities and challenges.

The challenges involved in integrating ISO 9000 and TQM are well reviewed in the literantre. We have seen that ISO 9000 has been advocated as the fxst step towards total quality management. The ISO 9000 series and the excellence models clearly have different goals and perspectives and define total quai~ty management at different levels of maturity (van der Wiele er ai., 2000). It is obvious then that the uiteria from the ISO 9000 series cannot simply be incorporateci into a model for business excelience. The criteria represented in the reference models are different, ISO 9000 representing the minimum requirements and the quaiity award models king more holisric paie, 1999). If rhis were to o c w , it would

lose much of its potency in the building of the foundaton of an organisation's TQM activities (Dale, 1999).

The quaiity a d models and the ISO 9001 standard use self-wessment and quality auditing respectively for evaluation of rhe otganisauon against them. To integrate the models would require the integration of these measurement methods. Karapetrovic and Wibom (2001B) explore the integration of quality audits and seif-assessment processes.

Another difficulty in integrating the ISO 9000 and the @ty award modeis is the different 'scoring" schernes used by eadi. For example, when Tonk () describes the integration of the MBNQA and the ISO 9000 system, he suggesu:

The Bddrige scoring system uses percenrages, w h m s the ISO 9000 systern uses, in effect, a pus/fd (conform;ince/nonconformuice) system Decisions need to be made as to whether to retain the MBNQA percenage scoring sysrem and if so what scoring levels will be reqwred in each of the uiterion in the new model.

2.2.2 Performance Measurement

Performance rneaswement is the process of coileccing data pertaining to al1 aspects of the company's activiues. This data can then be used to help control and correct waning performance areas and to set new targets for improved performance.

According to Sinclair and Zain (1999, rhis meanvernent is exuemely important to organisations for several reasons:

Meanires can be analysed to enable appropriate decision making. Measurement provides feedback and reinforces behaviour. Measurement is an integral part of continuous impmvement; "if yai m o t meanve an activity, you cannot irnprove it". Measwement "helps an organisation direct its scarce resources to the mon aMcnve impmvement opportunities*.

It has been shown that perfo~llil~lce improves if individuas are givea targets, and is . .

maxunised if targets are seen as cbillenging but achievable. Measurement is impoxtant in the maintenance of longterm focus.

Measurement aiso plays an important role in quality and producOvYy improvement (Oadand, 1993). It:

ensures that customer requirrments have been met provides standards for establishiog cornparisons provides visibility and a scoreboard for ~eople to monitor th& own performance levels highlighrs quality problems and deremines which areas require priority attention gives an indication of the costs of poor q d t y justifies the use of resources provides feedback for driving the improvement effort

Each of the National QluLty Awub provides guidelines for perfonning organisational self- assessments agalin the given set of criteria for business excellence. MBNQA provides a Guide to Self-assessrnent and Action. The EQA provides detailed guidance to organisations and suggests a self-assessrnent approach depending on the quaiity rnaturity of the organisation.

These organisations usually perform self-assessrnent in one of rhree ways (van der Weile et a., 1999):

taking the a d guideha and foiiowing these for intemal use in the sarne way as prescribed in the respective guidance booklets for those organisations who are putting forward a formal application for the chosen award adjusting the cnteria and/or the scoring to fit the specifc situation and goals of the organisation

speQfying the parh and seps to be t&n h m the present situation ro the end goal.

Conti (1993) suggescs that organisations should use already existing data in the assessment process and as additional information for the goal setting process. Some examples of this data are:

cunomer survgs, amorner cornplaint statistics, marketing strategies employee wqs, work safety statistics, illaess rates, absenteeism and fluctuation, human resources development plans processes e.g. processing Ume or process liability, ~rojects and gained improvements producr e.g. e m r rate. life duration and failure rates fmancial e.g. trends conceming profits, sales volume, renim on investment (ROI), qwlity coas &ink and Schmidt, 1998)

2.2.2.1.1 Self-Assessrnent Process

The self-assessrnent process usually follows the Deming PLAN-DO-CHECK-ACT qde. Figure 2-3 has been adopted from the EFQM (1995). It provides an o v e ~ m of the self- assessment process.

