Performance Measurement Processes Decision Points

These are the points within the performance measurement processes at which decisions are called for, or information is being collected in order to inform a decision. Links are provided to descriptions of potentially useful supplementary tools.

Performance Measurement (Phase 1)

Part 1 - Grouping Products

In this part, which is common to both the Manufacturing Strategy and Performance Measurement processes, the aims are for the company to:

1. "identify product groups with distinct competitive requirements".

2. "collect data on identified product groups".

Companies should aim to cluster their products into between 1 and 5 groups based on their competitive requirements. For many companies these will be simple tasks, however, some organisations may be competing in complex, unknown, or very fragmented markets, or may have very complex product ranges and may thus need further decision support tools.

Tools may be required to help:

• gather the required market information
• process or organise the information gathered
• cluster products into meaningful groups.
• collect data on identified product groups

Gathering Market Information

Customer views from survey and interview

Published market research data, Competitor Information - annual reports from Companies House, Industry trends from publications such as the Financial Times.

Sales Data (including lost sales and market share).

Organising Gathered Information

Standard spreadsheet and database software

Matrices.

Statistical software

Graphs for Sales Growth and Market Growth.

Product Life cycle for an individual product or group can be plotted as a graph, shown as a position (now) on a generalised product life cycle graph or on a Boston Plot.

Clustering Products

Clustering process.

2 x 2 matrix.

Polar chart.

Statistical software.

Standard find and sort procedures in spreadsheet and database software.

Collect Data on Identified Product Groups

(Sales as % of total sales; Contribution as a % of total contribution; Contribution as a % of group sales; Market share / Competitor ranking / Number of competitors; Sales growth, Market growth, Product group life cycle).

Most of the data required above should be available from the company's sales recording system, either in the form of monthly/annual sales reports or as on screen enquiries. Items that in our experience some companies have trouble with are:

• Market share.
• Number of competitors.
• Competitor ranking.
• Market growth.

This information can be difficult to acquire in some industry sectors and may require investigation of information sources such as magazine, newspaper and journal articles, national and international company and customer surveys, government reports, visits to industrial fora such as trade fairs and conferences and participation in benchmarking exercises.

Part 2 - What are the Objectives of Our Business?

In this part, which is also common to both the Manufacturing Strategy and Performance Measurement processes, the aims are for the company to:

1. "agree business objectives for each product group", by:

• Identifying customer needs

Customer survey, requests, returns and complaints. Information from sales staff is vital but steps should be taken to ensure that it accurately reflects customer requirements and is not merely the sales staff's fantasy or unsupported belief. Consider Quality, Time, Cost and Flexibility.

• Identify other needs

As well as identifying who the stakeholders are, it may prove useful to rank or weight them in some way. [Analytical Hierarchy Process, Criteria rating form]. Some stakeholder requirements (e.g. government regulators) may need to be met first, simply in order to be in the market at all. Others while still important or relevant may have a smaller impact on the conduct of the business.

On a larger matrix of ranked stakeholders / stakeholder needs, apparent trade-off situations could be identified and attempts made to resolve them. An AHP type of matrix may also be useful here.

• Identify what implication these combined needs have for the business.

Force field analysis.

Matrix of customer and stakeholder needs looking for conflicts.

• Set improvement targets for each business implication

Prioritisation of objectives.

Should targets be stretch? Realistic? Minimal? Benchmark? Based on competitor performance? How do we ensure consistency between individual targets? [Importance / performance matrix, Criteria rating form, Strategic Assessment Model]

• Set time scales for the attainment of each target

As "set improvement targets" above.

• Check whether your business objectives are consistent with any business strategy you might have.

How do we ensure consistency between targets and our business strategy? [Strategic Assessment Model, Forcefield Analysis, Generic Competitive Strategies]

2. "agree who can contribute to achieving the objectives" by:

• Assessing contributions to the attainment of the objectives.

One of the aims of this exercise is to ensure that the whole management team buys in to the process, hence to create a group consensus. [Soft Systems Methodology, SWOT, Strategic Assumptions Surfacing and Testing (SAST), Strategic Choice Approach]. The process suggests either dividing contribution to the attainment of each objective on a percentage basis or assigning "supportive", "medium" or "high" contribution to each function / target pair.

3. "agree who will be responsible for the attainment of each objective".

This is likely to be the individual representing the function that has the most to contribute to the attainment of the target.

Part 3 - Agreeing Performance Measures for Our Business Objectives

The aims of this part of the process are to:

• Identify a performance measure for each business objective

Performance measure record sheets and guidelines as to what constitutes a good performance measure.

• Complete one performance measure record sheet for each business objective.

Part 4 - Signing Off the Top-level Performance Measures

The aims of this part of the process are to:

• Check that everyone agrees with all the top-level performance measures.

Group decision support, consensus forming, e.g. SAST (Strategic Assumptions Surfacing and testing).

• Check the comprehensiveness of the measures.

Gap analysis. Compare with business objectives

• Identify and eliminate (whenever possible) conflicts between the different performance measures.

Conflict analysis.

• Check whether there are any other barriers to implementation.

Guideline list of potential barriers - culture, individuals, will, time, money.

How will the measure results be represented? Consider Graphs, Polar charts, Media, and for New product introduction the Hewlett-Packard return map

Part 5 - Embedding the Top-level Performance Measures

The aims of this part of the process are to:

• Agree an agenda for future performance reviews.

Common diaries.

• Agree a mechanism for reviewing the performance measurement system.

Acculturation. Building into performance measurement system..

• Conduct successful performance reviews.

Review decision making processes.

Performance Measurement (Phase 2)

Phase 2 of the performance measurement process has many similarities to phase 1 as it involves cascading the measures agreed at the top level down through the organisation. Thus parts 8, 9 and 10 virtually repeat parts 3, 4 and 5 except this time they involve individuals from within each business function rather than merely the heads of each function.

Part 6 - Identifying the Drivers of Performance

Uses information gathered in part 2 "what are our business objectives?" to create a decision support framework described as a 'polar fishbone' chart. This presents the main business objectives defined in part 2 as feeding into a central statement of the company's mission together with a representation of the contribution each business function has previously agreed they can make to the achievement of each business objective.

This part largely describes how

• to construct the basic polar chart.

Separate strands (objectives) as Ishikawa or other fishbone diagrams.

• the group should identify and capture performance measures and drivers of performance to populate the chart.
• the facilitator should go about summarising the finished chart.

Part 7 - Deciding Which of the Drivers of Performance are Key

This part uses the information from the summary of the polar chart created in part 6 to accomplish its aim, which is to:

• identify which of the drivers of performance are key so that appropriate performance measures can be developed, by
  • Identifying key activities.

Importance / Performance matrix.

• Evaluating key activities.

SAST.

• Agreeing responsibilities for developing performance measures for each key activity.

Part 8 - Agreeing Performance Measures for the Key Drivers

Part 8 uses the same decision support tool - the performance measure record sheet - as part 3.

Part 9 - Signing off the Performance Measures for the Key Drivers

Part 9 uses the same tools as part 4, but in terms of 'business team' performance measures instead of 'top-level' performance measures.

Part 10 - Embedding the Performance Measures for the Key Drivers

Part 10 is the same as part 5, but focused on business team performance measures instead of top-level performance measures.