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TQM Lecture # 4

The document outlines a 4-level performance measurement framework: 1) Strategy development sets goals and key performance outcomes. 2) Process management uses key performance indicators to measure inputs, processes, and outputs. 3) Individual performance is appraised against personal targets. 4) Performance reviews include internal/external benchmarking and self-assessment to improve performance.

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Dr. Mushtaq Ahmed
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124 views27 pages

TQM Lecture # 4

The document outlines a 4-level performance measurement framework: 1) Strategy development sets goals and key performance outcomes. 2) Process management uses key performance indicators to measure inputs, processes, and outputs. 3) Individual performance is appraised against personal targets. 4) Performance reviews include internal/external benchmarking and self-assessment to improve performance.

Uploaded by

Dr. Mushtaq Ahmed
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Total Quality Management

Lecture # 4

LECTURE BASED ON CHAPTER SEVEN


Performance Measurement Framework

The are four level of the framework in Figure 7.6 are


Level 1: Strategy development and goal deployment leading to
mission/vision, critical success factors and key performance
outcomes (KPOs).
Level 2: Process management and process performance
measurement through key performance indicators (KPIs)
(including input, in-process and output measures, management of
internal and external customer/supplier relationships and the use of
management control systems).
Level 3: Individual performance management and performance
appraisal.
Level 4: Review performance (including internal and external
benchmarking, self assessment against quality award criteria and quality
costing).
Performance Measurement Framework
Level 1 – Strategy development and goal deployment

 The first level of the performance measurement framework is the


development of organizational strategy, and the consequent
deployment of goals throughout the organization.
 Strategy development and goal deployment is clearly the responsibility
of senior management within the organization, although there should
be as much input to the process as possible by employees.
Step 1:
 Develop a mission statement based on recognizing the needs of all
organizational stakeholders, customers, employees, shareholders and
society.
 Based on the mission statement, identify those factors critical to the
success of the organization achieving its stated mission. The CSFs
should represent all the stakeholder groups, customers, employees,
shareholders and society
Level 1 – Strategy development and goal deployment

Step 2:
Define performance measures for each CSF – i.e. key
performance outcomes (KPOs). There may be one or several
KPOs for each CSF. Definition of KPO should include:
 Title of KPO;
 Data used in calculation of KPO;
 Method of calculation of KPO;
 Sources of data used in calculation;
 Proposed measurement frequency;
 Responsibility for the measurement process.
Level 1 – Strategy development and goal deployment

Step 3:
 Set targets for each KPO.
 If KPOs are new, targets should be based on
customer requirements, competitor performance or
known organizational criteria.
 If no such data exists, a target should be set based on
best guess criteria.
KPOs & KPIs
Level 1 – Strategy development and goal deployment

Step 4:
 Assign responsibility at the organizational level for
achievement of desired performance against KPO
targets.
 Responsibility should rest with directors and very
senior managers.
Step 5:
 Develop plans to achieve the target performance.
This includes both action plans for one year, and
longer-term strategic plans.
Level 1 – Strategy development and goal deployment

Step 6:
 Deploy mission, CSFs, KPOs, targets, responsibilities
and plans to the core business processes. This
includes the communication of goals, objectives,
plans, and the assignment of responsibility to
appropriate individuals.

Step 7:
 Measure performance against organizational KPOs,
and compare to target performance.
Level 1 – Strategy development and goal deployment

Step 8:
 Communicate performance and proposed actions
throughout the organization.

Step 9:
 At the end of the planning cycle compare organizational
capability to target against all KPOs, and begin again at step
2 above.

Step 10:
 Reward and recognize superior organizational performance.
Level 2 – Process management and measurement

The second level of the performance measurement framework is process


management and measurement, the steps of which are:
Step 1:
 Identify and map processes.; this information should include identification
of:
a) process customers and suppliers (internal and external);
b) customer requirements (internal and external);
c) core and non-core activities;
d) measurement points and feedback loops.

Step 2:
 Translate organizational goals, action plans and customer requirements into
process performance measures (input, in-process and output)
 Key performance indicators (KPIs); this includes definition of measures,
data collection procedures, and measurement frequency.
Level 2 – Process management and measurement

Step 3:
 Define appropriate performance targets, based on known process capability,
competitor performance and customer requirements.

Step 4:
 Assign responsibility and develop plans for achieving process performance targets.

Step 5:
 Deploy measures, targets, plans and responsibility to all sub processes.

Step 6:
 Operate processes.

