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Performance measure. Throughout this book, the term performance measure refers to an indicator used by management to measure, report, and improve performance. Performance measures are classed as key result indicators, result indicators, performance indicators, or key performance indicators. Critical success factors (CSFs). CSFs are the list of issues or aspects of organizational performance that determine ongoing health, vitality, and wellb..
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Douglas W. Hubbard |
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3f0cf6a
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Very few experts actually measure their performance over time, and they tend to summarize their memories with anecdotes. They are right sometimes and wrong sometimes, but the anecdotes they remember tend to be more flattering to them.
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Douglas W. Hubbard |
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7e95a6e
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Why do we care about measurements at all? There are just three reasons. The first reason--and the focus of this book--is that we should care about a measurement because it informs key decisions. Second, a measurement might also be taken because it has its own market value (e.g., results of a consumer survey) and could be sold to other parties for a profit. Third, perhaps a measurement is simply meant to entertain or satisfy a curiosity (e.g..
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Douglas W. Hubbard |
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c1d25ae
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Modeling the world mathematically is as uniquely a human trait as language or art, but you would rarely find anyone complaining of being "reduced to a poem" or "reduced to a painting."
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Douglas W. Hubbard |
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e3f7520
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If it's really that important, it's something you can define. If it's something you think exists at all, it's something you've already observed somehow. * If it's something important and something uncertain, you have a cost of being wrong and a chance of being wrong. * You can quantify your current uncertainty with calibrated estimates. * You can compute the value of additional information by knowing the "threshold" of the measurement where..
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Douglas W. Hubbard |
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7d4058d
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Instead of being overwhelmed by the apparent uncertainty in such a problem, start to ask what things about it you do know.
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Douglas W. Hubbard |
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1dbb056
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If we incorrectly think that measurement means meeting some nearly unachievable standard of certainty, then few things will be measurable even in the physical sciences.
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Douglas W. Hubbard |
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55845ba
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Measurement: A quantitatively expressed reduction of uncertainty based on one or more observations.
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Douglas W. Hubbard |
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8dfe55e
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we know that decision makers will experience an increase in confidence in their decisions even when the analysis or information-gathering methods are found to be ineffectual. This is part of what Dawes called the "illusion of learning."
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Douglas W. Hubbard |
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a606d35
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Anything currently estimated using expensive survey methods can be researched in different ways by any Internet-literate college student.
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Douglas W. Hubbard |
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2204f91
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What they really mean is that "numbers can be used to confuse people, especially the gullible ones lacking basic skills with numbers." With this, I completely agree,"
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Douglas W. Hubbard |
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0c95b22
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One of our measurement mentors, Enrico Fermi, was an early user of what was later called a "Monte Carlo simulation."
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Douglas W. Hubbard |
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67fcf87
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The fact is that the preference for ignorance over even marginal reductions in ignorance is never the moral high ground.
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Douglas W. Hubbard |
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9bf3677
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Consider these statistics. It used to cost Farm Journal, a client of Key Survey, an average of $4 to $5 per respondent for a 40- to 50-question survey of farmers. Now, using Key Survey, it costs Farm Journal 25 cents per survey, and it is able to survey half a million people.
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Douglas W. Hubbard |
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fb42fcd
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We need to lose less often in the fight against the bad guys. Or, at least, lose more gracefully and recover quickly.
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Douglas W. Hubbard |
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4994184
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We find no sense in talking about something unless we specify how we measure it; a definition by the method of measuring a quantity is the one sure way of avoiding talking nonsense. . . . --Sir Hermann Bondi, mathematician and cosmologist3
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Douglas W. Hubbard |
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e65b43d
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The fact is that the preference for ignorance over even marginal reductions in ignorance is never the moral high ground. If decisions are made under a self-imposed state of higher uncertainty, policy makers (or even businesses like, say, airplane manufacturers) are betting on our lives with a higher chance of erroneous allocation of limited resources. In measurement, as in many other human endeavors, ignorance is not only wasteful but can a..
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Douglas W. Hubbard |
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f4a1331
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the objection to using stats boils down to nothing more than an irrational fear of numbers causing some to believe math somehow detracts from understanding or appreciation
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Douglas W. Hubbard |
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1524670
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Bandwagon bias.
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Douglas W. Hubbard |
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6d8e693
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The most important questions of life are indeed, for the most part, really only problems of probability. --Pierre Simon Laplace, Theorie Analytique des Probabilites, 1812
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Douglas W. Hubbard |
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5fe70e2
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Knowing something about the monetary value and cost of the information in a measurement puts a new light on what is "measurable." If someone says a measurement would be too expensive, we have to ask, "Compared to what?" If a measurement that would just reduce uncertainty by half costs $50,000 but the EVPI is $5,000,000, then the measurement certainly is not "too expensive." Indeed, it would be a bargain. But if the information value is zero..
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Douglas W. Hubbard |
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09e0106
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Any decision we think we are about to make is something that can be Googled before we commit to a choice.
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Douglas W. Hubbard |
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3353547
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It is not too bold a statement to say that a software development project is one of the riskiest investments a business makes. For example, the chance of a large software project being canceled increases with project duration. In the 1990s, those projects that exceeded two years of elapsed calendar time in development had a default rate that exceeded the worst rated junk bonds (something over 25%).
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Douglas W. Hubbard |
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fa46155
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Is a programmer who gets 99% of assignments done on time and 95% error free better than one who gets only 92% done on time but with a 99% error-free rate? Is total product quality higher if the defect rate is 15% lower but customer returns are 10% higher? Is "strategic alignment" higher if the profit went up by 10% but the "total quality index" went down by 5%?"
