The Seven-Step QualityActivity-Based-Costing Planning Process - PDF by gvl14091


									A Process for Integrating Quality
     and Process Efficiency

              Dr. David C. Oehler
    Director of Assessment, Information and Analysis

  Northwest Missouri State University
Background of project
Allegations that Hg. Ed. funding is poorly used
Demands for accountability
State budget stress
Cuts in funding
Typical responses
   Efforts to increase revenue
   Across-the-board cuts
   Vertical cuts
Alternative: Reengineering processes
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Objectives of this presentation
Overview the Hubbard Cycle (Q/ABC
Highlight some of the approaches used in
implementing the Cycle

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History of 7-Step Process
Developed in 1992
Incorporates all of the elements of the
Baldrige Criteria

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Overview of Issues
Clarity & alignment of overall goals
Fact-based decision making
Systemic, process-oriented design
Improvement design based on a proven

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     Clarity and alignment of
     overall goals
  Who is it that judges the quality of what you do?
  What are their expectations?
  What attributes or characteristics should students
  possess when completing your program?
  What attributes or characteristics are associated with
  high quality service for your area?

Step 1 – Define & Validate Key Quality Indicators (KQIs)
Step 2 – Establish Goals and Objectives

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     Fact-based decision making
  How do you know how well you are doing?
  What can you measure to monitor your performance?
  How does this compare to appropriate competitors?

Step 3 – Formulate an Assessment Strategy

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     Systemic, process-oriented
  How do you “deliver” quality?
  How are your programs/services designed to meet the
  expectations of your customers/clients?

Step 4 – Develop an Action Plan and Deployment Strategy
Step 5 – Establish Baselines; Track Performance Trends

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     Improvement design based on
     a proven model
  What performance improvement targets are reasonable?
  Given your relative performance comparison, what is a
  reasonable performance target?

Step 6 – Search for Better Practices
Step 7 – Set Performance Targets and/or Stretch Goals

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       Seven Steps
1.   Define and Validate Key Quality Indicators
2.   Establish Process Goals and Objectives
3.   Formulate an Assessment Strategy
4.   Develop and Implement an Action Plan and
     Deployment Strategy
5.   Establish Baselines; Track Performance Trends
6.   Search for Better Practices
7.   Set Performance Targets and/or Stretch Goals

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2 types of activities
Continuous Quality Improvement (CQI)
Cost Analysis (CA) Activities

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History of Activity-Based
Term “activity-based costing” coined in 1975 by
Dr. Robert Kaplan
Resulted from dissatisfaction with traditional
accounting categories
Identifies activities as the fundamental cost
object of an organization
Widely used in industries (e.g. FedEx, Texas

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Benefits Associated With ABC
More accurate cost information
Improved cost control and management
Improved insight into cost causation
Better performance measures

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Benefits Associated with Applying
The Hubbard Cycle
Forces cost reduction discussions to consider the impact
on students/stakeholders
Facilitates a “value added” approach to discussions of
quality and cost
Stimulates a more profound discussion of costs in relation
to quality
Adds sophistication to an institution’s planning process by
promoting impact and analysis activities
Can assist an educational institution in developing more
mature accountability models to address every-increasing
state and federal mandates.
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Fundamental Understanding
All work is process.
A process is a sequentially linked set of
activities designed to produce a desired
The key to effective process management is to
have clear quality measures against which
efficiency and effectiveness can be gauged.
Processes function within larger systems.

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                               UNCONTROLLED VARIABLES

            MODULE (KQIs)
    Time       ACTIVITY
Resources     (Cost Drivers)

              (Cost Drivers)           COST/              VALUE-
                                      BENEFIT             ADDING
               ACTIVITY                                  OUTCOMES
              (Cost Drivers)         ANALYSIS

               ACTIVITY                                      NON
              (Cost Drivers)                             VALUE-ADDING

                                     ACT ANAL
                                      C OS

                                        QUA SSMEN


                                               Y-B SIS
              (Cost Drivers)


Applying The Hubbard Cycle…

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1: Define and Validate Key
Quality Indicators
      CQI Activities                 Cost Analysis Activities
Segment students/ stakeholders           List the activities that make
Identify needs and expectations          up the process
Formulate KQIs
Validate KQIs
Link to Institution’s Strategic

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What is Quality Service?

                          Quality Service


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Quality is Perceived When…
Most expectations are met and
A few expectations are exceeded

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Getting Inside the Customer’s Skin…
              Needs   Experience   Industry   Reputation   Promises





Educational KQIs
    Communications Competencies
    Problem Solving Competencies
    Critical/Creative Thinking Competencies
    Computer Competencies
    Self-Directed Learning Competencies
    Competence in a Discipline
    Personal/Social Development
    Team Work/Team Leading Competencies
    Multicultural Competencies
    Cultural Enrichment

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           Service KQIs
           Northwest Missouri State University recognizes that quality service is an essential
           component of a quality university. Furthermore, we acknowledge that all of us –
           students, faculty, staff, and administration – are at time providers and at other
           times recipients of services.

