Deck 3: Measuring Performance in Operations

Question 1

The only important measurement category in business is financial.

Answer 1

False

Question 2

Reliability is the ability to perform a service dependably and accurately.

Answer 2

True

Question 3

Measuring and reporting performance results can be a motivator for many workers.

Answer 3

True

Question 4

Quality measures the degree to which the output of a process conforms to management's expectations and requirements.

Question 5

Having a large number of performance measures is much better than having a selected few.

Question 6

Assurance is the willingness to help customers and provide prompt recovery to service upsets.

Question 7

Service quality measures are generally based on data collected from observing front-line operations.

Question 8

Most of the five dimensions of service quality pertain to behavioral characteristics, which makes them easier to measure.

Question 9

Empathy is the caring attitude and individualized attention provided to customers.

Question 10

Return on assets would normally be classified as a productivity measure.

Question 11

As output decreases for a constant level of input, productivity also decreases.

Question 12

Queue time is a fancy term for service time variance.

Question 13

Speed is usually measured in clock time, whereas reliability of a time-based measure is usually measured in quantifying the variances in average performances or targets.

Question 14

Good customer satisfaction measurement systems are designed to provide information about future buying behavior.

Question 15

Design flexibility is the ability to respond quickly to changes in the volume and type of demand.

Question 16

Having intensive care nurses on call in case of a dramatic increase in patient demand is an example of design flexibility.

Question 17

Measures and indicators of product and service performance that have a strong correlation with customer satisfaction are appropriate to monitor.

Question 18

It costs 3 to 5 times more to keep an existing customer than to acquire a new customer.

Question 19

Errors in service creation and delivery are sometimes called service upsets.

Question 20

Productivity is more closely related to effectiveness than efficiency.

Question 21

The balanced scorecard is designed to be linked to an organization's strategy.

Question 22

The Leadership category of the Baldrige criteria includes how an organization addresses its public and community responsibilities.

Question 23

The "value of a loyal customer" links customer satisfaction and loyalty to a firm's profitability measures.

Question 24

Health care and educational organizations were eligible for the Malcolm Baldrige National Quality Award since its inception in 1987.

Question 25

Although the award from the Malcolm Baldrige National Quality Award Framework receives the most attention, the primary purpose of the program is to provide a framework for performance excellence through self-assessment to understand an organization's strengths and weaknesses, thereby setting priorities for improvement.

Question 26

Which one of the following statements is true with regard to the case study BankUSA: Credit Card Division?

A)Service upsets represented 17 percent of total transactions.
B)Current performance reports indicate that the credit card division is meeting 99.2 percent of its service requirements.
C)The correlation between customer satisfaction and operating costs was negatively correlated.
D)The ultimate (real) service level for this organization is internal performance metrics.

Question 27

Which of the following would be a typical operational-level quality performance measure?

A)customer ratings of goods and services
B)customer retention
C)service representative courtesy
D)product recalls

Question 28

In the Baldrige Award criteria, the Business Results category focuses on how an organization selects, gathers, analyzes, manages, and improves its data, information, and knowledge assets.

Question 29

The balanced scorecard model uses the same categories as the Baldrige Award.

Question 30

Which of the following is not a key dimension of service quality?

A)conformance
B)tangibles
C)empathy
D)reliability

Question 31

Any measure a firm chooses to use should provide the basis for making executive-level strategic decisions.

Question 32

The triple bottom line (TBL or 3BL) refers to the measurement of sustainability in all of the following areas except

A)economic
B)social
C)technological
D)environmental

Question 33

Customer satisfaction rating increases as time-on-hold waiting decreases is an example of

A)productivity index
B)interlinking
C)value of a loyal customer
D)operational definitions

Question 34

The value chain model is probably the dominant model for operations managers.

Question 35

Interlinking is the quantitative modeling of cause-and-effect relationships between

A)internal performance criteria
B)external performance criteria
C)internal and external performance criteria
D)competing organizations' performances

Question 36

Which of the following is true?

A)The theory of the Balanced Scorecard model of performance is leadership drives the operating system that creates business results.
B)The Service-Profit Chain focuses on learning, internal business, customers, and financial performance.
C)Volume flexibility allows the firm to change their learning behavior of employees as conditions change.
D)In the BankUSA: Credit Card Division case study internal and external performance was negatively correlated.

