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TheOrganizationasaSystemofActivitiesChapter2TheOrganizationasaSystLearningObjective1

Understandhoworganizationsdefineobjectivesandusetheseobjectivestodefineoperatingpriorities.LearningObjective1 UnderstanTheNatureoftheOrganization’sObjectivesStrategyischoosingtargetcustomersanddecidinghowtoservethosecustomers.Strategicchoicesaremadewithinthecontextoftheobjectivesthattheorganization’sprincipalshaveset.Customersprovidetheorganization’sprimaryfocus.TheNatureoftheOrganizatiTheNatureoftheOrganization’sObjectivesWhatisaperformancemeasurementsystem?Itisasystemofintegratedmeasuresdevelopedbyorganizationstoassesstheperformanceofthevaluechain.TheNatureoftheOrganizatiTheNatureoftheOrganization’sObjectivesStakeholderGroupsOrganizationPartnersCustomersEmployeesOwnersorPrincipalsGeneralCommunityTheNatureoftheOrganizatiStrategicPlanningElementsPoolofPotentialCustomersTargetCustomersCustomers’ObjectivesOrganizationObjectivesProcessDesignandObjectivesStrategicPlanningElementsPooStrategicPlanningElementsProcessDesignandObjectivesPartnersEmployeesCommunityStrategicPlanningElementsProTheThreeLevelsofStrategyOrganizationalLevelBusinessLevelOperationalLevelTheThreeLevelsofStrategyOrLearningObjective2

Understandtheinsightsgainedwhenwethinkoftheorganizationasasequenceofactivitiesinavaluechain.LearningObjective2 UnderstanTheOrganizationasaSequenceofActivitiesoraValueChainAdministrativeActivitiesProcessingActivitiesMakingMovingStoringInspecting

InternalSupportPersonnelFinanceLegalAccountingResearchTheOrganizationasaSequenceTheOrganizationasaSequenceofActivitiesoraValueChain

ProductionActivitiesInputActivitiesProductdesignProcessdesignPurchasingReceivingHiringTrainingProcessingActivitiesTheOrganizationasaSequenceTheOrganizationasaSequenceofActivitiesoraValueChainSalesandPost-salesActivitiesOutputActivitiesProcessingActivitiesSellingShippingServiceTheOrganizationasaSequenceTheOrganizationasaSequenceofActivitiesoraValueChainItisusefultothinkofanorganizationasasequenceofactivitieswhoseoutputisagoodorservice.Thissequenceofactivitiesisalsoknownasavaluechain.Eachstepinthechainshouldcontributemoretotheultimatevalueoftheproductthatitscost.TheOrganizationasaSequenceTheOrganizationasaSequenceofActivitiesoraValueChainHowareactivitiesdefined?Anactivityisaunitofwork,ortask,withaspecificgoal.Activitiesareimportantbecausetheycreatecosts.Whatarethefourbroadclassesofactivitiesinthevaluechain?TheOrganizationasaSequenceTheOrganizationasaSequenceofActivitiesoraValueChainCustomermanagementactivitiesInnovationactivitiesOperationsactivitiesServiceactivitiesTheOrganizationasaSequenceFocusingtheValueChainWhattheCustomerWantsWhattheCustomerisPromisedWhattheCustomerisGivenServiceGapQualityGapFocusingtheValueChainWhattLearningObjective3

Understandhowperformancemeasureshelporganizationmembersmanagethevaluechain.LearningObjective3 UnderstanOrganizationandProcessControlOrganizationcontrolistheactivityofensuringthattheorganizationisontracktowardachievingitsobjectives.Whatarethefourcomponentsoforganizationcontrol?SpecifyingobjectivesCommunicatingobjectivestoorganizationmembersOrganizationandProcessContrOrganizationandProcessControlMonitoringperformancerelatingtoobjectivesActingondiscrepanciesbetweenactualandtargetperformanceOrganizationandProcessContrReflectingtheCustomerPerspectiveThefirm’sperformancemeasuresshouldcommunicateandsummarizethethingsthatarecriticaltotheorganization’ssuccessinmeetingtherequirementsofitstargetcustomers.Organizationsshouldsystematicallymeasurewhattheirtargetcustomerswantandvalue.ReflectingtheCustomerPerspeReflectingtheCustomerPerspectiveWhatarecustomer-validatedperformancemeasures?Thesearemeasuresthatreflectcustomerrequirementsandhelpemployeesmanagethevaluechain’sprocessesandactivities.Employeesconcentratetheirattentiononimprovingwhatmatterstothecustomer.ReflectingtheCustomerPerspeUsingtheCustomer’sValidationAninputiswhattheorganizationputsintoaprocess.Anoutputisaphysicalmeasureofactivity.Anoutcomeiswhatthecustomervaluesastheresultoftheactivity.UsingtheCustomer’sValidatioUsingtheCustomer’sValidationProcessareactivitieswhichtransformresourcesintooutputsOutcomesarehowthecustomervaluestheresultoftheactivityInputsareresourcesusedinactivitiesOutputsarephysicalmeasuresofactivityUsingtheCustomer’sValidatioReflectingComprehensiveInformationAneffectiveprogramofperformancemeasurementassessesallfacetsofrelevantperformance.Relevantbutunmeasuredfacetsofperformancemustnotbetradedforperformanceonmeasuredfacets.ReflectingComprehensiveInforProvidingFeedbackAneffectiveperformancemeasurementprogramwillhelpthepeoplewhomanagethevaluechainidentifyproblemsandsuggestsolutions.ProvidingFeedbackAneffectivePerformanceMeasuresasAidsinOperationsControlControlmaybeexercisedby…Ensuringcompliancewithstandardoperatingprocedures(task