Wbde the unciersiag pmcess re& the same, the ISO 9004 standard, the MBNQA and the EQA each has its own m a for conducOng the self-assessment.

The assessment method suggested in the ISO 9004 standard involves the evaluation of the mamrity of the @ty management synem for each major dause in ISO 9004 on a scale ranghg from 1 (no formal system) to 5 (best-inclas performance). The standard provides exvoples of typid questions that cm be asked duriag the self-assessment. It is suggested that self-assessment can be used in a flexible way according to the needs of the organisation. Two recommended m d o d s are to:

perfoxm the self-assessrnent on an individual basis for all or part of the quality management system and then to pursue improvement. have a cross-function group of people perfonn self-assessment on ail or part of the quality management system, followed by group review and an*, then consensus building, to detemilie improvement prioriries and action plans.

MBNQA The Baldrige National Qwltty Progra. provides a Gui& to Self-Assesunent and Action. This document ourlines ten seps ro conducting a self-assessment. 1. Idenufy the boundaries of the organisation to be assessed.

-7 2. Decide on a format for the assessment and action plan. I 3. Write the business/organisaon oveMew

l - 4. Select seven champions and teams, one for each criteria categoty 5. Practice self-assessrnent techniques with the seven category 6. Ctegory teams prepare a response for their assigned teams 7. Share responses among te- and fiiulise the fmdings J 8. Assess the organisation's strengths and o p p o d t i e s for improvement e-4-I

u 9. Develop and implement an action plan for improvement 1 - 10. Evaluate and improve the self-assessrnent and action process JLl .~m 1

EQA According to the EFQM, selecton among assesmient methods should be dependent on the quality ma- of the organisation. Table 2-4 presenu self-wessment approaches correspondmg to the maturity of the oqpnkation and the desired effort level.

Facihateci workshop

Award simulation

Pilot a w d simulation Pro-forma and wofkshop Verv detaleci questionnaire

This approach involves the creation of a questionnaire used to gather infomtion about the perceptions of people within the organisation. Some questionnaires can consisr of simple y e h o questions. Othen provide a set of possible a m e r s nich as A-Fullyachiwed, B- Considerable progress, C-Some progress, or D-Not started. These questionnaires are dinnbuted and used alone, or as nippon for more elaborate self-assessment approaches.

In this approach, an achievement ma& is developed For each category of the award, statements perraliing to possible achievernents by the organisation are set on a scaie from 1 (minimum achievement) to 10 (greatest achievement). This is used as a basis for management discussion and sening objectives for improvement.

Pro-forma Here pro-formas are created for each sub-category. The description of the critexia in the sub-category is printed at the top of the page with areas to address beneath it. The assessrnent entails f&g in suengths, areas for improvement, and evidence collected on the pro-forma itself.

Woikshor> The management team is responsible for gathering dam from their unit and presenting the results to their p e r s in a workshop environment.

Thic appmach is effectively a simulation of entering for the award. The unit undenaking the self-assessrnent wntes a full submission document. A team of trained assessors then evduates this report.

The EFQM dso indudes in the EQA document, a figure that i i l m t e d the relationship between the rigour of the different approaches and the quaiity of data captured. (See Figure

Process Rigour 4

Low

Q r n h u t i

Pro- f o n c3

Based on Opinion

Table 2-5 presents the evduation and scoring methods used by ach modeL

Mode1 ISO 9004

~ a&le S y s t d c pmess-bued appmpC4 Fufy =%e of system~tlc rmprovement , &ta avaiiable on c o n f o m c e to objectives and existence of improvement vends

Evaluation and Scoring Evalu?tes the m;uunty of the qu;rlity managtznenr system for cach major ciause in ISO 9009 on a s d e rianging from 1 (no formai system) to 5 (best-inlus performuice).

hpmvement process in use; good resuits and susuineci improvement

I I trends

r Details 1

2

100%. Evaluates each elexnent in the award criteria based on

No systematic approach cvident, no results, poor d t s or unpredimbIe d t s Problem or systemaric appfo;idr; minimum data on improvement resuits

Evaiuates each element in the a d criteria bved on the appmach, the deplayment of appmch, and resuits re?lised These are evaiuated on a d e from 0% to

these elemenu. These are evaiuated on a s d e fkm OYo to 100%.

