II.C.3 Organizational Performance Measurement
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Excerpt From The Certified Manager of Quality/Organizational Excellence Handbook
Measurements for processes are used to indicate the effectiveness of the processes in delivering products and services, such as product/service quality relative to customer satisfaction. Internal operational measures may include inventory turns, efficiency of the quality management system, cost savings from Six Sigma projects, and so on.Feedback Loops. Consider the experience of folding and flying paper airplanes, hoping that they would fly straight and true to their targets. Once launched, those planes went where they wanted to. Consider flying a model radio-controlled plane. When the wind blows the plane off course, the radio operator adjusts the rudder and ailerons, and the plane is back in control.
This difference contrasts open-loop versus closed-loop performance measurement. In closed-loop measurement, monitoring is continual so that immediate adjustment to the action can be made.
The better the design and construction of the paper plane, and the more experienced the operator, the more likely the plane will fly close to its desired target. This is basic to open-loop operations. Good planning, anticipation of the potential causes of disruption, tightening the process so that it is not easily deflected from the target—all these are useful practices that are effective in the hands of skilled managers. However, closed-loop processes are more likely to succeed in reaching their objectives because they can better handle disruption from unforeseen causes.
Every process should have two outputs: (1) a valuable product or service to satisfy the customer and (2) the information to manage, control, and improve the process. A closed-loop process has many advantages over the open-loop operation. Unfortunately, many processes are open loop, and managers resort to intuition, emotions, and other ineffectual methods in an attempt to eliminate common causes of variation. Management by fact—that is, using closed-loop processes and trend data to monitor continuous improvement—is the preferred approach.
The contrast between open-loop and closed-loop operations shows up early in deployment planning stages. Typically, in open-loop operations, planning focuses on how to detect or measure problems in the inputs and how to plan for contingencies. “What if the Barlow shipment is late?” “How late is too late?” or “What if the weather is too cold?” and “How cold is too cold?” In contrast, closed-loop planning focuses on how to measure the outputs and how to determine the control points where adjustments can be made.
Quality Management BOK Reference
II Strategic Plan Development and Deployment
II.C Strategic Plan Deployment
II.C.3 Organizational performance measurement - Develop organizational performance measures to ensure that they are aligned with strategic goals, and use those measures to assess the organization in relation to the strategic plan.
Additional Resources
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PDF: IMA Strategic Alignment for Driving Superior Business Results
Article: Lean Accounting: Aligning the Lean Organization
Book: Practical Lean Accounting
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Quality Management Division
05/01/2021 2:48pm CDT
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