control).Motivatingpeopletobecreativeinmeetingcustomerobjectives(results

control).PerformanceMeasuresasAidsPerformanceTargetsHowdoorganizationssetprocessperformancetargets?Somearebasedonestimated

potential.Somearebasedonimproving

performance.Somearebasedonwhatthe“bestinthe

class”aredoing.Choosetargetsthatmeetorexceed

customer

expectations.PerformanceTargetsHowdoorgaPerformanceTargetsBenchmarking

istheprocessofstudyingandadaptingthebestpracticesofotherorganizationsinordertoimprovethefirm’sownperformance.PerformanceTargetsBenchmarkinLearningObjective4

Understandtheprocessthatorganizationscanusetoreducecostsbyfocusingonactivityperformance.LearningObjective4 UnderstanCostasaProcessPerformanceMeasureTherearethreetypesofprocessperformancemeasures…costqualityserviceHistorically,managementaccountingemphasizedcost.CostasaProcessPerforCostasaProcessPerformanceMeasureInthepast,costinformationsupportedaprocesscalledmanagingbythenumbers.Whataresomeproblemswithmanagingbythenumbers?IneffectiveAssumescosttobetheonlyrelevantmeasureofperformanceDoesnotrecognizethereasonsforcostsCostasaProcessPerforCostasaProcessPerformanceMeasureWhatislifecyclecosting?Itisasystematicconsiderationofproduct’scostsduringtheproduct’slifetime:DevelopmentcostsandintroductioncostsProductioncostsDistributioncostsAfter-salesandtake-backcostsProductabandonmentcostsCostasaProcessPerforUnderstandingtheCausesofCostsImprovingcostperformancerequiresanexaminationoftheneed,efficiency,andeffectivenessofexistingactivitiesandanynewactivitiesoverthetotallifecycleoftheproductorservice.Understandingthe

ActivityorValueAnalysisWhatisactivityanalysis?Itisanapproachtooperationscontrolalsoknowasvalueanalysisoractivitybasedmanagement.Anactivityisanydiscretetaskthatanorganizationundertakestomakeordeliveraproductorservice.ActivityorValueAnalysisWha

ActivityorValueAnalysisWhatarethestepsinactivityanalysis?Identifytheprocessobjectives.Charttheactivitiesusedtocompletetheproductorservice.Classifyactivities.Continuouslyimprove.Wheneverpossible,eliminateactivities.ActivityorValueAnalysisWhaEndofChapter2EndofChapter2TheOrganizationasaSystemofActivitiesChapter2TheOrganizationasaSystLearningObjective1

Understandhoworganizationsdefineobjectivesandusetheseobjectivestodefineoperatingpriorities.LearningObjective1 UnderstanTheNatureoftheOrganization’sObjectivesStrategyischoosingtargetcustomersanddecidinghowtoservethosecustomers.Strategicchoicesaremadewithinthecontextoftheobjectivesthattheorganization’sprincipalshaveset.Customersprovidetheorganization’sprimaryfocus.TheNatureoftheOrganizatiTheNatureoftheOrganization’sObjectivesWhatisaperformancemeasurementsystem?Itisasystemofintegratedmeasuresdevelopedbyorganizationstoassesstheperformanceofthevaluechain.TheNatureoftheOrganizatiTheNatureoftheOrganization’sObjectivesStakeholderGroupsOrganizationPartnersCustomersEmployeesOwnersorPrincipalsGeneralCommunityTheNatureoftheOrganizatiStrategicPlanningElementsPoolofPotentialCustomersTargetCustomersCustomers’ObjectivesOrganizationObjectivesProcessDesignandObjectivesStrategicPlanningElementsPooStrategicPlanningElementsProcessDesignandObjectivesPartnersEmployeesCommunityStrategicPlanningElementsProTheThreeLevelsofStrategyOrganizationalLevelBusinessLevelOperationalLevelTheThreeLevelsofStrategyOrLearningObjective2

Understandtheinsightsgainedwhenwethinkoftheorganizationasasequenceofactivitiesinavaluechain.LearningObjective2 UnderstanTheOrganizationasaSequenceofActivitiesoraValueChainAdministrativeActivitiesProcessingActivitiesMakingMovingStoringInspecting

