Performance Measurement for Organizational Improvement

Transcription

1 12-ICIT 9-11/4/07 in RoC Going for Gold ~ Kaizen & Org. Development Paper #: Page- 1 /6 Performance Measurement for Organizational Improvement Puah Kok Yong Lecturer, Ngee Ann Polytechnic, Singapore pky@np.edu.sg ABSTRACT In the context of rapid changes, the concept of business processes as part of the management system requires change in mindset, by adopting systemic thinking in addressing business performance and evolution. As a framework for managing change, business process management is an interconnected and interdependent set of activities that is dedicated to strategic and operational requirements. By considering the organization as a set of business processes, the approach is to decompose these processes into more detailed sets of processes, which in turn are broken down into further level of detail and individual task. Performance measurement design is a systemic approach in the deployment of metrics that aimed at establishing performance indicators through the decomposition of these business processes. Using a case study, this paper illustrates a performance measurement system that translates and measures performance of a variety of processes within the organizational context. By identifying metrics that are significant to business processes, the system is able to qualify key indicators that are pertinent to organization s performance. This includes the alignment of quality characteristics, ISO 9001 Quality Management System, performance indicators, root causes and statistical analyses that aimed at organizational improvements. Keywords: ISO 9000 QMS, Business Process Management, Performance Measurement 1.0 Introduction Change is easy. Do nothing and things will change, although likely for the worse. Improvement, on the other hand, demands not only change, but change for the better. To most organization, change has become a metaphor for all that is linked to economic progress and competitiveness. Anyone can bring about change; the trick is to bring about improvement. In an organization, any improvement to the business processes have to be communicated to the people and facilitated by technology and communication system. The intent is to improve organizational performance by removing: The horizontal barriers within the organization, The vertical barriers in the organizational hierarchy, and The external barriers outside a department or business unit or in other words throughout the business processes. However, the real world is a complex place. In the ever changing business environment there is a need to think in terms system that can address this complexity. That way we can be more effective in bringing about not just change, but actual improvements in organizational performance. Systems thinking (systematic or systemic) in terms of process, people and performance provides the bases for improvement and managing change. 2.0 System Thinking In the context of business process management, the management of Alpha Company developed a system representation or mental model of how the organization operates and manages as a business entity, Figure 1. By decomposing the organization horizontally and vertically, the focus of the system is in the management of customers requirements, with emphases on the production flow of taking in resources from the suppliers, transforming them and ultimately delivering some product or service of value to the customers, Figure 2.

2 12-ICIT 9-11/4/07 in RoC Going for Gold ~ Kaizen & Org. Development Paper #: Page- 2 /6 Alpha Company as an organisation of processes Customer or market Figure 1: Organization as a Process Alpha Company as an organisation of processes Decomposition Quality Management System Business Processes Suppliers Management Processes Support and Development Operational Processes Performance Measures Control Measures Improvement Initiatives Cost of Quality Value Added Mgt Business Process Redesign Benchmarking Six-Sigma Customer or market Figure 2: Decomposing the Organization The system view of business process management emphasizes: Processes begin with customers and end with customers. Customers are the main focus of the system because they determine the purpose of the system and pay for the results. Suppliers are part of the system. Suppliers, after all, provide the organization with what it needs to function - the raw materials upon which the transformation process will be based. Customer as opposed to hierarchically driven. The traditional view sees the organization as driven by the positional power of top management. But the system view places the customers inputs at the front and meeting customers requirements at the end, representing the purpose or aim of the system itself.

3 12-ICIT 9-11/4/07 in RoC Going for Gold ~ Kaizen & Org. Development Paper #: Page- 3 /6 Improvement is driven by customer needs and requirements. Product or service flows to the customer, who in turn provides cash to Alpha Company for the value received. The cycle repeats again and again, meaning improvement is a continuous process driven by the need to increase value to the customers. Interdependency determines performance. Traditional view emphasizes independence and individual effort. However, in the context of Alpha Company increasing performance means targeting the specific problem area and raising the performance standards. In Alpha Company, the system emphasizes the importance of team effort ; Where the flow of production traveling across the organization, internally and externally. What happens in the process will affect the downstream processes. Performance comes from team effort and how the components of the system or process are designed and put together. The system also defines quality intent of Alpha Company and how to improve the performance of the processes. Through effective ISO 9000 Quality Management System and deployment of measurements, i.e. control measures and performance measures, the organization should provide a systematic foundation for managing changes and factual decision making. In implementing improvement initiatives the system has the versatility in adapting to changes in the market, by meeting the customers requirements and needs. In managing change through performance improvement, the aim of the ISO 9000 Quality Management System (QMS) is to minimize the undesired impact on the process while maximizing the effectiveness, efficiency and flexibility of those process that deliver product or service to customers. The purpose of QMS are: To communicate and transfer knowledge, To provide the facts required To better understand how the organization is functioning, wherein performance improvement can take place and flourish. 3.0 What is a Business Process? Business process is an interconnected and interdependent set of processes, which can be decomposed into the following hierarchical order: Business process Process Task Activity In Alpha Company, performing a process always yields results in the form of products or services, and should have the following characteristics: A process converts sets of inputs into useful output; for internal and/or external use; A process could consume sets of inputs to provide useful outputs for internal and external use; A process should provide a visible link in the customer-supplier chain; The contribution of each process should be geared towards the achievement of organizational objectives; The resulting outputs are amplified throughout the organization through a-synergistic effort. As the purpose of every process is to add value, Alpha Company has classified the processes at work into their specific role, with regard to how value is added. Three basic types of process are identified. These are: Operational Processes: Operational processes are those processes that directly contribute value to customers through the transformation of inputs to outputs. Support and Development: Other processes do not add customer value directly. but rather increase value by supporting, developing or improving the operational processes. Management Processes: In contrast, management processes in themselves do not add any value to customer. Most accounting and human resource processes can be identified as such. However, this does not mean that they are unimportant or that they do not produce value to the shareholders, in the form of required management direction and control. Base on the classifications and their value contribution, the company had also developed two flow processes.

