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The Four Sets of
Diagnostic Tools
To
manage the current business,
executives require a four sets of diagnostic tools: foundation information;
productivity information; competence information; and resource-allocation
information. Measurements must be
quantitative, systematic and proactive in order to support the
corporate culture
and
decision-making process.
Once managers know what
information they need for their work and what information they owe to
others, they can develop methods to turn "the chaos of data into organized
and focused information".3
Foundation Information
It refers to basic business
documents such as
cashflows,
balance sheets,
profit-loss
statements, sales, and other various conventional business ratios. Any
abnormality in these documents indicates a problem that need to be
identified and treated.
Productivity Information
It looks at the productivity of
key resources, including labor. You would also need measures like "economic
value-added analysis" to demonstrate that your business is earning more than
it capital costs, together with
benchmarking to show that its performance is as good as or better than
the best competition.
Competence Information
Though it's not a easy task, try
to define measurements, or if this is not possible – assessments, for your
core competences as well as your performance in the area of
innovation management. "Every
organization, not only businesses, need one core competence:
innovation," asserts
Peter Drucker.
Ask yourself questions such as:
"How many of the truly important innovation opportunities did we miss? Why?
Because we didn't see them? Or because we saw them but dismissed them?"
Resource-Allocation Information
In addition to traditional
measures of capital employment – return on investment, payback period,
cashflow, or discounted present value, to understand a proposed
investment, ask the two key questions:
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What will happen if the
investment fails to produce the promised results? Would it seriously
hurt the company?
-
If the investment is
successful, especially more so than we expect, what will it commit
us to?
"The is no better way to improve
an organization's performance than to measure the results of capital
spending against the promises and expectations that led to its
authorizations".
Capital, however, is only one key
resource of the organization. "The scarcest resources are performing
people." Place people, as purposefully and thoughtfully as capital, with
specific expectations as to what the appointee should achieve and with
systematic appraisal of the outcome.
Total Quality
Control (TQC): Japanese Approach
Japanese TQC practice
is based on the Kaizen strategy,
that deals with quality of people rather than products. TQC is everybody's
responsibility, a company-wide continuous activity involving all employees,
systems, software and hardware. TQC is also process oriented and aimed at
improving the total performance of the organization.
The seven main features of TQC
movement in Japan are:
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Company-wide TQC
-
Emphasis on education and training
-
Quality control (QC) circles involving small groups of volunteers
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TQC audits
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Use of statistical methods
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Continuous upgrading of standards, and
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Nation-wide TQC movement
Balanced Scorecard
The Balanced Scorecard is a framework for
designing a set of measures for activities chosen by you as being the key
drivers of your business. By having four distinct perspectives (financial,
customer, internal process and innovation and learning) it promotes a more
holistic view of the business...
More
Control
Systems for Strategic Management
In
strategic management, control systems deal with the fundamental question
of whether or not resources (people, capital, hardware, and software) are
being used to move the organization towards its goals and what should be
done if this is not the case. Different approaches used in strategic
management include controls based on inputs; controls based on outcomes; and
controls based on understanding inputs and outcomes.
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