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PERFORMANCE MEASUREMENT IN THE OPERATIONS MANAGEMENT
Performance measurement is the use of evidence to determine progress toward specific defined organizational objectives. This includes both quantitative evidence (such as the measurement of employee travel times) and qualitative evidence (such as the measurement of employee satisfaction and employee perceptions)..
For business owners and managers, eager to get the maximum possible output out of their workers, increasing productivity is a major goal. To determine how their current productivity levels are looking, many managers calculate operational performance measurements, determining how much of their product they are putting out in an hour or a similar measure to quantify productivity. If you seek to boost this number, there are a number of ways in which you can accomplish the task.
A primary purpose of measurement is to assess performance levels and to analyze what is happening and where. The most beneficial aspect of performance measurement, however, is pinpointing problem areas and focusing attention on actions that will have the best impact on overall business performance.
Without good performance measurements, it is easy to fall into the common trap of having people busy with all kinds of activities, but achieving few measurable results. Effective performance measurement is the compass that guides management in a direction that will produce meaningful results at the process level, results that will tie directly to your company’s goals
Many manufacturers focus on the wrong performance issues. The fact is, it is very difficult to improve what you don’t properly measure. The pressure to focus energy on activities that really matter must come from the highest levels of the manufacturing enterprise. Top management can talk about the need for making improvements, but unless the right performance factors are measured and rewarded, nothing will change. Today’s world-class manufacturers are continually tracking process performance factors that ultimately impact business success, such as order-to-delivery cycle time, throughput, inventory levels, operating expense and customer satisfaction.
Inappropriate measures will often lead managers to respond to situations incorrectly and continue to reinforce undesirable behavior. For example, when manufacturing’s goal is to keep absorbing overhead, the result is often bloated inventory and decreased customer service.
Measuring and driving toward a singular measure, such as purchase price variance, often leads to higher overall costs that are invisible in traditional accounting systems. Getting the lowest possible price is important, but insuring an uninterrupted supply of needed material to maintain the production schedule and meet customer deadlines is more important. Just think about the real cost of material shortages. The best purchased material value is a result of price, quality and on-time delivery.
Keeping an entire organization focused on the right targets and moving in the right direction is no easy task. Of course, what managers think their superiors consider important through the formal or informal measurement system is what is going to get done. For example, if something like cycle time gets good words from top management, but answering for the result is of minor consequence, cycle time essentially becomes a secondary issue, if it exists as a real performance measure at all. And if the performance measurement system does not focus on a clear direction, the measurement system itself will enforce the wrong actions.
If your company has conflicting performance measures, you are certain to have differing values and directions, many of which will be disconnected from the company’s strategy. Without uniform expectations, it is virtually impossible to keep an organization marching toward the same goals. This, by itself, makes re-evaluating how you measure business performance a very high priority.
Managers must strive to direct all levels of their organization to focus on the right priorities. World-class companies have learned (many the hard way) that effective performance measurement that will drive improvement and continue to encourage the right response and behavior requires linking strategy with day-to-day actions.
Financial results are the ultimate measures, but not drivers, of business success. As a result, the need to link day-to-day activities to financial results is necessary. Waiting for a fiscal month or quarter to close is far too late for numbers that would appropriately influence day-to-day actions.
The five generic performance objectives – quality, speed, dependability, flexibility and cost –can be broken down into more detailed measures, or they can be aggregated into ‘composite’ measures. The more aggregated performance measures have greater strategic relevance. The more detailed performance measures are usually monitored more closely and more often. In practice, most organizations will choose to use performance targets from throughout the range
Developing a successful system
As you design, develop and implement your new performance measurement system, keep in mind that successful measurement systems share some common traits. Here are some of the critical traits that are common to successful performance measurement systems:
Indicators and performance measures for each operational objective provide a framework for monitoring, review and evaluation of the performance of management in achieving both the operational objective, and because of the linkages, the higher-level policy goals.
Performance measurement systems are the focus of considerable attention in academic and practitioner communities. They clearly have a considerable contribution to make the management of performance of organisations. However, for this contribution to be realised, it is essential that the measurement systems used are relevant and appropriate for the environment and strategies of the organisation. Given the dynamic and rapidly changing environment in which most organisations compete, it is important that organisations effectively manage their measurement system so that it remains appropriate and provides information that is relevant to the issues that are of currentimportance.
Perfomance Measurment In Toyota Production System
Length: 3 pages (825 Words)
Performance measurement in Toyota production system
Performance measurement is defined as the use of evidence with the aim of determining progress towards specific defined organizational objectives. The organizational objectives in this case can be categorized into two broad categories that include quantitative evidence and qualitative evidence. The aim of any business is to maximize their profit margins. However, for the business to meet this target it is mandatory that all the parties work together to fulfill the desire of the business. Business owners and managers also value the productivity of their employees because their productivity translates to the performance of their businesses. Managers calculate operational performance measurements, determining how much of their product they are putting out in an hour or a similar measure to quantify productivity to determine how their current productivity levels are looking.