Lecture 7B - The Voice of the Market (Chapter 6)

1. Lecture 7B - The Voice of the Market (Chapter 6) Benchmarking, Performance Monitoring

2. SJSU Bus. 142 David Bentley “Voice of the Market”

3. SJSU Bus. 142 David Bentley Beat in Class Benchmarking

4. SJSU Bus. 142 David Bentley Benchmarking

5. SJSU Bus. 142 David Bentley “Benchmark”

6. SJSU Bus. 142 David Bentley Purposes of Benchmarking

7. SJSU Bus. 142 David Bentley Difficulties in Monitoring and Measuring Performance

8. SJSU Bus. 142 David Bentley Commonly Benchmarked Performance Measures

9. Productivity SJSU Bus 142 - David Bentley 9

10. Productivity – Macro vs. Micro Macro productivity Country as a whole or a region of the country Sectors of the economy Individual industries Micro productivity A small work group or team An individual worker SJSU Bus 142 - David Bentley 10

11. Productivity - Micro Productivity = Output / Input Single factor productivity Usually labor productivityinput Multi-factor productivity Usually labor, material and overhead productivityinputs, where overhead may include fixed and variable SJSU Bus 142 - David Bentley 11

12. Productivity - Micro Single factor productivity Example: Carpet laid in 8 hours = 720 sqyds; crew size = 4 installers; hourly productivity per worker = ? 720 sqyds / 4 workers x 8 hrs = 22.5 sqyds/hr Multi-factor productivity Example: 7,040, valued at $1, units produced in a day; 5 workers paid $25 per hour; fixed OH = $520 per day; variable overhead = 200% of direct labor cost (7,040 units x $1.00) / $1,000 + $520 + $2,000 = 2 SJSU Bus 142 - David Bentley 12

13. Productivity – TFP & MFP Total Factor Productivity (TFP) Effects in total output not caused by inputs Incorporates technological progress, management techniques, smart work Developed by Robert Solow (MIT) Won Nobel Prize for Economics in 1987 Multifactor Productivity (MFP) Considers labor, material, and capital inputs More reasonable than labor productivity in most cases SJSU Bus 142 - David Bentley 13

14. SJSU Bus. 142 David Bentley Benchmarking and Company Objectives

15. SJSU Bus. 142 David Bentley Best-In-Class Benchmarking

16. SJSU Bus. 142 David Bentley Best-Of-The-Best Benchmarking

17. Business Process Benchmarking Business Process Questions

18. SJSU Bus. 142 David Bentley 5W2H Approach • What? Subject • Why? Purpose • Where? Location • When? Timing/sequence • Who? People involved • How? Method • How much? Cost/impact

19. SJSU Bus. 142 David Bentley Eliminate Unnecessary Tasks

20. SJSU Bus. 142 David Bentley Change the Sequence or Combination

21. SJSU Bus. 142 David Bentley Simplify the Task

22. SJSU Bus. 142 David Bentley Select an ImprovementMethod

23. Robert Camp’s 10 Steps

24. Robert C. Camp • Principal of the Best Practice Institute • Retired Manager, Benchmarking Competency, Quality Office, USCO, Xerox • Author of three books on benchmarking

25. SJSU Bus. 142 David Bentley Robert Camp’s 10 Steps

26. SJSU Bus. 142 David Bentley Robert Camp’s 10 Steps

27. SJSU Bus. 142 David Bentley Robert Camp’s 10 Steps

28. SJSU Bus. 142 David Bentley Leading and Managing the Benchmarking Effort

29. SJSU Bus. 142 David Bentley Leading and Managing the Benchmarking Effort

30. SJSU Bus. 142 David Bentley Leading and Managing the Benchmarking Effort

31. SJSU Bus. 142 David Bentley Leading and Managing the Benchmarking Effort

32. SJSU Bus. 142 David Bentley Problems with Benchmarking

33. SJSU Bus. 142 David Bentley Summary