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CHAPTER- 7

PERFORMANCE
MEASURES
Definition of Performance
 Performance refers to work of
an employee in terms of
productivity and in terms of
minimising problems for the
organisation be being to work
on time, by not missing days,
and by minimising the number
of work-related accidents.
Concept of Performance Measure

 Performance measure is the


formal, and systematic process of
establishing performance
standards and assessing of
employees’ performance in jobs in
relation to established standards
and of communicating that
assessment to employees.
Objectives of Performance
Measures
 Baseline measures and reveal trends.
 Identify improvement needs of processes and
individuals.
 Indicate process gains and losses.
 Compare goals with actual performance.
 Provide information for individual and team
performance.
 Provide information to make informal
decisions.
 Determine overall performance of t he
organisation.
Types of Measurements
 Human resource- Lost times,
absenteeism, turnover, productivity,
number of accidents, training hours,
suggestions implemented, grievance etc.
 Customers: Number of complaints and
on-time delivery, customer satisfaction
index, time to resolve complaints etc.
 Production. Inventory turns, amount of
scraps/rework, process yield, machine
downtime, actual performance to goal,
number of returns, cost per unit etc.
Continues
 Suppliers: Service rating, SPC chart, quality
performance, billing accuracy, average lead
time, errors, JIT target etc.
 Marketing: Sales expense, order accuracy,
promotion expenditure, new customers,
gained/lost accounts, number of successful calls
per week etc.
 Administration: Revenue per employee, cost of
poor quality, due accounts receivables, vehicle
fleet data, billing accuracy, condition of office
equipments etc.
Quality Criteria for Measures
1. Simple.
2. Few in number.
3. User friendly.
4. Customer relevance.
5. Improvement scope.
6. Cost.
7. Visible.
8. Timely or Actionable on time.
Continues
9. Aligned to organizational goals.
10. Results oriented.
Strategies for Performance
Measures
 Strategic measurement system is
created to ensure achieving core
values, goals, mission, vision of the
organization and to performance goals.
 It is aimed at tracking trends, identify
problem areas and allocate resources
to operations.
Strategic Elements
 Quality : Aims at reducing percent of cost of poor
quality, corrective cycle time, non-conformities etc.
 Cost : aims at increasing percent inventory
turnover, material shipped, output per employees
etc.
 Flexibility: Aims at percent reduction in cycle time,
setup time, batch size etc.
 Reliability: Aims at percent reduction in down time,
warranty costs, design change etc.
 Innovation: Aims at percent reduction of new
product innovation time, management time spent,
and percent increase in new patents granted.
Operational Process of
Performance Measures
 Development of strategic measurement
system for the organisation.
 Development of measures for functional
areas.
 Determine the process or processes that are
critical to provide input for the strategic
system.
 Determine the critical matrics/measures for
the process/processes.
 Assign responsibility for the collection,
analysis, and dissemination of the data.
 Develop improvement procedures.
Performance Presentation
Techniques
 Time series Graph
 Control Chart
 Capacity Index ( is the ratio of the tolerance
to the capability).
 Taguchi’s Loss Function.
 Cost of quality
 Malcolm Baldrige national Quality Award
QUALITY COSTS
 What is Quality Cost?
 Quality costs are the costs that
are associated with the non-
achievement of product or service
quality.
QUALITY COSTS CATAGORIES
 Preventive costs
 Appraisal costs
 Internal failure costs
- Product design failure cost.
- Purchase failure costs.
 External failure costs.
- Liability
-Penalties
- Warranties claims.
-Goodwill loss.
Quality Data Collection and
Reporting
A. Collection System Design
-It requires the close interaction of the quality
and accounting departments.
- A well coordinated system of cross
departmental lines to have cost data easily.
- Quality data should be collected by product
lines, projects, departments , operations and
work centers.
- Comptroller office must be directly involved
in the design of the quality cost collection
system.
Continues
B. Quality Cost Bases.
- Labour
- Production
-Sales
- Units
C. Quality Cost Report
D. Analysis : Trend and Pareto analysis.
QUALITY OPTIMIZING COSTS :
How to determine.
 Technique-1: Make comparison with
other organisation. It is done with net
sales.
 Technique-2: Make failure cost
Zero.
 Technique -3: Analyse the
relationship among the costs
categories.
Quality Costs Improvement
Strategy
1. Constitute Project Team to improve quality
through problem solving.
2. Invest in the right prevention activities..
3. Reduce appraisal costs in appropriate
situation with sound method.
4. Continuously evaluate and redirect the
prevention effort to gain further quality
improvement.
Quality Cost Program
Implementation
 Establish the benefit of the program.
 Get approval of the top management.
 Train and educate personnel on quality
cost programs.
 Trial use the implementation program
in one place or unit.
 Fit the accounting procedures with the
program.
 Establish the system to overall
organisation.
MALCOLM BALDRIGE NATIONAL
QUALITY AWARD (MBNQA)
 CATAGORIES OF AWARD
1. Manufacturing.
2. Service.
3. Small Business.
4. Health Care.
5. Education.
Three awards are given to each category.
MBNQA Continues
Criteria for Performance Excellence
 Leadership.
 Strategic Planning .
 Customer and Market Focus.
 Information and analysis.
 Human Resource Focus.
 Process Management
 Business Results.
Key Characteristics of the Criteria
of MBNQA
1. The criteria are directed toward
results.
2. The criteria are non-prescriptive and
adaptable .
3. The criteria are supportive to a
system approach to maintaining
organization –wide goal alignment.
THANK YOU ALL.

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