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CHAPTER 3: MEASUREMENT TYPES OF MEASURES Central to benchmarking is measurement. Measurement provides an objective way to gauge performance and to identify best performances. In the case of customer-driven benchmarking, you need to apply a set of measures in order to assess how well you address customer desires and satisfaction. If you are not measuring, then you cannot possibly be doing benchmarking, and if you are not applying measures oriented toward how well you are serving your customers, then you are not doing customer-driven benchmarking. During the last several decades, a system of classifying measures has evolved that helps to focus on customers. In the 1960s and 1970s, most attempts to develop performance management systems, including traditional maintenance management systems, focused on two types of measures: outputs and inputs. These measures are defined as follows. Outputs Outputs are a measure of production or accomplishment. In highway maintenance, examples of output measures are lane miles of roadway surfaced, the number of bags of litter picked up, and the number of acres mowed. Inputs Inputs are the resources used to deliver a product or service, perform an activity, or undertake a business process. In highway maintenance, the inputs consist of labor, equipment, and materials. The funds needed to pay for these resources may also be considered an input. Under certain circumstances, other productive resources--such as land, water, or air--can be treated as an input. As illustrated in Figure 5, maintenance agencies focused on measures of productivity use these measures by looking at the ratio of output to various types of inputs. One could measure output per labor hour, per equipment dollar, per quantity of material used, or per dollar of expenditure. One might also examine unit costs expressed as the cost per unit of output. 45
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Chapter 3: Measurement Figure 5. Product and Service Delivery Processes The trouble with input and output measures is that they are internally focused on the work maintenance personnel do. They are not externally focused on customers. More recently, especially since the enactment of the Government Performance and Results Act of 1993, the focus has been increasingly on outcomes. Outcomes Outcomes are the results, effects, or changes that occur due to delivering a product or service, conducting an activity, or carrying out a business process. For example, an outcome of pavement resurfacing might be smoother pavement. An outcome of litter pickup might be cleaner roadsides, and the outcomes of mowing might be increased sight distance at intersections and around curves and, consequently, reduced accidents. Outcomes are more likely to be externally focused and frequently relate to customer preferences, expectations, and satisfaction. By looking at the ratio of outcomes relative to inputs, one can address the effectiveness of a program in addressing customer- oriented results. Typical measures might be an outcome per labor hour, per equipment hour, or per dollar of expenditure. One might also examine cost effectiveness, which is the cost per unit of outcome achieved. Figure 4 illustrates that as one transitions from using output measures to outcome measures, the emphasis shifts from productivity to effectiveness. 46
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Some agencies have gone one step further and identified another set of measures: value added. Value Added Value-added measures are customer-oriented outcome measures expressed in terms of the value received by the customer. Measures of value added include an increase in customer satisfaction or an increase in economic value from, for example, travel time saved or life-cycle costs avoided. As one transitions from a focus on outcomes to value added, the Customer-driven perspective shifts from effectiveness to the net value added to the benchmarking is like a stool customer and provides the basis for resource allocation in that rests on four types of economic terms. measures Four Types of Measures for Customer-Driven Benchmarking In customer-driven benchmarking, use measures similar in type to the ones described above. However, the project team suggests you think about four types of measures: 1. Outcomes--the customer-oriented outcome or value- added measures as defined above. 2. Resources--the same as the inputs defined above (e.g., labor, equipment, materials, and funding). Hardship 3. Outputs--measures of levels of production or Factors Inputs accomplishment. Outputs 4. Hardship Factors--factors outside the control of the Outcomes maintenance organization such as weather and terrain that influence the outcomes and level of resources used. Relationship of Outcomes, Resources, and Hardship Factors In the spirit of sound economic analysis, customer-driven benchmarking takes the approach that some overall picture of outcomes relative to some overall picture of the resources expended, while adjusting for factors outside the control of a maintenance organization, is the proper way to assess performance. There is no attempt to combine outcomes into a single measure of benefits, which would require converting all benefits into dollar terms or applying appropriate weights to each outcome in order to construct an overall performance index. 47