Question 37

Which of the following would not be a typical organizational-level financial performance measure?

A)labor and material costs
B)revenue and profit
C)return on assets
D)earnings per share

Question 38

The quote "Happy employees create happy customers" best characterizes the Service-Profit Chain (SPC) model.

Question 39

Employee satisfaction might be considered as a lagging indicator of employee turnover.

Question 40

The service-profit chain model is based on understanding cause-and-effect linkages among performance measures.

Question 41

Employee satisfaction and other workforce-related measures fall into which perspective in the Balanced Scorecard?

A)Financial
B)Customer
C)Innovation and Learning
D)Internal

Question 42

The number of patent applications and the number of improvement suggestions implemented relate best to which operational performance measure category?

A)financial
B)customer and market
C)innovation and learning
D)productivity

Question 43

When Bill Gates stated that "Microsoft is always two years away from failure," he was emphasizing the importance of

A)innovation and learning
B)productivity
C)design flexibility
D)speed

Question 44

Of the four models of organizational performance, which two focus on the "big picture" of organizational performance rather than on operational-level framework?

A)Malcolm Baldrige National Quality Award Framework and the Value Chain model
B)Balanced Scorecard and the Service-Profit Chain
C)Malcolm Baldrige National Quality Award Framework and the Balanced Scorecard
D)Value Chain model and Service-Profit Chain

Question 45

What are the major categories of organizational performance measures? Provide an example measure for each category.

Question 46

Value chain measures would generally be less valuable to

A)top management
B)middle managers
C)first-line supervisors
D)employees to monitor any control

Question 47

Airline revenue per passenger mile and hotel revenue per full-time employee are examples of

A)reliability
B)value of a loyal customer
C)sustainability
D)productivity

Question 48

Which category of the Malcolm Baldrige National Quality Award examines how the organization fulfills its ethical, legal, and societal responsibilities, and supports its key communities?

A)Leadership
B)Strategic Planning
C)Customer Focus
D)Results

Question 49

The service-profit chain model

A)is based on a set of cause-and-effect linkages
B)is only focused on internal performance
C)was designed first for manufacturing organizations
D)is focused on equipment utilization

Question 50

Dell's ability to provide a wide range of customized computer hardware to accommodate customers' needs best describes

A)volume flexibility
B)design flexibility
C)cycle time
D)queue time

Question 51

Productivity is the

A)quality of output/quantity of input
B)quality of input/quantity of output
C)quantity of output/quantity of input
D)quantity of input/quantity of output

Question 52

Of the four performance perspectives of the balanced scorecard model, which is most relevant to operations managers?

A)financial
B)customer
C)innovation and learning
D)internal

Question 53

Which of the following would be an example of an innovation and learning performance measure?

A)employee satisfaction
B)earnings per share
C)design flexibility
D)product-related litigation

Question 54

Regarding the service-profit chain model, which of the following is not viewed as internal performance?

A)customer satisfaction
B)employee satisfaction
C)employee retention
D)employee productivity

Question 55

Which one of the following statements is true regarding FedEx's Service Quality Indicator (SQI)?

A)FedEx's SQI is an example of volume flexibility.
B)FedEx's SQI places the most weight (importance) on late pickups.
C)FedEx's SQI places the most weight (importance) on damaged and lost packages.
D)FedEx's SQI places the most weight (importance) on delivery on the wrong day.

Question 56

The ability to respond quickly to changes in the amount and type of demand is called

A)learning
B)service quality
C)design flexibility
D)volume flexibility

Question 57

In regard to the value chain model, efficiency, cost and cycle time would be most related to

A)suppliers
B)inputs
C)value creation processes
D)outputs and outcomes

Question 58

Of the seven categories of the Malcolm Baldrige National Quality Award criteria, which is least relevant to an operations manager?

A)Leadership
B)Workforce Focus
C)Customer Focus
D)Measurement, Analysis and Knowledge Management

Question 59

In choosing performance measures, an organization might consider all of the following criteria except

A)Is the measure actionable?
B)Is the measure based on behavioral performance?
C)Is the measure important to customers?
D)Does the measurement support the firm's mission?

