The trainer was Mr. Mark Lee and his talk was included “Current Situation”, “The 5 Traps”, “The 6 Steps to Succeed” and “Group Discussion”.
He said that the most popular performance measure was “Financial Measure”. The current trend was Non-Financial Measure (NFM) such as customer loyalty, employee satisfaction and non-financial but ultimately affected profitability. However, a few companies realized the benefits of non-financial measure because of the followings:
i) Fail to identify, analyze, and act on the right non-financial measures.
ii) Do not identify areas of NFM that might advance their chosen strategy
iii) Cannot demonstrate a cause-and-effect link between improvement in those non-financial areas and in cash flow, profit, or stock price.
Mr. Lee introduced the 5 traps and they are:
i) Not Linking to Strategy
For example, Causal Models were missing.
Causal Models were laid out plausible cause-and-effect relationship that existed between the chosen drivers of strategic success and outcomes.
i) Not Validating the Links
Even those companies that create causal models rarely go on to prove that actual improvements in non-financial performance measure affect future financial results. Therefore, it is unable to allocate resources according to their most beneficial uses or to create meaningful incentives plan.
ii) Not Setting the Right Performance
Improve non-financial measures can even damage short-term returns (Short-term vs. Long-term)
iii) Measuring Incorrectly
It is at least 70% of companies employed metrics that lack statistical validity and reliability.
(Validity refers to the extent to which a metric succeeds in capturing what it is supposed capture.)
(Reliability refers to the degree to which measurement techniques reveal actual performance changes and do not introduce errors of their own.)
(Inconsistency and Contradictory Result)
iv) Sticking to Your Numbers Too Long
Performance assessment systems seldom evolve as fast as business do.
(Smaller and growing companies are especially likely to fall into this trap.)
And then speaker mentioned the 6 steps to success.
Step 1: Develop a Causal Model
Step 2: Pull Together the Data
Step 3: Turn Data into Information (Quantitative Statistical Method and Qualitative Method)
Step 4: Continually Refine the Model
Step 5: Base Actions on Findings
Step 6: Assess Outcomes
i) Not Linking to Strategy
For example, Causal Models were missing.
Causal Models were laid out plausible cause-and-effect relationship that existed between the chosen drivers of strategic success and outcomes.
i) Not Validating the Links
Even those companies that create causal models rarely go on to prove that actual improvements in non-financial performance measure affect future financial results. Therefore, it is unable to allocate resources according to their most beneficial uses or to create meaningful incentives plan.
ii) Not Setting the Right Performance
Improve non-financial measures can even damage short-term returns (Short-term vs. Long-term)
iii) Measuring Incorrectly
It is at least 70% of companies employed metrics that lack statistical validity and reliability.
(Validity refers to the extent to which a metric succeeds in capturing what it is supposed capture.)
(Reliability refers to the degree to which measurement techniques reveal actual performance changes and do not introduce errors of their own.)
(Inconsistency and Contradictory Result)
iv) Sticking to Your Numbers Too Long
Performance assessment systems seldom evolve as fast as business do.
(Smaller and growing companies are especially likely to fall into this trap.)
And then speaker mentioned the 6 steps to success.
Step 1: Develop a Causal Model
Step 2: Pull Together the Data
Step 3: Turn Data into Information (Quantitative Statistical Method and Qualitative Method)
Step 4: Continually Refine the Model
Step 5: Base Actions on Findings
Step 6: Assess Outcomes
In Group Discussion, there were 8 questions to be ranked (where 8 = Most Difficult, …, 1 = Easiest).
1. Design the right causal model with right links
2. Find and prove the real key performance drivers
3. Set the right performance targets
4. Collect data or create meanful data
5. Make sure data are valid and reliable
6. enable teamwork among department to work together
7. Get enough resources from top management to execute
8. Long-term persistence to run and review it
Our group concluded the following results
Then we shared the results in each group and some interested discussions were recorded.
i) It collects all goods of each method (e.g. ISO, 6 sigma,lean, etc.) but it also collects all shorts (default) of each method.
ii) Too many methods like fashion, the organization cannot digest it.
iii) When boss need KPI, then I “PK”! (PK means problem)
iv) If you can’t change the environment, you can change your behaviour.
v) The important thing is to change the good method into good habit.
vi) All measurement or method used can be classified as “Non-finanical Measure”.
Finally, Mr. Lee concluded that the question 8 “Long-term persistence to run and review it” is the result and the questions 1 to 7 are the cause.
For more information:
The Centre for Logistics Technologies and Supply Chain Optimization, CUHK: http://www.logitsco.cuhk.edu.hk/
1. Design the right causal model with right links
2. Find and prove the real key performance drivers
3. Set the right performance targets
4. Collect data or create meanful data
5. Make sure data are valid and reliable
6. enable teamwork among department to work together
7. Get enough resources from top management to execute
8. Long-term persistence to run and review it
Our group concluded the following results
Then we shared the results in each group and some interested discussions were recorded.
i) It collects all goods of each method (e.g. ISO, 6 sigma,lean, etc.) but it also collects all shorts (default) of each method.
ii) Too many methods like fashion, the organization cannot digest it.
iii) When boss need KPI, then I “PK”! (PK means problem)
iv) If you can’t change the environment, you can change your behaviour.
v) The important thing is to change the good method into good habit.
vi) All measurement or method used can be classified as “Non-finanical Measure”.
Finally, Mr. Lee concluded that the question 8 “Long-term persistence to run and review it” is the result and the questions 1 to 7 are the cause.
For more information:
The Centre for Logistics Technologies and Supply Chain Optimization, CUHK: http://www.logitsco.cuhk.edu.hk/
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