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58 Cards in this Set

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Organizational Performance Measures
used to manage and monitor performance in many areas of the organization including financial, customer, internal processes, employees, suppliers.
Strategy
decribes how an org. uses its activites and resources to achieve its objectives. Ethically maximize financial value.
Execution
-ensure strategy is being executed
-monitor performance
Performance Measures
are specific ways an organization measures outcomes and activites related to achieving its strategy.
Types of Performance Measures
-Financial
-Nonfinancial
Performance Measurement Frameworks
-Balanced Scorecard
-Value Based Management
NonFinancial Performance
-customer satisfaction
-customer retention
-on-time delivery
-quality
-employee satisfaction
Balanced Scorecard
translates an organization's mission and strategy into a set of performance measures.
4 Perspectives of Balanced Scorecard
1) Financial Perspective
2)Customer Perspective
3)Internal Business Processes Perspective
4)Learning & Growth Perspective
Financial Perspective
focuses on return on investment, and profability.
Strategic objective would be to increase profitability, and measure would be ROI.
Customer Perspective
focuses on performance in areas that are most critical to the customer. Strategic Objective would be increase customer satisfaction, perf. measure would be cust. satisfaction ratings.
Internal business processes perspective
focuses on operating effectively and efficiently. Processes that are involved in producing the product. Strategic Objective is to impove on time delivery, and perf measure would be percentage of on time deliveries.
Learning & Growth Perspective
focuses on infrastructure and employees. Strategic objective would be train employees on quality tools, perf measure would be hours of training on quality tools.
Baseline Performance
the current level of performance for the performance measure.
Strategic Iniatives
Plans for improvement
Value Chain
the sequence of business processes in which usefulness is added to the products or services of a company.
3 Processes of Value Chain
1)Innovation Process
2)Operations Process
3)Post Sales Process
Characteristics of Balanced Scorecard
-Strategy focused
-Balanced
-Included financial and nonfinancial
-cause and effect linkages
-unique to the strategy
Performance Drivers
leading indicators
Outcome Performance Measures
lagging indicators
Strategy Maps
are diagrams of the cause and effect relationships between strategic objectives.
Value Based Metrics
Financial Performance Measures
-ROI
-Economic Profit
-Economic Value Added
-Cash Flow ROI
-Residual Income
When to use EVA
useful for incentive compensation. "Pay for Performance" is defined as creating financial value.
Cash Flow ROI
represents the average real cash return of all existing projects. IRR for all assets.
Profability Ratios
-Gross Margin
-Operating Profit Margin
-Return on Assets
-Return on Equity
-Dividend Payout Ratio
Asset Utilization Ratios
-Receivables Turnover
-Average Collection Period
-Inventory Turnover
-Fixed Asset Turnover
-Total Asset Turnover
Liquidity Ratios
-Current Ratio
-Quick Ratio
Debt Utilization Ratio
-Debt to total Assets
-Debt to Equity
-Times interest earned
Market Ratios
-Price/Earnings Ratio
-Market-Book Ratio
Horizontal Analysis
an evaluation of the firm's ratios and trends over time.
Cross Sectional Analysis
involves benchmarking the ratios against ratios of similar firms at a point in time. (Industry Averages)
Common Size Income Statement
all revenues and expenses are presented as a percentage of net sales.
Vertical analysis
development of common size financial statements.
Limitations of Financial Ratios
-other firms in the industry may not be comparable
-industry averages may not be reliable
-variations in way ratios are calculated
-financial statements contain estimates that might distort results
-ratios do not provide a balanced view of performance.
Internal Benchmarking
compares similar operations within different units of the same organization
Competitive Benchmarking
targets processes and methods used by an organization's direct competiitors.
Functional Benchmarking
compares similar functions within the same broad industry.
Generic Benchmarking
compares processes that are independent of industry.
Total Quality Management
focuses on managing the organization to excel in all dimensions of products an d services for customers.
Six Sigma
a satistical measure expressing how close a product comes to its quality goal. Six Sigma is 99.99999 percent perfect.
ISO 9000
standards agreed upon by the International Organization for Standardization. 9000-9004
ISO 14000
developed to control the impact of an organization's activities on the environment and focuses on reducing the cost of waste management.
Total Quality Control
application of quality principles to all company activities.
Kaizen
the japanese art of continous improvement. Underlies total quality management and just in time business techniques.
Cause and effect diagrams
identifies four categories of potential causes of failure.
4 Categories of Cause and Effect Diagrams
-human factors
-methods and design factors
-machine related factors
-materials and components factors.
Poka Yoke
involves making the workplace mistake proof.
Theory of Constraints
methods to maximize operating income when faced with bottleneck operations.
Bottleneck Resources
any operation where the capacity is less than the demand placed upon it.
Nonbottleneck Resources
have capacity greater than demand.
Throughput Contribution
revenues minus the direct materials cost of goods sold.
Operating Costs
salaries and wages, rental expense, utilities, and depreciation.
Cost of Quality
based on philosophy that failures have an underlying cause, prevention is cheaper than failures, and cost of quality can be measured.
4 Components of Cost of Quality
-Prevention Cost
-Appraisal Cost
-Internal Failure Cost
-External Failure Cost
Prevention Cost
cost of any quality activity designed to help do the job right the first time.
Example: Quality Training, Supervision of Prevention activities.
Appraisal Cost
cost of quality control including testing and inspection. Designed to test deffective products.
Example:test and inspection of incoming materials.
Internal Failure Cost
costs incurred when substandard products are produced but discovered before shipment to the customer.

Example:Scrap, Spoilage, Reinspection on reworked products.
External Failure Cost
cost incurred for products that do not meet requirements of the customer and have reached the customer.

Example: Product Recalls