Performance Evaluation Tools for SASO - Case Study Example

Running Head: Performance Evaluation Tools for SASO Student’s Name: Instructors Name: Course Code and Name: Institution: Date Assignment is due: Performance Evaluation Tools for SASO Introduction The application of performance measurement in organisations form an effective technique for enhancing continuous improvement within the organisation through identifying strengths and shortcomings of the organisation’s strategies. In essence, it is the basis for evaluating the achievement of objectives and strategies within the organisation and hence establishes whether it is performing optimally. Analysis of organisation through a performance evaluation culminates in the establishment of better strategies to meet the organisation’s objectives and to mitigate its shortcomings in meeting these objectives. This paper seeks to determine the most appropriate tools for Saudi Standards, Metrology and Quality organization (SASO) to use in performance evaluation in order to enhance efficiency and continuity. The choice of tools is based on a specific procedure that will involve identifying 10 criterions for consideration. Methodology This study will utilize both the primary and secondary method in collecting data relevant to the formulation of performance measurement tools that SASO could utilise in enhancing productivity. The primary data will involve obtaining information about the organisational strategies and objectives and how they have been achieved so far. The respondents, who will be required to fill a questionnaire, will also indicate their views on the organisation, strengths and challenges that have been identified (Orcher, 2005, p. 91). Secondary sources will include books and journals which will offer an insight on performance management. Through a study of various case studies of tools used by other companies, this project will culminate in the establishment of effective performance measurement tools, which will play a significant role in enhancing performance at SASO. Saudi Standards, metrology and Quality organization (SASO) The Saudi Standards, metrology and Quality organization (SASO) is a corporate organization that concerns itself with the issuance of Saudi Standards and the implementation of Quality Systems. This is conducted in different fields including agricultural and food products, petroleum products, mineral products, construction products, building materials, electronic products and textile products among others. SASO’s customers include companies and factories, whose products’ qualities need to be reviewed for quality before they can be distributed to customers. The organization, which has 900 employees, aims at improving quality in products, with an objective of protecting customers’ health and safety. SASO was established in accordance to the Royal Decree No. M/10, which was issued on 17th April 1972 and its Board of Directors is headed by the Minister of Commerce and Industry. In the year 2008, SASO became ISO9001 certified, following the implementation of international standards in the organisation. The organisation’s vision is to be distinguished in all standardization and quality fields, nationally, regionally and internationally. Their goal is to protect consumers and protect public interest through issuing and applying standards and quality systems. The organisation also aims at preventing fraud and dumping of counterfeit products in the market. These functions are conducted by applying a combination of values, with leading ones being commitment to the Sharia Law, loyalty, neutrality, transparency and cooperation. The organisation regulates the standards for commodities and also maintains standards in calibration, metrology, marking, sampling, inspection, testing and identification of commodities. Further, it undertakes the role of publishing Saudi standards and promoting standardisation awareness. SASO has a 5-year plan in which it has an objective of improving the organisation’s effectiveness to a large extent. The plan whose implementation will begin in the year 2012 includes a goal of increasing the number of approved Saudi standards to 30000. Secondly, SASO wants to ensure that the number of industrial installations which take the Saudi Quality Mark to 500. Thirdly, SASO aims at increasing Saudi Arabia’s number of accredited laboratories to 200. The final objective in the plan is to increase the total number of samples analysed in SASO laboratories to 300,000 samples. Like any other organisation, SASO has been faced by various problems. Among the most prominent are financial resource difficulties which often lead to failure to develop the quality control measures. Further, there are weaknesses in the qualified technical cadres such that training new personnel is particularly challenging. Finally, awareness of the importance of national standards and the quality mark are highly limited among factories and companies. This to a large extent increases the amount of work that the organisation has to handle in creating awareness thus consuming a lot of resources. Defining a performance measurement system Performance management is best described as the evaluation of the organisation’s operation, including the input, output, productivity and transformation, with an objective of establishing its effectiveness and efficiency in accomplishing the set strategies. This is facilitated by performance criteria that seek to measure the company’s productivity in accordance with a stipulated set of rules, standards and objectives (Parker, 2000, p. 63-64; McDougall, Kelly, Hinks and Bititci, 2002, p. 143). Measurement is based on the stated criteria, which also defines the set standards at which the organisation can be described as average, above average or below average. In the least, an organisation must strive to attain the minimum standards set through proper utilisation of available resources; understanding the organisation’s internal and external environment; designing effective