5

the approach, the depIoyment of approach, the resuits r e d i d , and the assessrnent and review (RADAR) of

I

Cfiecklist is evaiuatd Each category is worth the same.

Strongiy integrated impmvement process; best-in&s results dernonstrateci

See Table 2-7 for details.

See Table 2-6 for details

Table 2-6 desaibes the evaluation dimensions used by the EQA.

Results r-- Assessrnent & Review r

Embodies evduation, improvemendleaming

1s b d on diable inforrmtion and &ta

Dcsaiptim Mallod(s) d to ;iddress item requvcmcnu

Alignmeat with o ~ t i o d needs Eviduice of innovation

Elernmt is cvaiuatcd based on Appmpri?teness of the methods to the rrgUiranmfs Effectivcness of the use of the methods

Exrem CO which a p p r d is applied to 4 the in each item

1 . breacith, and importance of ~our

Use of the approach in addressing item requtements relevant to your organisation Use of the a p p r d by 1 appropriate work units

OutcomesinachieVing the purposes of the item

CuITentperformance Performance relative to appropriate compvisons or bencbmarh

The scope of evidence

Gtpn from measurement and leamhg is / anw and useci KI identify, prioritise, plan

performance impmvements Remilu me;uurement of the effectiveness of

of measurernent, leaming and Unprovernent activities

1 and impIernent improvementr

t h b r o a c h and deplayment is carrieci out Levniag acvities are used to idenufy and share best practice and improvement opportuniues

Table 2-7 illusuates the wduation dimensions used by the MBNQA

I m a c h and Dcployment no systematic approach aident; ando t a l

l eariy stages of a transition from re?cting to problems to generai improvernent orientation major gaps exist in deplayment dut wouid inhibit progress in ?chi+ the prinury

a sound, systematic a p p d , responsive to the primry purposes of the item

I a faa-based improvement process in place in key areas; more emphasis is piaced on improvement than on reaction no major gaps in deployment, though ( someunrmayixineariyrvges

a sound, systermtic approach, responsive to overail purposes of the item

1 a fact-based irnprovernent process is a key management toil; dear evihence of

I refinmient and improved integrauon as a r e d t of improvement @es and adysk approach is well-deploye, with no major gaps; deployrnent may Vary mong some areas or work units

a sound, systematic approach, fully responsive to al1 the requirements of the item

1 a very nrong, fut-based improvement I pm&s is a key managem&t tool; nrong refinement and integrauon - backed by excellent axmlysis approach is f d y deployed without any sipificuit weaknesses or gaps in any ueas

R c d s no resuits or poor results in areas reponed

evfy sages of eveloping trends; some improvements d m eariy good performance levels in a few areas results not r e p o d for mvry to most areas of importance to the cornpuiy's key business requirrments

improvement trends di good performance levels reporteci for m;ury to moa ueu of importince to the company's kqr business fequirements no p a m of adverse trends d m poor performance lweis in areas of importance to the appliant's key business requinmenu some trends and/or current perfommce lwels-evaiuated against relevant cornparisons d m bencbmuks-show areas of svengrh and/or good to very good relative performance levels

current performance is good to excellent in most key ares of importance to the company's key business requirements most improvement trends andlor current performance lwels are sustained muiy to rnost trends and/or current performance levels-evaluated a g a , relevant cornparisons and/or benchmuks- show areas of leadership and very good relative performance lwels current performance is excelient in most ares of impoxtance to the company's key business requirements excellent improvement mds and/or sustained excelent performance in most a r e s

mong evidence of industry and benchmvk leadership dernonsvated in many areas

In self-assessment, once the evduation of each element is complete, the cmmhtive scores are used to calculate a fnal score. In both the EQA and the MBNQk this is a score out of l. These IWO points have k e n distributed among the caregories of the award by the developers of these modeis based on the perceived imponan of each.

Table 2.8 uses the MBNQA categones to illusvate how a final score is calculated. First, each category is evaluated out of 100% according to the process described previously. Nem, each score is calculated based on the total poim value of the categoty and the evaluation v h . For the Leadership category, the evaluation wu 60%, the total point value for the category is 125 so the score for Leadership is 75 (125 x 60%).