Question 60

Why is measurement important?

Question 61

Briefly discuss the seven categories of the Malcolm Baldrige National Quality Award.

Question 62

A guest at Raphael's Italian Restaurant generally spends $150.00 on a meal.Most of Raphael's customers are local and eat at the restaurant twice a month.If the restaurant's margins are 60 percent, and a loyal customer is estimated to be worth $3000, determine the average defection rate.

Question 63

Consider the following information.

a.Which quarter, First or Second, had the higher labor productivity (output quantity per labor dollar input)?
b.Which quarter, First or Second, had the higher material productivity (output quantity per material dollar input)?
c.Which quarter, First or Second, had the higher total productivity (dollar output per total dollar input)?

Question 64

A family rents videos from a local video store.On average, they spend $80.00 a month.The store's contribution margin is 45 percent and the average customer defection is 40 percent.Determine the value of a loyal customer.

Question 65

A manufacturer of business copier workstations has a 75 percent customer retention rate.Their accounting department estimates the incremental contribution to profit and overhead as 40 percent.Customers purchase the workstations every three years at an average cost of $1,500.00.Determine the average value of a loyal customer.

Question 66

A manufacturer of paint has two factories located in France and Spain and due to economic conditions must close one of them.The factory productivity data is as follows:

Question 67

A retail store sells a popular cosmetic called Devine and the store manager was given $300,000 by the corporate office to improve store performance any way she thinks best.The "base case" information is a price of $30 per bottle, a contribution margin of 0.50, a customer defection rate of 20%, and a repurchase frequency of 3 times a year.If these improvement funds could be used to either (a) increase the contribution margin to 0.60 or (b) reduce the customer defection rate to 12% or (c) increase the repurchase frequency to 4 times per year, what is the best way to spend these improvement funds? (Assume all other variables remain at the base case level for each of the three improvement options.) VLC = P*CM*RF*BLC
a.What is the value of a loyal customer (VLC) for improvement option (a)?
b.What is the best way to use the $300,000 in improvement funds?

Question 68

Using the information provided in the table below, determine the percentage change in productivity from 2009 to 2010.

Question 69

Provide some examples of criteria that can be used to help select and delete performance measures from an organization's information system.

Question 70

A retail store sells a popular cosmetic called Devine and the store manager was given $100,000 by the corporate office to improve store performance any way she thinks best.The "base case" information is a price of $30 per bottle, a contribution margin of 0.50, a customer defection rate of 17%, and a repurchase frequency of 3 times a year.If these improvement funds could be used to either increase the contribution margin to 0.58 or reduce the customer defection rate to 15% or increase the repurchase frequency to 4 times per year, what is the best way to spend these funds? (Assume all other variables remain at the base case level for each improvement option.)
You may want to use the table below to help organize your computations and answer.
Note: BLC is 1/.17 = 5.882 years and 1/.15 = 6.67 years.

Question 71

Explain the difference between goods quality and service quality, and how they are measured.

Question 72

Define interlinking.Why is this concept significant?

Question 73

A computer manufacturer currently has a 15 percent customer defection rate.Their accounting department estimates the incremental contribution to profit and overhead as 30 percent.Customers purchase computers every four years at an average cost of $1,200.00.In an effort to reduce the defection rate, the company is improving both the quality of its computers and its post-sale service.Determine the increase in the average value of a loyal customer if the defection rate drops to 5 percent.

Question 74

Explain the concepts underlying the service-profit chain model.

Question 75

Using the information below, determine the productivity (measured as output per dollar input) for the each quarter and calculate the percentage change in productivity.

Question 76

Describe the five key dimensions of assessing service quality.

Question 77

A coffee shop's average transaction price is $3, the contribution margin is 60 percent, the typical customer makes a purchase once a week or 52 weeks per year, and management estimates the value of a loyal customer over the buying life cycle as $520.What is the customer defection rate?

Question 78

Briefly discuss the four performance perspectives of the Balanced Scorecard Model.

Question 79

Jeff Camm, the president of Biometrics, Inc.has received the following data from his accountant:
How is productivity changing in Jeff's firm?

Question 80

Explain the difference between design flexibility and volume flexibility.