InternalSupportPersonnelFinanceLegalAccountingResearchTheOrganizationasaSequenceTheOrganizationasaSequenceofActivitiesoraValueChain

ProductionActivitiesInputActivitiesProductdesignProcessdesignPurchasingReceivingHiringTrainingProcessingActivitiesTheOrganizationasaSequenceTheOrganizationasaSequenceofActivitiesoraValueChainSalesandPost-salesActivitiesOutputActivitiesProcessingActivitiesSellingShippingServiceTheOrganizationasaSequenceTheOrganizationasaSequenceofActivitiesoraValueChainItisusefultothinkofanorganizationasasequenceofactivitieswhoseoutputisagoodorservice.Thissequenceofactivitiesisalsoknownasavaluechain.Eachstepinthechainshouldcontributemoretotheultimatevalueoftheproductthatitscost.TheOrganizationasaSequenceTheOrganizationasaSequenceofActivitiesoraValueChainHowareactivitiesdefined?Anactivityisaunitofwork,ortask,withaspecificgoal.Activitiesareimportantbecausetheycreatecosts.Whatarethefourbroadclassesofactivitiesinthevaluechain?TheOrganizationasaSequenceTheOrganizationasaSequenceofActivitiesoraValueChainCustomermanagementactivitiesInnovationactivitiesOperationsactivitiesServiceactivitiesTheOrganizationasaSequenceFocusingtheValueChainWhattheCustomerWantsWhattheCustomerisPromisedWhattheCustomerisGivenServiceGapQualityGapFocusingtheValueChainWhattLearningObjective3

Understandhowperformancemeasureshelporganizationmembersmanagethevaluechain.LearningObjective3 UnderstanOrganizationandProcessControlOrganizationcontrolistheactivityofensuringthattheorganizationisontracktowardachievingitsobjectives.Whatarethefourcomponentsoforganizationcontrol?SpecifyingobjectivesCommunicatingobjectivestoorganizationmembersOrganizationandProcessContrOrganizationandProcessControlMonitoringperformancerelatingtoobjectivesActingondiscrepanciesbetweenactualandtargetperformanceOrganizationandProcessContrReflectingtheCustomerPerspectiveThefirm’sperformancemeasuresshouldcommunicateandsummarizethethingsthatarecriticaltotheorganization’ssuccessinmeetingtherequirementsofitstargetcustomers.Organizationsshouldsystematicallymeasurewhattheirtargetcustomerswantandvalue.ReflectingtheCustomerPerspeReflectingtheCustomerPerspectiveWhatarecustomer-validatedperformancemeasures?Thesearemeasuresthatreflectcustomerrequirementsandhelpemployeesmanagethevaluechain’sprocessesandactivities.Employeesconcentratetheirattentiononimprovingwhatmatterstothecustomer.ReflectingtheCustomerPerspeUsingtheCustomer’sValidationAninputiswhattheorganizationputsintoaprocess.Anoutputisaphysicalmeasureofactivity.Anoutcomeiswhatthecustomervaluesastheresultoftheactivity.UsingtheCustomer’sValidatioUsingtheCustomer’sValidationProcessareactivitieswhichtransformresourcesintooutputsOutcomesarehowthecustomervaluestheresultoftheactivityInputsareresourcesusedinactivitiesOutputsarephysicalmeasuresofactivityUsingtheCustomer’sValidatioReflectingComprehensiveInformationAneffectiveprogramofperformancemeasurementassessesallfacetsofrelevantperformance.Relevantbutunmeasuredfacetsofperformancemustnotbetradedforperformanceonmeasuredfacets.ReflectingComprehensiveInforProvidingFeedbackAneffectiveperformancemeasurementprogramwillhelpthepeoplewhomanagethevaluechainidentifyproblemsandsuggestsolutions.ProvidingFeedbackAneffectivePerformanceMeasuresasAidsinOperationsControlControlmaybeexercisedby…Ensuringcompliancewithstandardoperatingprocedures(task

control).Motivatingpeopletobecreativeinmeetingcustomerobjectives(results

control).PerformanceMeasuresasAidsPerformanceTargetsHowdoorganizationssetprocessperformancetargets?Somearebasedonestimated

potential.Somearebasedonimproving

performance.Somearebasedonwhatthe“bestinthe

class”aredoing.Choosetargetsthatmeetorexceed

customer

expectations.PerformanceTargetsHowdoorgaPerformanceTargetsBenchmarking

istheprocessofstudyingandadaptingthebestpracticesofotherorganizationsinordertoimprovethefirm’sownperformance.PerformanceTargetsBenchmarkinLearningObjective4

Understandtheprocessthatorganizationscanusetoreducecostsbyfocusingonactivityperformance.LearningObjective4 UnderstanCostasaProcessPerformanceMeasureTherearethreetypesofprocessperformancemeasures…cost

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