In an initial assessment such as this, mon organisations do not score more than 250 out of 1000 points. World class perfoxmance would achieve a score of around 700 points, while a

C;rtegory Leadership Srrategic Phnning Custorner and Market Focus Information and A d y m Human Resource Focus

score of 500 is exception@ good (Public Service Office, 2001)

Evduation 60% 45% 55% 60% 52%

Point Vaiues

85 450 IO00

L

A score of 200 is reporte* typical for an initiai assessment of an organisation at the beglining of a Baldxige-based quality effort (McWaid, and Gale, 1995).

Aau;il Score 75

38.25 46.75

51 43.35

It is important to emphasise though, the importance of improvement over the a d score

M h u m Score 125 85 85 85 85

34 157.5

370.85

Process Management Business Resulfs Totai

achieved in any specific assessment.

40% 35%

Qrulity auditing is another method rhP o e t i o n s un use to meastue their performance. A quality audit is

A systematic, independent, and documenteci proces for ob- audit M d m c e , and waluati~ it objecvely to determine the extent to which agreed aiteria ue fulfilled

(ISO 9000: 2000) Severai elernents are essential to the performa~lce of an effective audit Fint, there is the audit standard. Standards provide guidance on the prinaples of auditing, the management of audit programs, the conduct of a& as weil as the competence of auditors (ISQ 19011: 2002). ISO 1001 1 is the m t standard for @ty management system audi*. A new auditkg standard however, ISO 1901 1, is being drafted to integrate quality and environmental management system au&.

There are three ~ / p e s of audits that c m be p e r f o m d These are first, second and rhird parry audits. First puty audits, o t h e W e known as intemal audits, are performed by the organisation on itself. Second p a q audits are initiated by a customer (die dient) to venfy that the organisation meas their quality requirernents. Third party audits are refemed to as exvinsic audits. These are performed by an outside f m calied a registrar and are prompted by the organisation directiy (Goetsch and Davis, 1998).

Before performing the audit, its scope m m be defmed. This should be based on the objectives or information desired byrhe client and should be communicated to the auditee pnor to the audit (ISO 14010,1995). It is prudent ro do so to ensure that the auditee is prepared wirh necessary documents or objective evidence to demonstrate cornpliance to the cnteria being auditeci.

Audit criteria are the set of policies, procedures or requirements used as a reference (ISO 1901 1,2002). Audit evidence are the records, statements of fact or other information, which

evaluation of the coiiected a d t evidence a g d the audit &ria.

Audits should not be stand-done processes, but part of an overali auditing system (Goetsch and Davis, 1998; Karapetrovic and Wdbom, 2lA). Wdibom and Cheng (1994) suggew thar a badine audit (a more cornprehensive and inteasive audit) establishes the starting effectiveness of the sysrem and t h du+ the eariy pend of implementation, regulu audits should be scheduled at reg& intervals to mainuia the inaeases in effectiveness of the system. As the system matures and the effectiveness stabilises, audits should be scheduied less frequendy.

The execution of any audit indudes sweral steps. ISO 19011 prodes a dugram to illustrate the activities involved in the auditing process (See Figure 2-5)

T In i t ibg the audit Appointhg the audit team leader Defining objectives, scope and criteria Determinhg the feasibility of the audit Estabidmg the audit team Establishing i n i d contan with the auditee

Conduaing document revicw 1 Review relevant management system documents, induding record, and determining their adequacy

w

Prcparing for in-site audit actRritics 1 Preparethe audit p h I / Arrigning woik to the audit team I

Gmducting on-site wdit actinties ConducMgopeningmccting Communication during the audit Roks and responsibilRies of gui& and observen Cdlectiag aud verifying informaion Genvllring audit fin+ Prepuing audits conciusions Conducting closing mecting

Preparing, approving and distributhg the audit rtport

Prepariq the audit repon Approving and distributhg the audit report

I Completing the wdit RRinuigd~cuments F i the audit

I ...-... ---...-...- --- ....

