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Performance Evaluation

Performance Evaluation. "We get what we measure." Traditional Measures: Expenses and volume, Income, Return on Investment, Comparison with Budget Traditional Results: Short-term behaviors on maintenance, personnel, investment, research, and new product development. . ETHICS.

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Performance Evaluation

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  1. Performance Evaluation • "We get what we measure." • Traditional Measures: Expenses and volume, Income, Return on Investment, Comparison with Budget • Traditional Results: Short-term behaviors on maintenance, personnel, investment, research, and new product development.

  2. ETHICS • Management can influence the measurement process as managers effectively report their own score: • Management hires/fires accountants.   • Some managers play games with the transactions and estimates. • Potential for fraud.

  3. Measurement Issues • Large organizations tend to be monolithic, measuring all managers in about the same way: "Fairness" • Entity versus Manager Performance: Intermingling of results manager/entity • Manager evaluated by entity performance. • Short-run, long-run decisions and fast-track managers.

  4. More Issues • Always an excuse for poor performance (predecessor, circumstances). • SAVE THAT SHIP--CAPTAIN GOES DOWN WITH SHIP • Good managers in poor circumstances--turn it around. • Poor managers in good circumstances--caretaker. • Senior managers may change or be forgetful: good managers lost with entity closure or sale.

  5. Use performance measuresstrategically EVALUATION MEASURES (Where are we?): • Cycle time, processing time • Movement, waiting, inventory levels • Space required per unit of output • Defects, product/service reliability, warranty costs • Customer satisfaction • Total cost per unit compared to competition • Number and success of recent new products

  6. Use performance measuresstrategically MOVING MEASURES (Get people to change): • Lead time reductions • Rework/scrap improvements • Move and wait decreases • Inventory and space reductions • Elimination of non-value-added activities • Increases in output per worker • New Products developed this period • Success of new products • Improvement in customer satisfaction

  7. Use performance measuresstrategically ARRIVAL MEASURES (Celebrate achievement): • On-time schedule attainment • Setup and cycle times • Space per unit • Inventory levels • Scrap/rework levels • Output per worker • Conversion costs • New product sales

  8. Stable & Balanced Measures Final System: Few measures, easy to measure, efficient

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