Performance Measurement Essay
Huawei, a telecommunication equipment provider has consolidated its advantaged position in Telecom Networks, and continued to create value for customer and fulfilled customer needs through its products and solutions. Even with soft economy condition in 2010, Huawei still manage to achieve sales revenue of “CNY 185. 2 billion, a year-on-year increase of 24. 2%. ”1 Besides contribution from its customer-centric approach and dedicated employee, the major achievements actually come from continuous improvement for the respective performance target.
According to Hellqvist, (2011), an effective performance management (PM) required a parent’s strategy objective which can reflect in the performance target through measuring the achievement of each target. Since Huawei is a Chinese global company, to establish a performance management to measure each performance target in different location is a difficult decision and complex process as the expectation for its target should applicable and standardize for local and worldwide. (Evans et al. , 2002).
In particular, the aspect of performance target included Broad Strategic Measure, Functional Strategic Measure, Composite Performance Measures, Generic Operations Performance Measures and Detail Performance Measures (Slack and Lewis, 2008). Huawei believe operation performance measurement should broader its measurement scope from external to internal, long-term as well as short-term and “soft” as well as “hard” measure (Slack and Lewis, 2008). Implicitly, a more complex aggregation of performance target model is needed to perform a more detail and organized performance measurement.
Significant effort has been established to develop criterion for each performance target which is a core assessment area for Detailed Performance Measures. The measurement for each performance target is interrelated with five generic performance objectives which included quality, speed, cost, dependability and flexibility (Slack and Lewis, 2008). In addition, this area usually requires high diagnostic, data collection and frequency of measurement , so the accuracy of measured information will influence the strategy applied to meet the goal for each performance objective toward internal and external (Srimai, S. Radford, J. and Wright, C. , 2011).
In detail, for quality measurement, Huawei has set up a systematic quality control system with several divisions such as Incoming Quality Control (IQC), Manufacturing Quality Engineering team (MQE) and Suppliers Quality Engineering (SQE) to monitor and measure the quality performance from supplier such as performing sampling check and measures total defect unit from supplier’s fresh lots, determine root cause of quality issue whether the issue is caused by internal process or supplier parts and measure the frequency, seriousness and total batch involved for a quality issue.
Externally, Huawei measured the total complain from customer, reject and recall from the market. In term of internal cost control, there are strict measurement target for cost reduce of material cost, manufacturing and labor cost, and operation cost. While external cost control, Huawei measured the networking operation cost and maintenance cost for its telecom operator (customer) to bring down customer overall operation cost. Besides that, supplier order processing lead time, production lead time, production capacity and buffer stock preparation is the main measurement criterion for speed.
Externally, Huawei measure customer order lead time, contract completion date (COD) and product query time. For dependability, measurement for on-time delivery and lateness complaints is essential measurement for internal and external. The same measurement expectation is set for flexibility which focus on ability to change for product specification and design, timing for delivery and order quantity Forming composite performance measure required a construction of specify composite indicator which collapses information across several primitive data dimension that enable to address set of issues: scope, normalization and aggregation.
Huawei developed Customer Relation Management (CRM) team to perform a detail measurement on product quality (such as product reliability, system security), service quality (such as on-time delivery, technical maintenance, training), user experience (such as downtime, delivery delay, unmanageable system) and overall company image (such as positive, security concern) with the selected five of its top prioritize customer.
In this measurement, a list of questionnaire model and mathematical equations is needed to measure random rating which represent the level of satisfactory. In business situations, a stochastic model having a random rating is better than a deterministic model due to uncertainties caused by external factors, such as behavior of competitors and customers (Fukushima and Peirce, 2011).
Assuming the total measure index is 5, the rating for satisfaction index is 4 and 5, and dissatisfaction index is 1 and 2. Each rating is classified as importance or seriousness of an issue (T) and final formation of satisfactory measurement model is (T/5 x100%). For example, customer has scored 2 point or 40% for service quality, it explained Huawei has limited understanding on customer requirement on networking maintenance service and there are still room (60 percent) for improvement.
Functional strategic measure involved cross-functional activities and involvement of various departments in collaboration at functional or operational level and strategy level (Ireland and Crum, 2005). In additional, performance measurement in this stage of collaboration measured market strategy objectives, operations strategic objectives and financial strategic objectives for its efficiency and risk or return ration (Ramanathan et al, 2011).
In order drive a sustainable growth for the organization, Huawei has established the concept of enriching the communication with digital living, develop video become the most common way for interaction, shifting consumer information platform from personal computer (PC) to mobile device such as “Generation Me”1 smart phone and expending the mobile broadband technology from 2G to Long Term Evolution (LTE).
And bring-in the revolution of cloud computing technology and restructure the IT industry. For financial strategy objectives, Huawei has set a tight schedule to consolidate the financial statement summary on time, consolidated items of property, plant and equipment measured in the balance sheet to accumulated depreciation, “reducing the long-term and short term borrowing with a decrease of 28. 9 percent compare to year 2009”. In terms of operations strategy objective, Huawei has increased the inventory turnover (ITO) to reduce the inventory cost pressure, increased outsourcing of consignment project to sub-contract manufacturer to reduce manufacturing cost, and continue to reconsolidate the supplier base and locate more business to preferred supplier.
Finally board strategic measures a board aspect of internal performance such s monitoring medium to long-term business plan and company’s strategy direction, evaluating the policies on human resources, hired and training plan and corporate strategy and reviewing the company’s operational and financial result while ensuring integrity and accuracy of financial information. For external performance measurement, Huawei will continue to improvement the management in order to develop a more customer-centric sales and service approach, more responsive to customer requirement, expectation and complaint, become the market leader for telecommunication equipment and lead the industry to next stage.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 27 December 2016
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