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Summary of Key Points and Terminology - Chapter 8

Summary of Key Points and Terminology - Chapter 8 - Summary...

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Summary of Key Points and Terminology Chapter 8 Data are simply representations of facts that come from some type of measurement process. Measurement is the act of quantifying the performance dimensions of products, services, processes, and other business activities. Measures and indicators refer to the numerical information that results from measurement. Information is data in context of a business or organization. Organizations need performance measures to drive strategies and organizational change, to manage resources, and to operate processes effectively and continuously improve. Data and information support control, diagnosis, and planning at the three levels of quality. Benefits include better knowledge of product and service quality, worker feedback, a basis for reward and recognition, means of assessing progress, and reduced costs through better planning. The balanced scorecard consists of four perspectives: financial, internal, customer, and innovation and learning perspectives. A good balanced scorecard contains both leading and lagging measures and links them through logical cause-and-effect relationships. The Baldrige criteria provides a slightly different view of a balanced scorecard, and focuses on six categories of performance measurement and indicator outcomes: product, customer, financial and market, workforce, process effectiveness, and leadership. Although many specific measures and indicators can be defined in each category, the ones an organization chooses should be tied to those factors that make it competitive in its industry. The purposes of a performance measurement system include providing a perspective of the past, present, and future; identifying trends and progress; facilitating understanding of cause-and-effect relationships; providing direction and support for continuous improvement; and allowing performance comparison to benchmarks. Many organizations make two fundamental mistakes: (1) not measuring key characteristics critical to company performance or customer behavior, and (2)
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taking irrelevant or inappropriate measurements. Leading organizations select appropriate measures and indicators using well-defined criteria.
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