strategies to perform effectively under the prevailing environment; working on identified weaknesses; and mitigating threats in the environment (Shane, 2003, p. 16; Jackson, 2001, p. 63; Moeller, Breilinger & Esler, 2000, p. 255-256). Performance measurement is highly imperative for any organisation because it helps in identifying areas that need improvement and thus promote the achievement of the organisation’s objectives. Criteria for SASO's performance measurement 1) Customer satisfaction Customer satisfaction is among the most imperative aspects within the organisation because customers are the sole determinants of organisational success (Udo, Bagchi and Kirs, 2010, p. 485). This implies that the level of customer satisfaction at SASO is what will shape the organisation’s future. The management therefore must strive to ensure that customer’s needs are well catered for, both internally and externally. Including customer satisfaction as a measure for performance in SASO will be effective in establishing whether the organisation effectively meets its objectives and whether increased customer satisfaction could help improve the organisation’s performance. 2) Empowering employees Employees have been identified as a major asset in the contemporary organisation, such that they need to be constantly empowered. This may be done through learning and development as well as continued involvement in organizational decision making and added responsibility. Empowerment is an efficient motivation tool and is expected to have a positive impact on SASO’s productivity. Such empowerment is expected to build confidence among SASO employees and thereby increase their efficiency at work. This would further impact on foster the achievement of the organisation’s objectives because employees are likely to be more productive. It is therefore imperative for SASO’s performance evaluation to include empowerment in order to establish whether the employees are empowered and whether this has contributed in the achievements of the organisation’s objectives (Bryant, Jones & Widener, 2004, 131). 3) Evaluate the employee’s involvement The involvement of employees in decision making, problem solving and strategic mapping within the organisation is not only motivating for employees but also a catalyst for efficiency within the organisation. Employees provide valuable insights which promote the organisation’s process and performance (Gjerde and Hughes, 2007, p. 7). Furthermore, an organisation that involves its employees in decision making helps to nurture employee capabilities because they do not have to wait for instructions from their bosses in order to perform tasks. The performance evaluation must seek to establish the level of employee involvement within the organisation in order to establish how it will affect continuous improvement at SASO. 4) Assess the clarity of policy and strategy It can be undeniably justified that policy and strategy clarity determine the performance of employees and the overall outcome within the organisation. This is because employees will only work in accordance to the management’s expectations if the policies and strategies are well spelt out for them as opposed to where they do not understand them (Gimbert, Bisbe and Mendoza, 2010, p. 478). For this reason, they must be clear and concise to enhance understanding. Performance evaluation aimed at assessing the clarity of policy and strategy is important in enhancing SASO’s continuity as it will allow the organisation to make adjustments where necessary in order to maximise the organisation’s effectiveness. 5) Evaluate the teamwork Subsequent studies indicate that the importance of teamwork within modern organisational settings is highly valuable and that organisations are continuously seeking to derive values through requiring employees to work in teams. Teamwork is known to enhance productivity because it allows employees to chip in valuable ideas and hence perform quality work (Lussier and Achua, 2009, p. 61). Resources are also well utilised when teamwork is used such that SASO would benefit significantly by using teamwork. 6) Ensure the customer's feedbacks are measured Customer feedback is a benchmark for measuring the level of their satisfaction with an organisation’s services. The feedback generated from customer relationship tools helps an organisation to effectively focus on achieving higher performance levels through improving on weaknesses and capitalising on strengths identified by the customers (Udo, Bagchi and Kirs, 2010, p. 485). In essence, the feedback from customers helps in determining the direction that the organisation should take towards enhancing customer satisfaction. Accordingly, evaluation of customer feedback will play a significant role in improving the SASO’s performance. 7) Measure the key performance indicator It is highly imperative for SASO to maintain a record of key performance indicators (KPIs) in order to track the organisation’s performance. SASO’s KPIs would include increased companies seeking certification, increased netting of companies whose products are not certified and lesser customer complaints regarding the quality and quantity of goods obtained. Costs, income and profits for the organisation are also included among the KPIs because they indicate the strength of the company. Measuring KPIs in performance evaluation is therefore imperative in order to gauge and thereby enhance the performance of SASO (Gimbert, Bisbe and Mendoza, 2010, p. 479). 8) Evaluate the supplier performance The evaluation of supplier performance is significantly important because suppliers play a great role in enhancing the effectiveness of SASO. The organisation may not function without suppliers because they provide the tools with which its activities are conducted (Lee, Kwon and Severance, p. 445). Furthermore, suppliers have a role in influencing the organisation’s strategy and policy (Lee, Kwon and Severance, p. 445-446). SASO should therefore evaluate the performance of suppliers in order to enhance timely delivery and product quality; which will in turn enhance the firm’s effectiveness. 