Accordingly, we pledge our best efforts to provide quality service to you by:
   Treating you with respect, fairness, and honesty.
   Making you feel important and earning your trust.
   Performing our tasks with competence and skill.
   Giving you confidence in the quality of what we provide.
   Communicating clearly and courteously the services provided.
   Making it easy for you to know what you can expect.
   Listening actively to your requests, comments, and concerns.
   Making it easy for you to tell us what you need.
   Being flexible and open to new ideas.
   Accepting you and valuing your knowledge.
   Providing what we agree to deliver in a timely manner.
   Enabling you to depend on us to help meet your goals.
   Maintaining a safe and orderly, healthy, well-functioning and attractive campus.
   Providing you with a safe and pleasant environment in which to learn and work.
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  Enrollment KQIs
We will serve place-bound learners through cooperative efforts with
other post-secondary institutions and through web-based offerings.
We will continue to expand our primary catchment area with a special
focus on Kansas City.
We will continue to recruit an expanding number of traditional
students who meet our moderately selective admissions standards.
We will identify and recruit Missouri’s academically gifted sophomore
high school students for admittance to the Missouri Academy of
Science, Mathematics, and Computing.
We will emphasize diversity in our applicant pool by making special
efforts to attract minorities, international students, and first
generation college applicants.

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   Financial KQIs
We will maintain sufficient E&G reserves to allow for internal borrowing
and to cushion downturns in the economy.
We will maintain sufficient Auxiliary reserves to sustain a 3A bond
We will receive annually our share of state support relative to our in-
state peers.
Private support from the Northwest Foundation will increase relative to
state support and tuition.
We will competitively compensate our faculty and staff relative to our
We will strive to be a leader in efficiency among our peers as measured
by the proportion of our budget expended for instruction.
We will maintain the historic beauty of our campus and facilities
through a systematic program of renovation and restoration.
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2: Establish Goals and
Performance Targets
      CQI Activities                Cost Analysis Activities
Set goals                               Flowchart the process
Establish objectives for each
Flowchart the process needed to
achieve the objectives

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The Hubbard Cycle Process Map
    INPUTS               ACTIVITIES                       OUTPUTS                RECIPIENTS
•Environment           (Activities required           (Learning and Services)   •Another process
                       to produce the outputs)                                  •Students
•People                                                                         •Faculty
•Materials                                                                      •Other stakeholders
•Equipment/                                                                      (Internal or external)

                             Key Cost                  Key Performance           Key Satisfaction
                            Indicators                    Indicators               Indicators
                       •Activity Costs                Service                   Service
                       •Comparisons                   •Reliability              •Ease of Interaction
                       •Ratios                        •Timeliness               •Tangibles
                                                      Learning                  Learning
                                                      •Tests                    •Instruction
                                                      •Comparisons              •Advising

                                                 Quality and Cost Analysis
3: Formulate an Assessment
   CQI Activities             Cost Analysis Activities
Identify satisfaction and      Modularize the process (if
performance measures and       necessary)
                               Link the KQIs from Step 1 for
Decide on the type of
assessment                     the module/process
Determine frequency of
Specify the audience for
Describe the intended
usage of results

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4: Develop and Implement an Action
Plan and Deployment Strategy

   CQI Activities         Cost Analysis Activities
Assign responsibility         Log the resources
Develop a deployment          consumed by each activity
strategy                      Determine the unit cost of
Develop a training            each cost driver
Develop a
communications strategy

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                           Q/ABC Activity Costing Shell
                            (Time + Resources =Cost Driver)
    Process: ____________________________________________________________

Activity #            Description                       Time   Resources   Cost
 5: Establish Baseline; Track
 Performance Trends
    CQI Activities               Cost Analysis Activities
Measure results of the process     Calibrate the total cost of the
to establish the baseline          module/process
Track performance trends

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6: Search for Better
      CQI Activities               Cost Analysis Activities
 Brainstorm ways to improve the       Search for better (more
process                               efficient) activities
 Do root cause analysis               Construct a new flowchart
 Analyze each activity                Estimate the cost of the
(Eliminate? Shorten? Substitute       refined process
technology? Substitute lower-
cost effort?
Do competitive comparisons
Benchmark others’ processes

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       Service Quality Root Cause Assessment Model

              Needs                       Setting              Experience            Reputation   Commitments



                                                                 Actual                  Gap 5

                   Gap 1                   Gap 4
                                                           Quality Standards,
                                                         Specifications, Training

                                          Gap 2 & 3

                                                    Failure to Understand Expectations
Adapted from Delivering Quality Service
Root Cause Analysis--
Do the results reflect what the students’ really
How well is the test aligned with the
department’s objectives?
Are we providing the learning opportunities
necessary to do well on the test?
Are we presenting the material but the students
aren’t learning it?

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  Cost/Benefit Analysis
Four Questions:
  Could this activity be eliminated?
  Could this activity be shortened?
  Could technology be substituted for human
  effort to accomplish this activity?
  Could lower-cost effort be substituted for
  higher-cost effort to accomplish this activity?

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7: Set Performance Targets
and/or Stretch Goals
      CQI Activities                Cost Analysis Activities
Set new performance targets            Go back to Step 3:
based upon the search for better       Review/revise the assessment
practices                              strategy, develop an action
Set stretch goals as appropriate       plan and deployment strategy
Develop an approach for
achieving the new targets by
combining the best of the old
and new processes

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