Organizational Linkages Understanding the Productivity Paradox (1994) / Chapter Skim
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6 THE INFLUENCE OF ORGANIZATIONAL LINKAGES AND MEASUREMENT PRACTICES ON PRODUCTIVITY AND MANAGEMENT
6 THE INFLUENCE OF ORGANIZATIONAL LINKAGES AND MEASUREMENT PRACTICES ON PRODUCTIVITY AND MANAGEMENT
Pages 131-160
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3. There is a paradox, and addressing it is confounded by the lack of systems thinking, lack of profound knowledge, and inadequate measurement methodology.
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Defining specifically what linkages are expected is critical in developing a performance measurement methodology. Much evaluation research simplistically assumes that an improvement at one organizational level wall automatically cause an improvement at another level.
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makes decisions and takes actions aimed at improving the performance of the organizational system. Performance is multidimensional, and ambiguity and inconsistency regarding the criteria for measuring are major problems common to researchers and practitioners involved with the measurement of organizational performance.
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Our ongoing and recently updated review of the literature (in preparation) confirms that there are at least seven interrelated and interdependent performance criteria for an organizational system: (1)
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Quality is pervasive throughout the organizational system. One can stop short of a thorough operational definition of quality by espousing the overly simplistic but often-cited adages "quality is conformance to requirements" and "quality is making the customer happy." However, one can do business with an operational definition (Deming, 19861.
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SMITH OR. yields five quality checkpoints (see Figure 6-2)
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This is clearly a linkage issue relative to individual- and group-focused performance improvement processes. Historically, U.S.
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SOURCE: Sink (1993~. MEASUREMENT, LINKAGES, AND MANAGING ORGANIZATIONAL PERFORMANCE: FOUR GUIDELINES A management team makes decisions and takes actions aimed at (1)
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the relationships across organizational levels, or even to assess organizational performance and productivity completely. Guideline 1: The Measurement System Should Support the Organization*
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Measuring and feeding back the results of positively regarded behavior can increase its frequency of occurrence, and measuring and reporting unacceptable behavior can decrease its frequency of occurrence (Fists and Posner, 1968:26-319. Designers and users of management information systems must realize that performance measures provide KOR and must take positive action to take advantage of their effects.
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Whether on the shop floor, at a retail sales counter, or in a classroom, the operational decisions that must be made are typically for action in the immediate planning horizon. Making a process adjustment, responding to a customer complaint, or finding a new way to explain a particularly difficult concept requires knowledge of the situa
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At the work-group level, planning a monthly production schedule, determining the number of additional clerks to call in for the upcoming sales period, or establishing the annual roster of course offerings is a tactical issue and has a longer planning horizon (typically measured in weeks or months)
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(19901: "Translating the strategic goals of the organization into the performance measurement system provides management with a means to manage change and channel employee behavior. Proactive management suggests that changing measurements and incentives are critical." For both sets of authors above, the ability of an organization to adapt its system of measurement is a seminal feature of the management information system and a key to success.
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The principles of material velocity management presented in Goldratt and Cox's (1986) highly acclaimed and widely read work The Goal dictate that manufacturing cells only produce in quantities demanded by customer orders, not to the capacity of the cell.
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(1990:118) point out, "For control of factory operations, the traditional accounting measures are too irrelevant due to allocations, too vague due to 'doliarization,' too late due to accounting period delays, and too summarized due to the length of the accounting period." The problem of inappropriate cost-based measures that confronts manufacturers also applies to the service sector and to office, professional, and technical settings.
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FIGURE 6-4 Improved management systems are required to ensure continuous performance improvement. SOURCE: Adapted from Kurstedt (19861; Sink and Tuttle (19891.
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The five lines passing through the decision-to-action interface represent improvement interventions being made at the five key quality checkpoints in the management system. (Recall that the quality checkpoints are (1)
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Figure 6-5 depicts how performance measurement and continuous improvement are built into a strategic management planning process. Measurement supports and enhances strategic plans aimed at performance improvement.
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~ - o E E in, 3 o ._ N Ct o U)
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Listed below are issues, principles, and assumptions associated with the development of measurement for world-class competition, many of which challenge existing paradigms: · The goal is to design, develop, and implement successfully measurement systems that share information and thereby support and enhance continuous performance improvement. · Organizations that learn faster than their competitors have little to fear.
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· A performance measurement system must not appear to those involved as simply a passing fad (Morris et al., 1977~. · The measurement system must clearly fit into the management process and be acknowledged as decision making and problem solving aimed at supporting performance improvement.
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In order to understand linkage issues, to measure their effects, and to predict their impact so that valid performance evaluation can be conducted at various organizational levels, the design of the measurement systems will have to be approached much more systematically. identifying Suitable Measures Designers of a measurement system must be aware of the attributes of numerous possible performance measures.
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They illustrate the basic principle that performance measurements must be uniquely appropriate to the individual, group, or organization in their most elementary attributes. Key Design Variables The foregoing issues and principles translate into design variables for developing an organizational performance measurement system.
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Key design variables, such as the unit of analysis, user purpose, and operational definitions of measures, must be addressed and specified if the measurement system is to be successful. Specifying the unit of analysis entails defining the organizational system for which the performance measurement system is being established.
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Once the hierarchy of measures is determined, specific indicators must be established, operational definitions written, the measurement-to-data interface determined, and ultimately, the user interfaces and utilization completed. In the final analysis, however, examining the organization and designing the measurement system and the management information system can only do so much.
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industry may not have worked out the theory or the underlying mechanisms, but in material velocity management, for example, they have sensed one of the keys to achieving "the goal." Organizations can put the information system to work to enhance their ability to achieve that goal. We have discussed how the performance measurement system can provide management with information and a mechanism to reinforce behaviors consistent with organizational goals.
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In order to address the productivity paradox and organizational linkages methodologically or quantitatively, several prerequisites must be resolved. First, profound knowledge of productivity and quality improvement is necessary to model and predict improvement in an entity.
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· Determine if the reluctance to make performance improvement interventions is due to lack of information. If so, concentrate on evaluating candidate performance improvement interventions from a systems perspective.
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Nanni, and T.E. Vollmann lsso The New Performance Challenge: Measuring Operations for World Class Competition.
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Sink, D.S. 1993 Developing measurement systems for world class competition.
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