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What roles do companies use performance management systems to perform?
- Communicate the company's strategic objectives.
- Motivate employees to help the company achieve its strategic objectives.
- Evaluate the performance of managers, employees, and operating units.
- Help managers allocate resources to the most productive and profitable opportunities.
- Provide feedback on whether the company is making progress in improving processes and meeting the expectations of customers and shareholders.
What is the balanced scorecard?
It measures organizational performance across four different but linked perspectives that are derived from the organization's mission, vision, and strategy.
What are the four fundamental questions addressed in the balanced scorecard?
- Financial: How is success measured by our shareholders?
- Customer: How do we create value for our customers?
- Process: At which processes must we excel to meet our customer and shareholder expectations?
- Learning and growth: What employee capabilities, information systems, and organizational capabilities do we need to continually improve our processes and customer relationships?
What is the purpose of the financial perspective?
To increase the ROE
What are the objectives of the customer perspective?
- Retain customers
- Deliver products on time
- Offer competitive prices
What are the measures of the customer perspective?
- Percentage of repeat customers
- Growth in customers' salaries
- % deliveries made on time
- Prices compared to competitors
What are the objectives for process perspective?
- Reduce process cycle times
- Improve process quality
What are the measures for process perspective?
- % improvement in cycle times
- Product defect rates
- Process yield improvement
What are the objectives for learning and growth?
Develop employees' process improvement skills
What are the measures for learning and growth?
% employees trained and certified in process improvement capabilities.
What is a strategy? (i.e., two essential components)
- The company's advantage in the marketplace.
- The scope for the strategy.
What are strategic objectives?
What the company is attempting to accomplish with its strategy.
What are strategic measures?
Descriptions in more precise terms how success in achieving an objective will be determined.
What is a strategic map?
A picture, used to illustrate the causal relationships among the strategic objectives across the four balanced scorecard perspectives.
The company's financial performance improves through what two basic approaches?
- Productivity improvements (i.e., improve cost structure & increase asset utilization)
- Revenue growth (i.e., enhance existing customer value & expand revenue opportunities)
What are the 3 types of value propositions?
- Lowest total cost (i.e., Wal-Mart, McDonald's)
- Product leadership (i.e., Apple, Mercedes)
- Complete customer solutions (i.e., IBM, Nordstrom sales staff)
What are operations management processes?
Basic, day-to-day processes that product products and services and deliver them to customers.
What are examples of operation management processes?
- Achieve superior supplier capability.
- Improve the cost, quality, and cycle times of operating (production) processes.
- Improve asset utilization.
- Deliver goods and services responsively to customers.
What are customer management processes?
Expand and deepen relationships with targeted customers.
What are examples of customer management processes?
- Acquire new customers.
- Satisfy and retain existing customers.
- Generate growth with customers.
What are innovation processes?
Develop new products, processes, and services, often enabling the company to penetrate new markets and customer segments.
What are regulatory and social processes?
Processes that earn the company the right to operate in the communities and countries in which they produce and sell.
The learning and growth perspective is broken into what 3 segments?
- Human resources
- Information technology (IT)
What are the main reasons the balanced scorecard approach may fail?
- Senior management is not committed.
- Scorecard responsibilities do not filter down.
- The solution is over-designed, or the scorecard is treated as a one-time event.
- It is treated as a systems or consulting project.
What was the main dilemma for the St. Elsewhere Hospital case?
How to link everday operation objectives to corporate strategy?
Summarize the competitive environment for St. Elsewhere Hospital?
A low patient consensus combined with higher costs (of operating a new facility and the introduction of managed care all negatively affected the hospital's financial situation.
Describe the competitive environment for St. Elsewhere Hospital.
- Prior to mid-1980s "fee-for-service" basis
- Rise of managed care (with reduced fee-for-service) and "capitation" payment system
- General Hospital was capturing the bulk of "new business"
- Substantial excess capacity (low "patient census" at St. Elsewhere
What was St. Elsewhere's revised mission statement?
"Establish an environment that promotes customer satisfaction through personal attention and quality service"
What was St. Elsewhere's revised strategy?
- Changed patient mix (greater proportion of patients form the more affluent, and growing, suburban locations)
- Increased patient volume