Measuring Performance in Operations

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Measuring Performancein Operations

• Chapter 3
• Operations Management Goods, Services, and
  Value Chains, by D. A. Collier and J. R. Evans

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To-The-Point Timely InformationLeads To Good
Decisions

• Meg Whitman, eBays CEO, personally monitors a
  host of measurements and indicators, including
• how many people visit the web site,
• how many register to become users,
• how long each user remains per visit,
• how long pages take to load, and so on
• eBays take raterevenues over value of goods
  traded on the site, and
• what days are the busiest (Mondays in June are
  slow Fridays in November rock).

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To-The-Point Timely InformationLeads To Good
Decisions

• She even monitors the noise on eBays
  discussion boards, online forums where users
  discuss, among other things, their opinion of
  eBays management
• (Level 1 means silent, and 10 means hot or
  the community is ready to kill you. Normal for
  eBay is about 3).
• The more stats, the more early earnings and the
  more levers to pull to make things work.
• But be aware of paralysis by analysis.

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Value Politics of Information

• For every leader in the company, not just for
  me, there are decisions that can be made by
  analysis. These are the best kind of decisions!
  Theyre fact-based decisions.
• The great thing about fact-based decisions is
  that they overrule the hierarchy. The most junior
  person in the company can win an argument with
  the most senior person with a fact-based
  decision. Unfortunately, theres this whole other
  set of decisions that you cant ultimately boil
  down to a math problem.
• Jeff Bezos, CEO of Amazon.com

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Performance Measures
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Productivity Measures

• Total Productivity Total Output / Total Input
• Multifactor Productivity Total Output / Subset
  of Inputs
• Partial Factor Productivity Total Output /
  Single Input

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Partial Factor Productivity Examples
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Productivity Measurement Example
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DESIGNING PERFORMANCE MEASUREMENT SYSTEMS

• Does the measurement support our mission?
• Will the measurement be used to manage change?
• Is it important to our customers?
• Is it effective in measuring performance?
• Is it effective in forecasting results?
• Is it easy to understand/simple?
• Are the data easy/cost-efficient to collect?
• Does the measurement have validity, integrity,
  and timeliness?
• Does the measure have an owner?

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Malcolm Baldrige National Quality Award
Performance Framework
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Balanced Scorecard Performance Framework
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Value Chain Performance Model
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Service-Profit ChainPerformance Model
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Performance Measures Are Interlinked