4 12-ICIT 9-11/4/07 in RoC Going for Gold ~ Kaizen & Org. Development Paper #: Page- 4 /6 3.1 Production Flow The process takes inputs from suppliers and transforms these inputs in some fashion that produces value added outputs for which customers are willing to pay. This flow of production moves from left to right in the diagram. Suppliers, inputs, the process, outputs and customers - all are part of the system and are presented in the order in which the basic production flow occurs. 3.2 Improvement Flow While the flow of production is from left to right, the flow of improvement tends to be just the opposite, from right to left. It starts with the customer and work backward, moving upstream in the system until it reaches the suppliers providing the inputs the process requires. In other words, improvement starts with the customer, be they internal or external to the organization. All improvement initiatives are driven by value, wherein non-added activities are either removed or minimized. In Alpha Company, improvement flow does not stop at the respective processes, but continue to move upstream. The focus are on the processes, but also include the inputs the process receives. In the management viewpoint, improvement and innovation cannot stop at product or process redesign; it must work its way back through the entire system to ensure it can and will be implemented. 4.0 Process Measures When improving organizational performance, Alpha Company has a broad frame for reference, in association with the scope for improvement effort that determine of the system to be analyzed. In measuring a process for improvement, the quality characteristics of the process has to be captured by asking the following questions: What is the process supposed to do, and its impact on the customers? Does it adds values to the process chain? Is the process capable in meeting the specifications? Is the process robust and consistent? Production Flow Control Measures Suppliers Input Process Output Customers Quality Characteristics Performance Measures Improvement Flow Figure 3: Measurement system In measuring a process for improvement two types of measures are required to complement each other: (a) Control measures (b) Performance measures

5 12-ICIT 9-11/4/07 in RoC Going for Gold ~ Kaizen & Org. Development Paper #: Page- 5 /6 Figure 3 illustrates the role of control and performance measures in relation to the process. Both types of measures are inter-related. The general experience in Alpha Company is that the tighter the control measures (low variability), the higher the performance measures (quality) should be. 4.1 Control Measures In Alpha Company, control measures are intended for the control of the level of variation inherent in each process. Process management has accepted that all processes can be subjected to some form of variation at some point in time. The purpose of control measures is to understand the type of variation (whether it is due to common causes or special causes) and to help in its control through the use of statistical techniques such as SPC, control charts etc; 4.2 Performance Measures Performance measures are about quantifying in terms of time, quantity, quality and responsiveness amongst others. They are determined from the quality characteristics of the processes that describe both the input sides of processes beginning with the suppliers, ending with the final output and customers. This arrangement gives the feedback on how well the process is doing, and the relevance of quality characteristics in meeting the customer s satisfaction and management objectives. 5.0 Conclusion In developing the system approach, there is still needs in some level of hierarchy within the organizations, where performance improvement comes from people relationship and not through enforcement or power relationships. Quality management is to articulate the process of managing changes, wherein people are able to accept changes as part of the organizational development. Only when fear is removed from the workplace can different levels in the organization be expected to communicate in the way required for real improvement to occur. In Alpha Company this means an openbook approach to sharing information, where: People cannot be expected to contribute meaningfully to goal setting if they do not understand how the organization measures performance or where it stands relative to those goals. People need to understand how their job contributes to the big performance picture. Management can meaningfully contribute to identifying methods if people are unwilling to share information on process problems. People must be free and feel free to communicate problems and issues if management is to understand the details of what really matters. References Galloway, D. [1994]. Mapping Work Processes, Milwaukee, WI: ASQ Quality Press. Hammer, M and Stanton, S [1999]. How Process Enterprise Really Work, Harvard Business Review, November-December, pp Kaplan, R.S. and Norton, D.P. [1992]. The Balanced Scorecard Measures that Drive Performance, Harvard Business Review, January-February, pp Rose, K.H. [1995]. A Performance Measurement Model, Quality Progress, February, pp Webster, Q.W. [1995]. Achieving Value Through Activity-Based Costing, Proceedings of ASQC 49 th Annual Quality Congress, Cincinnati, Ohio.

6 12-ICIT 9-11/4/07 in RoC Going for Gold ~ Kaizen & Org. Development Paper #: Page- 6 /6 Author s Background Mr. Puah Kok Yong is a Lecturer of Ngee Ann Polytechnic. His qualifications and experience include: Academic qualification: Master Philosophy (University of Leicester) Master Business and Technology (University of New South Wale, Australia) Master of Engineering (National University of Singapore) Bachelor of Science Engineering (London University) Professional qualification and memberships: Chartered Engineer, Engineering Council, Britain Senior Member Institution of Engineers Singapore Member Society of Manufacturing Engineers Member American Society of Mechanical Engineers Member Institution of Engineering Designers Member Institution of Mechanical Engineers Member Institution of Engineering Technologists Professional experience: Consultant to Diners Travels in SQA initiatives (current) National Assessor for Singapore Quality Award (4 years) Assessor for Singapore Quality Class Assessor for School Excellence Model Consultant, Central Manpower Base, Ministry of Defence ( ) Full Time Quality Consultant, Tan Tock Seng Hospital ( ) Full Time Tooling Consultant, Singapore Aerospace Mfg. Ltd. (Aug Sep 1991)