After obtaining and measuring performance, it is now time to compare it with the standard. To do this, managers analyze the results of the performance to see if there are deviations or the actual performance meets the standard. The last step is taking corrective action. If there are deviation and variances, controls need to be implemented. Corrective actions should be appropriate to the nature of the problem. This is where quality control comes in. One quality control method that has become effective and even won a Malcolm Baldridge National Quality Award is the Six Sigma method used by Motorola.
In the mid 80s, Motorola saw competition rising. Their then- CEO, Bob Gavin, introduced a quality method called Six Sigma (Bateman & Shell 2002). Sigma, a Greek letter, is a statistics figure denoting the estimated typical variation in a process (2002). Signifying the number of defects per million opportunities (DPMO), a three level sigma has 6, 210 DPMO; taking this into consideration, a lower sigma level means that there is more variation and vice versa (2002). A Six Sigma means that there are 99. 999966 percent defect-free at a time.
With Six Sigma placed in the company, Motorola was not only able to reduce cycle time but control costs, too without sacrificing the value to the customer (2002). Since then, the Six Sigma Program has been adopted by various companies such as General Electric (GE), Honeywell and Merck (2002). Then there is also what is called the balanced scorecards, a tool used to measure organizational performance. Developed by Drs. Robert Kaplan and David Norton, the balanced scorecard is a framework to include financial and nonfinancial metrics to provide a balanced treatment of measuring organizational performance (Balanced Scorecard Institute 2008).
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The term balanced scorecard first appeared in the 50s, following the work on GE and the French process engineers who used a board to measure performance (2008). What used to be a performance measurement tool has now evolved into a strategic management system. Aside from detailing performance measurements, the new balanced scorecard now features identification of plans to assist managers and executives in implementing their tactics (2008). Feedback for both business process and results are constantly identified to allow room for improvement.
The Balanced Scorecard is a tool that allows an organization to be scrutinized from four aspects- learning and growth business process, customer and financial (2008). In the learning and growth perspective, the focus in on employee training and organization culture as it relates to the overall organizational attitude. This includes communication, training, with stress on the learning part (2008). Likewise, this perspective takes in the technological systems used to ensure high performance levels.
Meanwhile, the business perspective level includes metrics to show managers how the internal business processes are working, to gauge if the products are meet the standards and are deployed to the customer properly (2008). The customer perspective in a balanced scorecard is geared towards the customer’s attitudes towards the product, if he/she is content with it, to weight its performance. For instance, if the product receives poor performance from the customer perspective, this may indicate that its prospect may not be bright. Financial data is one of the most widely recognized data used in measuring organizational performance.
Budgetary control is essential in understanding where the company is headed to. What the balanced scorecard does is aim to balance financial with the non financial aspects of the organizational performance. Another tool to measure organizational performance is using a Corporate Performance Management system (CPM). A CPM scrutinizes performance data and set them against the key performance indicators (KPIs) (Gruman 2004). It is presented similarly to a balanced scorecard, but with graphics and metaphors like stoplights and gauges (2004). In a way, it is like a dashboard.
KPIs may refer to anything, from profits to employee turnover (2008). What is unique with the CPM is that KPIs cut across the board so that the entire organizational performance is at stake, not just specific business processes (2008). What happens is that CPM tools are deployed in specific tools but the CPM system integrates them to provide an all-compassing view (2008). There are several CPM providers like Applix, BusinessObjects, Cognos and SRC Software. However, only 20% of these sellers are rightly equipped with the infrastructure and transparency required to install a winning CPM system (2008).
CPM systems are not limited to financial data. Like the balanced scorecard, it is the integration of financial and operations data that are crucial in deploying an effective CPM system. Measuring organizational performance is a fundamental part of the organizational life. When an organization exists, so do targets and benchmarks; identifying these is crucial in improving organizational performance. As such, it is important to have tools that may provide measurements. However, it is not enough to have the data and metrics. What is important is to have the appropriate metrics that will serve the organizational in its endeavor.
Organizational performance tools must be in sync with the organization at hand. Otherwise, even a slew of organizational performance tools may not even measure what the organization is trying to achieve in the first place.
References Balanced Scorecard Institute 2008, Balanced scorecard basics, Balanced Scorecard Institute. Available from: http://www. balancedscorecard. org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default. aspx [ 5 December 2008]. Bateman, T & Shell, S 2002, Management competing in the new era 5th ed, McGraw-Hill Irvin, USA.
Bowsher, J 1998, Revolutionizing workforce performance, Jossey-Bass Publishers, San Francisco. Carnell, M, Jennings, D & Heavrin, C1997, Fundamentals of organizational behavior, Prentice-Hall, New Jersey. Gruman, G 2004, CPM Software: an elegant way to measure business indicators, Infoworld. Available from: http://www. infoworld. com/archives/emailPrint. jsp? R=printThis&A=/infoworld/article/04/10/08/41FEbperfm_1. html> [5 December 2008]. Harrington, JH 1991, Business process improvement-the breakthrough strategy for total quality, productivity, and competitiveness, McGraw-Hill, New York.
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