Conducting audit foilow-up

The objectives of a quality audit, as outlined by the ISO IO0 1 1 standard, are to: determine the conformity or nonconformity of the quality system elernents with specified requirements

determine the effeaiveness of the implemented quality v e m in meeting specified quality objectives provide the auditee with an opportunity to improve the @ty systern

meet regulatory requirements and

permit the listing of the audited organisation's quality system in a regiaer

Audits of management sysrems are invaluable in assuring that a system is perfomhg effenively and meeting its objectives. It is also a necessaxy component in the continuous

improvement process. The achievemem of continu ou^ improvement can o d y occur if quality audits are used in a dynamic and proactive rnanner (w;ubom, 1990; Banhelezlly and Zairi, 1994; and Peters, 1998). If organisation use a u d i a only as a tool to verify cornpliance widi agreed standYb wthout dieduog the aptness of the standards thernselves or seeking information about the effectiveness of the q d t y system in meeting objectives (Beeler, 1999), auditiug will not lead to impmvement.

Result-bued perfomunce measurement is a third m n h d for meaniring performance. Redt-based measurement system is an integnl pan of an organisation's performance management system. It is a means of gathering data to support and CO-orciinare the process of making decisions and taking action throughout the organisation (Schallcwyk, 1998)

Organisations, and researchers in the performance management field, have developed many performance mevurement models. These models range from a balanced set of indicators that periodicdy show an organisation how it is performing in various areas of the business, to integrated models that provide real t h e information with respect ro how thqr are performing cmently and forecasts how thq. mry do in the future. As competitiveness increases, organisations require measurement synems that provide not onty up to date performance idonnation but also examine how these meanires interrelate so they can make more informed decisions. Performance measurement systems should be aligned with organisationai goals and objectives. This helps to ensure that the organisation is measuring the efficiency and the effectiveness of the activities that have the greaten effect on the achievement of these goals.

The set of measures selected by a parcicular organisation should provide m e n t information penaining to the health of the organisation and also link direcrty to suategic objectives. Traditional perfomiance meaSuTemenrs systems are based m a d y on f inand performance measures 6.e. retum on invesunent, renun on sdes, productivity and profit per unit

production) that were once sufficient to s u c c e s s ~ express a compmy's perfomunce. However, organisations need more than a badrwvd giance at how w d rhey have done over the past p e n d Lgging metrics, apparent on firunad reports, were the r e d t of past decisions and are not seen as usefd in operational performance asessrnent (Ghalayuii and Noble, 1996). An organisation neeck to see how w d ir is doing now, in t e m of con, t h e , flexibility and quality. Not oniy do they need to k m their current perfomimce but also how thqr CUI improve this perfomiance. Neely (1999) suggests that the mevures in today's Company need to be:

focused on organisational strategy provide data on @y, responsiveness and flexibility encourage managers to se& improvement continually provide information on what cunomers want and how cornpetitors are performiag indicate what would happen in the short r e m and the long term

Selecting a set of measures that will fulfil these requirements can be a daunting task. One method that researchers have used is to i d e n e uiticai performance areas and corresponding meanires to coiiea the important data This data is then used to control and improve performance in these key areas.

It is becoming increasingly important for companies to understand how all areas of their organisation are perforrning. If properly consvucted, performvv~ meanires provide information to management to enable fact-based decision making. They are also important for effective communication. Their use increases constructive problern solving, increases influence, monitors progress, and gives feedback and reinforces behaviour (Sinclair and ZaLi, 1995A). Performance measuremenr helps an organisation allocate scarce resources to processes with weaker perfomiance because it highghts areas that require these resources the most.

If an organisation dwelops performance mevurrs for each process, this may result in a very large lia of measures. The question is, how does one select a few kqr measures that wili

ensure manageable data collection but yet provide a good indication of the naus of the organisation's health.

M q authon have trieci to develop guidelines or approaches that will help in this selection process (Keegan et al., 1989, Fitzgerald et ai., 1991, Kaplan and Norton, 1996, Dixon et al., 1990, Neeiy et al., 1995, Globenon, 1985). To d s e the contributions of these authors, performance measures should:

be linked to strategy stimulate action

support long-terni improvement

emphasise whar is important to the organisation currently cover ali the appropriate elements of perfonnance, not jus the finanaal ones not be in conflict with each other enable cornparison with other organisations in the same busine