9) Assess the quality of service Customer satisfaction is to a large extent determined by the quality of service that they receive. This signifies that an organisation must strive to perform in accordance to the customers’ needs, hence the need for SASO to maintain the provision of high quality services to customers (Udo, Bagchi and Kirs, 2010, p. 482). Given that customers are an integral aspect of the organisation, it is important to ensure that their needs are met and consistently design ways of enhancing customer satisfaction. It is therefore important for the performance evaluation procedure undertaken to include a section to analyse SASO’s quality of service and how improvements may be done to enhance increased customer satisfaction. 10) Easy to implement and use In establishing the tools to be used for performance evaluation, SASO must ensure that these are easy to implement and use because difficulties in using them may render the tools ineffective (Bento and White, 2010, p. 3-5). This would allow members of the organisation to implement the tools to measure the performance without having to seek assistance from outside sources. Tools implementation The tools discussed below represent evaluation strategies that SASO can use in improving its performance. These are the tools that got the highest score as indicated in appendix 1. 1. Benchmarking Benchmarking emerges as one of the most valuable tools in performance evaluation because it offers organisations an opportunity to determine the industry’s best practices and thereby design ways of competing against other organisations in the industry. Organisations that make use of benchmarking target the best firms within the industry they operate in and then compare results and processes in these organisations to their own (Dervitsioti, 2000, p. s642; Jonex, 2001, p. 126). The objective is to learn how well these organisations perform and what can be learned from such processes, which are then implemented in the organisation. Specific indicators are used in the measurement of performance, with major dimensions being quality, time and cost. Benchmarking is a continuous process and organisations must seek to continually conduct such exercises to promote performance. Characteristics of benchmarking Focuses on a single process at all times Partners are selected following a thorough analysis of their performance and practices before finding out these partners' good practices. These are then adopted to improve the organisation's procedures and practices. The process involves comparison through actual visiting of partners. The information exchanged must be kept confidential. The Benchmarking Procedure The benchmarking procedure should start with the selection of a committee to oversee the process and determination of concepts to be studied during the performance evaluation process. The basic benchmarking procedure can be described as follows: Fig 1: Process for benchmarking This denotes a continuous process in which an organisation seeks to improve its performance through repeating the benchmarking procedure from time to time. It is highly important for an organisation to establish effective role model companies to be used for analysing its performance. The more effective the chosen organisations are; the more likely that the organisation will end up with efficient results (Vogot, 2004, p. 22). A more efficient benchmarking procedure and which will be used for SASO's performance evaluation is illustrated in fig 2. Fig 2: Benchmarking procedure i) Conduct preliminary analysis This will involve establishing problems and challenges in SASO's work processes so as to identify what needs to be benchmarked. It is important to note that only a single process can be studied at any given time; such that the study of more than one aspect will require the organisation to conduct separate studies (Vogot, 2004, p. 23). It is imperative for the selected committee to understand the processes well. This may be enhanced through flowcharting in order to break down the various processes. Most importantly, the benchmarking areas should be highly biased towards enhancing customer satisfaction. ii) Develop process measures This procedure involves identifying points of comparison between the selected partners and the organisation (Dervitsiotis, 2000, p. s644). This may be done in terms of unit measures such as profit per year, cost per unit, number of customers per area and number of employees per department among other measures (Jonex, 2001, p. 129). These can then be compared to factors within the organisation in order to establish why the selected countries are doing better. iii) Identify Partners Selection of efficient partners enhances the outcome of the benchmarking exercise because it not only sets a good pace for the organisation but also acts as a source of inspiration for the organisation through utilisation of the identified best practices. SASO must thereby identify partners with demonstrated excellence in performance (Roberts, 2001, p. 31). They must also have similar demographic profiles to SASO. SASO will need to identify agents in other countries which conduct quality and standardisation functions. The main objective will be to identify the organisations' procedures and what they do to make their organisations successful. SASO should focus on the following: Role played by the organisations Their objectives and mission The management structure of these organisations The role played by management in the success of the organisations Strategies put in place and how they are achieved Innovative products and procedures that the organisations have put in place to enhance quality control and standardisation. Their methods of dealing with defaulters of the set rules The factors identified above should act as a guide for the organisation through analysing and comparing SASO to other organisations, with an objective