Step 7:
 Measure process performance and compare to target performance.
Level 2 – Process management and measurement

Step 8:
Use performance information to:
a) Implement continuos improvement activities
b) Identify areas for improvement;
c) Update action plans;
d) Update performance targets;
e) Redesign processes, where appropriate;
f) Manage the performance of teams and individuals (performance
management and appraisal) and external suppliers;
g) Provide leading indicators and explain performance against
organizational KPIs.
Level 2 – Process management and measurement

Step 9:
 At the end of each planning cycle compare process
capability to customer requirements against all
measures, and begin again at step 2.

Step 10:
 Reward and recognize superior process performance,
including sub processes, and teams.
Level 3 – Individual performance and appraisal management

The third level of the performance measurement


framework is the management of individuals.
Performance appraisal and management is usually
the responsibility of the direct managers of
individuals whose performance is to be appraised. At
all stages in the process, the individuals concerned
must be included
The below activities should be undertaken by the
individual whose performance is being managed,
together with their immediate superior.
Level 3 – Individual performance and appraisal management

Steps in performance and management appraisal are:


Step 1:
If not already completed, identify and document job
descriptions based on process requirements and personal
characteristics. This information should include identification
of:
a) Activities to be undertaken in performing the job;
b) Requirements of the individual with respect to the identified
activities, in terms of Experience, skills and training;
c) Requirements for development of the individual, in terms of
personal training and development.
Level 3 – Individual performance and appraisal management

Step 2:
Translate process goals and action plans, and personal training and
development requirements into personal performance measures.
Step 3:
Define appropriate performance targets based on known capability
and desired characteristics (or desired characteristics alone if there is
no prior knowledge of capability).
Step 4:
Develop plans towards achievement of personal performance targets.
Step 5:
Document 1 to 4 using appropriate forms, which should include
space for the results of performance appraisal.
Level 3 – Individual performance and appraisal management

Step 6:
a) Manage performance. This includes:
b) Planning tasks on a daily/weekly basis;
c) Managing performance of the tasks;
d) Monitoring performance against task objectives using
both quantitative (process) and qualitative information
on a daily and/or weekly basis;
e) Giving feedback to individuals of their performance in
carrying out tasks;
f) Giving recognition to individuals for superior
performance.
Level 3 – Individual performance and appraisal management

Step 7:
Formally appraise performance against range of measures developed, and compare to
target performance.

Step 8:
Use comparison with target to:
a) Identify areas for improvement;
b) Update action plans;
c) Update performance targets;
d) Redesign jobs, where appropriate. This impacts step 1 of the process.

Step 9:
After a suitable period, ideally more than once a year, compare capability to job
requirements and begin again at step 2.

Step 10:
Reward and recognize superior performance.
Level 4 – Performance review

The fourth level of the performance measurement framework is


the use of performance review techniques. Steps in the review are
as follows:
Step 1:
Identify the need for review, which may come from:
a) Poor performance at the organizational or process levels
against KPO/KPIs;
b) Identified superior performance of competitors;
c) Customer inputs;
d) The desire to better direct improvement efforts;
e) The desire to concentrate attention on the need for
performance improvement.
Level 4 – Performance review
Step 2:
Identify the method of performance review to be used.
This involves determining whether the review should be carried out
internally within the organization, or externally, and the method to
be used.
Some techniques are mainly internal, e.g. self-assessment, quality
costing; while others, e.g. benchmarking, involve obtaining
information from sources external to the organization.
The choice should depend on:
a) How the need for review was identified (see 1);
b) The aim of the review, e.g. if the aim is to improve performance
relative to competitors, external benchmarking may be a better
option than internally measuring the cost of quality;
c) The relative costs and expected benefits of each technique.
Level 4 – Performance review

Step 3:
Carry out the review.

Step 4:
Feed results into the planning process at the organizational or process level.

Step 5:
Determine whether to repeat the exercise. If it is decided to repeat the exercise,
the following points should be considered:
a) Frequency of review.
b) At what levels to carry out future reviews, e.g. organization-wide or process
by process.
c) Decide whether the review technique should be incorporated into regular
performance measurement processes, and if so how this will be managed.
Review Techniques

Techniques identified for review include:


1. Quality costing, using either prevention-appraisal-
failure, or process costing methods.
2. Self-assessment against Baldrige, EFQM Excellence
Model, or internally developed criteria.
3. Benchmarking, internal or external.
4. Customer satisfaction surveys.
5. Activity-based costing (ABC).
Thank you

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