· Establishing appropriate performance measures is important, because you do “get what you measure”
· The performance measures should be designed to help you achieve your strategic objectives
· If the measures are to be used to drive and improve your business they should be :
o easy to understand
o under the control of the people being measured
o targets agreed by the people being measured
o hard to manipulate or cheat
o displayed clearly, preferably in the work area of the people being measured. Information, not data, should be provided in numerical and graphical format with any improvements shown by lines going up
o the information should be provided in a timely manner. If possible, updated by the people being measured.
o precisely defined and measures consistent throughout your organisation
· When selecting the actual measures to use in your business consider the following points:
· The Balanced Scorecard has been used by management teams in a wide range of businesses to assist in selecting appropriate measures.
· It is essential to measure against your managements’ profit and cash commitments to gain credibility and sustain a successful business
· You also need, however, to measure aspects of:
1. Customer delivery and satisfaction
2. Internal processes. For example, Manufacturing operations key performance measures might include:
¨ Schedule adherence (actual deliveries made on time, in full to the agreed customer request dates)
¨ Cost of quality (internal costs - scrap, rectification; external costs – warranty claims, retrofits; and quality assurance costs)
¨ Stock turns (utilisation of work in progress and stores inventory)
¨ Productivity (how effective are people and / or equipment)
¨ Controllable costs (significant items of consumable expenditure that can be assigned to defined groups of people)
3. The things you are doing to set up your business to meet future challenges.
· One of the benefits of cellular/modular factories is that costs can be allocated and performance measures calculated for a group of people and equipment
· Productivity can be a tricky thing to measure. It can be based on output per man-hour, machine efficiencies or a combination of these depending on the parameters of your business.