of making establishing new ways of improving SASO's performance. iv) Collect and analyse data Once the organisations have been identified, SASO should now concern itself with analysing various processes within the partners depending on their needs. Collection of data involves reading about the identified partners from the internet, company profiles, engaging in discussion and allowing information exchange between the organisation and the partners (Roberts, 2001, p. 30). This should include information on what enhances good performance for these partners. Analysis requires a combination of qualitative and quantitative data, with an objective of identifying main attributes and how the organisation can benefit from adopting such strategies in their organisations. v) Present results to management/Adapt The results of the benchmarking exercise are to be presented to the SASO management once the analysis is complete. These indicate the various processes that were considered valuable and which the partners find valuable in enhancing success (Parker, 2000, p. 65). The management then has an opportunity to review the recommendations before approving them for adoption within the organisation. Benchmarking benefits to SASO Benchmarking would play a significant role in adding value to the organisation through increased efficiency, increased customer satisfaction, improved performance and better strategy adoption (Bento and White, 2010, p. 19). Through doing a comparison of SASO and other organisations, it is possible to identify its points of weakness and thereby adopt procedures that have proved valuable in the identified partners. 2. Self-assessment Organisational self-assessment is highly valuable in achieving the overall objectives and strategies because it involves an analysis of the organisation’s identity (Brown, 2001, p. 4; Bento & White, 2010, p. 19). A self-assessment is conducted through analysing an organisation’s internal environment and external environment (Gene-Badia, et al, 2000, p. 408). The internal environment covers the organisation’s strengths and weaknesses and represents factors that it has control over. On the other hand, the external environment represents factors that the organisation has no control over and includes opportunities and threats. While organisational self-assessment varies from one institution to the other, there are various aspects that should be strictly addressed. These include: Identifying the key people in the organisation Revising the organisation’s motivation and vision Establishing the nature of relationship among key people and how this influences the organisation’s activities and overall performance For what is each key person responsible The organisation’s history and evolution Strengths possessed by the organisation How these strengths provide competitive advantage Organisation’s position in the market in comparison to other organisations Weaknesses that need to be improved on Using the EFQM model for self-analysis The European Foundation for Quality Management (EFQM) model is highly regarded in the UK and a significant number of companies have adopted it for performance evaluation. This model was developed in 1988 by and is designed to help companies in achieving excellent results. There are nine criteria for performance evaluation, which mostly focus on the organisation’s process, policy, structure and strategy (EQFM, 2003, p. 3). The nine criteria are known as enablers and their success is highly dependent on how effectively they are developed (Michael, Davies & Jackson, 2004, p. 199-200). In essence, the enablers determine the results as indicated in fig 3 below: Fig 3: EFQM Excellence model Source: EFQM The procedure for self assessment using EFQM The EFQM Model is a relatively new concept at SASO and a significant level of training may be required for those who undertake the self-assessment process. In adapting the tool, the management should be highly committed in accomplishing the set objectives in order to derive positive results. The SASO team identified should immediately start assessment through data collection, evidence gathering and identification of areas of strength and improvement. The process of self assessment as identified by Hides, Davis and Jackson (2007, p. 194-195) is highly rigorous and the designed steps should be followed strictly to enhance the level of performance. The procedure is indicated in fig 4 below. Fig 4: Procedure for self assessment: Source- EFQM Conducting self-assessment The actual self assessment is conducted once the management and the concerned parties have been trained regarding the model and how they are expected to conduct the exercise (Bryant, Jones and Widener, 2004, p.129). SASO could make use of the RADAR logic and the self assessment snapshot survey which is in the form of an assessment questionnaire in conducting the assessment. The RADAR Logic At the core of the EFQM Excellence Model lies the RADAR logic, composed of 4 elements namely: Results, Approach, Deployment, and Assessment & Review. RADAR denotes a continuous process which goes on and on throughout the organisation’s life cycle as long as performance is being evaluated (Sanchez, 2004, p. 61). The RADAR logic is normally used by most organisations that use EFQM and is highly useful because it helps in identifying, prioritising, monitoring, analysing, planning and implementing improvements where they are needed. Different enablers are rated in terms of percentage in order to determine their efficiency. Fig 5: The Radar Logic; Source: EFQM Self-assessment Snapshot Survey The various enablers are analysed and ranked from zero base to extremely strong as indicated in fig. 6 (Global Consulting, 2008, p. 10). An example is shown in fig. 7 below. Zero Base Nothing happening in this area – no evidence of system, process or measures. Very weak A start has been made, but very early stages of deployment, with immature approach – few or no evidence of measures and improvement trends. Weak Implementation has