Measuring Process Performance CHAPTER 5

Measuring Process Performance CHAPTER 5

1. Internal and External Measures

   • External measures
     • tell you about the results achieved by a process or value chain
       • Income measures
       • Measures of customer satisfaction
       • Market growth measures
       • Stockholder satisfaction
   • Internal data
     • tell you about how the process is working, but they don’t tell you if the process is satisfying its stakeholders
       • Efficiency and effectiveness of specific functions or subprocesses
       • Costs of producing the product or service
       • Quality of internal outputs

2. Leading and Lagging Indicators

   • Leading indicators
     • measures that report on situations that are causally related to outcomes that you desire
       • leading indicator will be more useful to the process manager who wants to use the measure to help achieve his or her goals.
   • Lagging indicators
     • describe situations that can’t be changed.

3. DEVELOPING A COMPREHENSIVE MEASUREMENT SYSTEM

   • a major goal of those concerned with process work is to specify a measurement system that can link strategic goals, stakeholder goals, and internal process goals into one consistent system.

4. BALANCED SCORECARD AND PROCESS MEASURES

   • tool to define managerial responsibilities and to align the goals and measures used to evaluate the performance of managers
     • Financial Measures
     • Internal Business Measures:
     • Innovation and Learning Measures
     • Customer Measures
     • they introduce a hierarchical model that suggests that some measures contribute to others and are summed up in shareholder value
       • assign goals to managers start by generating a corporate scorecard
   • Kaplan and Norton

5. ALIGNING PROCESS MEASURES

   • the organization has a division that is focused on producing a specific product line. Or it might be a company that is organized around undertaking projects.
     • we can align our process measures by “backing” into the process and writing “contracts” that define the relationships between each of the processes and subprocesses in the value chain
       • The value chain is made up of three core processes, 1, 2, and 3.

6. DERIVING MEASURES FROM BUSINESS PROCESS FRAMEWORKS

   • both supply chain operations reference model (SCOR) and VRM provide measures for each of their processes
     • The five high-level SCOR measures are divided between external (customer-facing) and internal measures.
   • SCOR to structure its business process hierarchy, then it can proceed to derive appropriate measures from the SCOR reference materials.
   • The Supply Chain Council not only provides a comprehensive set of measures for the processes included in their Supply Chain, Design Chain, and Sales and Marketing frameworks, but they also work with an outside benchmarking agency so that companies using the Supply Chain Council’s measures can get benchmark information on the same measures