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TheOrganizationasaSystemofActivities,Chapter2,LearningObjective1,Understandhoworganizationsdefineobjectivesandusetheseobjectivestodefineoperatingpriorities.,TheNatureoftheOrganizationsObjectives,Strategyischoosingtargetcustomersanddecidinghowtoservethosecustomers.Strategicchoicesaremadewithinthecontextoftheobjectivesthattheorganizationsprincipalshaveset.Customersprovidetheorganizationsprimaryfocus.,TheNatureoftheOrganizationsObjectives,Whatisaperformancemeasurementsystem?Itisasystemofintegratedmeasuresdevelopedbyorganizationstoassesstheperformanceofthevaluechain.,TheNatureoftheOrganizationsObjectives,StakeholderGroups,OrganizationPartners,Customers,Employees,OwnersorPrincipals,GeneralCommunity,StrategicPlanningElements,PoolofPotentialCustomers,TargetCustomers,CustomersObjectives,OrganizationObjectives,ProcessDesignandObjectives,StrategicPlanningElements,ProcessDesignandObjectives,Partners,Employees,Community,TheThreeLevelsofStrategy,OrganizationalLevel,BusinessLevel,OperationalLevel,LearningObjective2,Understandtheinsightsgainedwhenwethinkoftheorganizationasasequenceofactivitiesinavaluechain.,TheOrganizationasaSequenceofActivitiesoraValueChain,AdministrativeActivities,ProcessingActivities,MakingMoving,StoringInspecting,InternalSupport,PersonnelFinance,LegalAccountingResearch,TheOrganizationasaSequenceofActivitiesoraValueChain,ProductionActivities,InputActivities,ProductdesignProcessdesignPurchasing,ReceivingHiringTraining,ProcessingActivities,TheOrganizationasaSequenceofActivitiesoraValueChain,SalesandPost-salesActivities,OutputActivities,ProcessingActivities,SellingShippingService,TheOrganizationasaSequenceofActivitiesoraValueChain,Itisusefultothinkofanorganizationasasequenceofactivitieswhoseoutputisagoodorservice.Thissequenceofactivitiesisalsoknownasavaluechain.Eachstepinthechainshouldcontributemoretotheultimatevalueoftheproductthatitscost.,TheOrganizationasaSequenceofActivitiesoraValueChain,Howareactivitiesdefined?Anactivityisaunitofwork,ortask,withaspecificgoal.Activitiesareimportantbecausetheycreatecosts.Whatarethefourbroadclassesofactivitiesinthevaluechain?,TheOrganizationasaSequenceofActivitiesoraValueChain,CustomermanagementactivitiesInnovationactivitiesOperationsactivitiesServiceactivities,FocusingtheValueChain,WhattheCustomerWants,WhattheCustomerisPromised,WhattheCustomerisGiven,ServiceGap,QualityGap,LearningObjective3,Understandhowperformancemeasureshelporganizationmembersmanagethevaluechain.,OrganizationandProcessControl,Organizationcontrolistheactivityofensuringthattheorganizationisontracktowardachievingitsobjectives.Whatarethefourcomponentsoforganizationcontrol?SpecifyingobjectivesCommunicatingobjectivestoorganizationmembers,OrganizationandProcessControl,MonitoringperformancerelatingtoobjectivesActingondiscrepanciesbetweenactualandtargetperformance,ReflectingtheCustomerPerspective,Thefirmsperformancemeasuresshouldcommunicateandsummarizethethingsthatarecriticaltotheorganizationssuccessinmeetingtherequirementsofitstargetcustomers.Organizationsshouldsystematicallymeasurewhattheirtargetcustomerswantandvalue.,ReflectingtheCustomerPerspective,Whatarecustomer-validatedperformancemeasures?Thesearemeasuresthatreflectcustomerrequirementsandhelpemployeesmanagethevaluechainsprocessesandactivities.Employeesconcentratetheirattentiononimprovingwhatmatterstothecustomer.,UsingtheCustomersValidation,Aninputiswhattheorganizationputsintoaprocess.Anoutputisaphysicalmeasureofactivity.Anoutcomeiswhatthecustomervaluesastheresultoftheactivity.,UsingtheCustomersValidation,Processareactivitieswhichtransformresourcesintooutputs,Outcomesarehowthecustomervaluestheresultoftheactivity,Inputsareresourcesusedinactivities,Outputsarephysicalmeasuresofactivity,ReflectingComprehensiveInformation,Aneffectiveprogramofperformancemeasurementassessesallfacetsofrelevantperformance.Relevantbutunmeasuredfacetsofperformancemustnotbetradedforperformanceonmeasuredfacets.,ProvidingFeedback,Aneffectiveperformancemeasurementprogramwillhelpthepeoplewhomanagethevaluechainidentifyproblemsandsuggestsolutions.,PerformanceMeasuresasAidsinOperationsControl,ControlmaybeexercisedbyEnsuringcompliancewithstandardoperatingprocedures(taskcontrol).Motivatingpeopletobecreativeinmeetingcustomerobjectives(resultscontrol).,PerformanceTargets,Howdoorganizationssetprocessperformancetargets?Somearebasedonestimatedpotential.Somearebasedonimprovingperformance.Somearebasedonwhatthe“bestintheclass”aredoing.Choosetargetsthatmeetorexceedcustomerexpectations.,PerformanceTargets,Benchmarkingistheprocessofstudyingandadaptingthebestpracticesofotherorganizationsinordertoimprovethefirmsownperformance.,LearningObjective4,Understandtheprocessthatorganizationscanusetoreducecostsbyfocusingonactivityperformance.,CostasaProcessPerformanceMeasure,TherearethreetypesofprocessperformancemeasurescostqualityserviceHistorically,managementaccountingemphasizedcost.,CostasaProcessPerformanceMeasure,Inthepast,costinformationsupportedaprocesscalledmanagingbythenumbers.Whataresomeproblemswithmanagingbythenumbers?IneffectiveAssumescosttobetheonlyrelevantmeasureofperformanceDoesnotrecognizethereasonsforcosts,CostasaProcessPerformanceMeasure,Whatislifecyclecosting?Itisasystematicconsiderationofproductscostsduringtheproductslifetime:DevelopmentcostsandintroductioncostsProductioncostsDistributioncostsAfter-salesandtake-backcostsProductabandonmentcosts,UnderstandingtheCausesofCosts,Improvingcost

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