commenced, and approach is integrated to a reasonable extent across the organization – some evidence of improvement. Acceptable Coherent approach used, with deployment across most primary areas of the business. Improvement trends documented, but needs further deployment to be considered effectively implemented. Strong Solid approach and deployment, and continuously improving trends in most performance variables. Extremely Strong Best in class status – supported by hard evidence, fully deployed and integrated, and demonstrating sustained and improving performance. Fig 6: Template indicating how enablers are analysed 1a. Developing and modelling the way Zero Base Very Weak Weak Acceptable Strong Extremely strong Strong 1 Leaders’ commitment to organisation goals 2 Leaders are given feedback on their individual performance 3 Leaders’ behaviour is ethical Fig 7: Analysis sketch sample Self assessment benefits to SASO Conducting self-assessment will definitely play a significant role in providing a clear understanding of SASO performance and hence provide insights on which the organisation could base its future endeavours. The self-assessment indicates the organisation’s major strengths and weaknesses; which are then used in identifying areas of improvement (Nabitz, Klazinga & Wallburg, 2000, p. 193). By adopting the self-assessment performance measure, the organisation stands a good chance to improve its competitive advantage over other organisations in the country and internationally. 3. Internal audit This is the third tool that could play a significant role in evaluating the organisation’s performance. An internal audit refers to an independent consulting activity that involves the review of various business activities including financial reports, management systems, employee development and strategy development in order to establish whether the organization is working under the set guidelines and policies (lmer, Higgs and Hooks, 2005, p. 3) Such an audit is controlled internally and strives to establish whether there is conformity to the set objectives and in response to the regional and international standards. According to Allen and Snyder (2007, p. 44), an internal audit aids a company in the accomplishment of organizational objectives through evaluating efficiency and effectiveness, internal control, promoting accountability and discipline, streamlining the governance system and enhancing risk management. SASO is already using this tool and this is done every year. There are various challenges witnessed in the auditing process. Firstly, the process is quite lengthy and complex and thus takes a considerable amount of resources. There are also challenges in following up cases of genuine mistakes in financial statements since one may not establish whether it was really a mistake or intentional occurrence. Other difficulties include accounting for services, given that SASO is mostly a service organisation. Services cannot necessarily be given a monetary value, such that they may often go unaccounted for. Further, in accounting for employee performance, it becomes very challenging to determine whether employees actually met all their goals since these goals are often intangible. An example is creating awareness of the importance of standardisation. Gauging the level of awareness created may prove quite challenging. Conclusion This report undeniably establishes that the performance measurement is an important aspect and that it plays a significant role in shaping the direction of the organization through providing insights into the managerial outcomes. An organization that needs to prosper must therefore constantly undertake performance management in order to measure their achievements and determines points of improvement. A case study of SASO results in the use of benchmarking, self analysis using the EFQM model and internal auditing, which prove invaluable in analyzing the organisation’s performance. Remarkably, internal audit which is already in use at the organisation is an effective performance measurement tool as it helps to ascertain whether the organisation has achieved the set objectives on each particular year. Benchmarking emerges as a highly effective tool in performance management and so does the self-assessment tool which will be of great importance to SASO through identifying the organisation’s strengths and areas of weakness. Notably, key aspects of the organisation including customer satisfaction, employee empowerment and involvement, teamwork, policy and strategy are addressed in the criteria. References Allen, C. E. & Snyder, L. A. (2007). Navigating the crossroads of control and independence: Practical guidance for private company auditors, Journal of Accountancy December Issue, 2007, 42-46. Bento, A. & White, L. F. (2010). An exploratory study of strategic performance measurement systems, Advances in Management Accounting 18 (1), 1-26. Brown, S. J. (2001). Managing the complexity of best practice health care, Journal of Nursing Care Quality, 15(2), 1-8 Bryant, L., Jones, D. A. & Widener, S. K. (2004). 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Appendix 1 Criteria of SASO’s performance measurement: 1) Empowering employees 2) Customer satisfaction 3) Evaluate the employee’s involvement 4) Assess the clarity of policy and strategy 5) Evaluate the teamwork 6) Ensure the customer's feedbacks are measured 7) Measure the key performance indicator 8) Evaluate the supplier performance 9) Assess the quality of service and product 10) Easy to implement and use Criteria Bench-marking Internal Audit Failure model Self Assessment based on EFQM model Just In time Service quality Six sigma Quality function deployment Balance scorecard 1 X M X H X X X X X 2 X H L H H H H H H 3 M H X H M X X X M 4 H H X H M X H M M 5 H L L L L X X X L 6 M M M M L H H M H 7 H H H H X H H H X 8 L H L H H H X X X 9 H L H H L H H M H 10 H H H M L M X L M Score 20 24 14 26 14 17 15 13 16 Ranking 3 2 7 1 7 4 6 8 5 H = 3 M = 2 L = 1 X = non applicable Read More