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Douglas W. Hubbard |
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1f18697
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Once managers figure out what they mean and why it matters, the issue in question starts to look a lot more measurable.
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Douglas W. Hubbard |
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77e038f
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Myth: When you have a lot of uncertainty, you need a lot of data to tell you something useful. Fact: If you have a lot of uncertainty now, you don't need much data to reduce uncertainty significantly. When you have a lot of certainty already, then you need a lot of data to reduce uncertainty significantly. In other words--if you know almost nothing, almost anything will tell you something.
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Douglas W. Hubbard |
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10f70fe
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Hoshin Kanri Business Methodology The balanced scorecard had its origins in Hoshin Kanri, so it is appropriate to examine this business methodology. As I understand it, translated, the term means a business methodology for direction and alignment. This approach was developed in a complex Japanese multinational where it is necessary to achieve an organization-wide collaborative effort in key areas. One tenet behind Hoshin Kanri is that all e..
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Douglas W. Hubbard |
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1336c70
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Success is a function of persistence and doggedness and the willingness to work hard for twenty-two minutes to make sense of something that most people would give up on after thirty seconds. --Malcolm Gladwell, Outliers: The Story of Success
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Douglas W. Hubbard |
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b403654
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It seems that to have a truly profound revelation, you almost always have to look at something other than what you have been looking at in the past. Being able to compute the value of information has caused organizations to look at completely different things--and doing so has frequently resulted in a surprise that changed the direction of a major decision.
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Douglas W. Hubbard |
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982f6d9
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For all practical decision-making purposes, we need to treat measurement as observations that quantitatively reduce uncertainty. A mere reduction, not necessarily elimination, of uncertainty will suffice for a measurement.
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Douglas W. Hubbard |
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134130d
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measure what matters, make better decisions.
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Douglas W. Hubbard |
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the traditional form of Hoshin Kanri, there is a grouping of four perspectives. It is no surprise that the balanced scorecard perspectives are mirror images (see Exhibit 1.8). As with the balanced scorecard, Hoshin Kanri can be improved with the introduction of employee satisfaction and environment and community. EXHIBIT 1.8 Similarities between Hoshin Kanri and Balanced Scorecard Perspectives
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Douglas W. Hubbard |
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adc776e
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A problem well stated is a problem half solved. --Charles Kettering (1876-1958), American inventor, holder of 300 patents, including electrical ignition for automobiles There is no greater impediment to the advancement of knowledge than the ambiguity of words. --Thomas Reid (1710-1769), Scottish philosopher
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Douglas W. Hubbard |
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2b3c3a2
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1. Key result indicators (KRIs) tell you how you have done in a perspective or critical success factor. 2. Result indicators (RIs) tell you what you have done. 3. Performance indicators (PIs) tell you what to do. 4. KPIs tell you what to do to increase performance dramatically. EXHIBIT 1.1 Four Types of Performance Measures
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Douglas W. Hubbard |
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84dc2b3
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The common characteristic of these measures is that they are the result of many actions. They give a clear picture of whether you are traveling in the right direction. They do not, however, tell you what you need to do to improve these results. Thus, KRIs provide information that is ideal for the board (i.e., those people who are not involved in day-to-day management). KRIs typically cover a longer period of time than KPIs; they are reviewe..
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Douglas W. Hubbard |
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1d8e391
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Establishment of a quarterly rolling planning regime, wherein management both sets out its revenue and expenditure requirements for the next 18 months and seeks approval for expenditure planned for the next 3 months, is a key requirement for beyond budgeting management. Each quarter, before approving these estimates, management sees the bigger picture six quarters out. While firming up the short-term numbers for the next three months, all s..
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Douglas W. Hubbard |
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15b04b9
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It is the mark of an educated mind to rest satisfied with the degree of precision which the nature of the subject admits and not to seek exactness where only an approximation is possible. --Aristotle (384 b.c.-322 b.c.)
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Douglas W. Hubbard |
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5674dbe
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what makes a measurement of high value is a lot of uncertainty combined with a high cost of being wrong.
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Douglas W. Hubbard |
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087d6c5
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The PIs help teams to align themselves with their organization's strategy. PIs are nonfinancial and complement the KPIs; they are shown with KPIs on the scorecard for each organization, division, department, and team. Performance indicators that lie beneath KRIs could include: Percentage increase in sales with top 10% of customers Number of employees' suggestions implemented in last 30 days Customer complaints from key customers Sales calls..
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Douglas W. Hubbard |
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9336c20
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Understanding how to measure uncertainty is key to measuring risk. Understanding risk in a quantitative sense is key to understanding how to compute the value of information. Understanding the value of information tells us what to measure and about how much effort we should put into measuring it.
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Douglas W. Hubbard |
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da72089
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Result indicators that lie beneath KRIs could include: Net profit on key product lines Sales made yesterday Customer complaints from key customers Hospital bed utilization in week
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Douglas W. Hubbard |
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e5fefdb
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researchers have run experiments25 showing that experts can be trained to be better at estimating probabilities by applying a battery of estimation tests, giving the experts a lot of quick, repetitive, clear feedback along with training in techniques for improving subjective probabilities.
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Douglas W. Hubbard |
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693cd0b
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Bertrand Russell once said, "Mathematics, rightly viewed, possesses not only truth, but supreme beauty. . . ."
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Douglas W. Hubbard |
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2c5eddd
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One example is how Amazon.com provides free gift wrapping in order to help track which books are purchased as gifts. At one point Amazon was not tracking the number of items sold as gifts; the company added the gift-wrapping feature to be able to track it. Another example is how consumers are given coupons so retailers can see, among other things, what newspapers their customers read. Inexpensive personal sensors and apps for smart devices ..
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Douglas W. Hubbard |