Views > Strategy > Quotation > Performance Measures
ahmad, Member, Management Consultant, Jordan
A good article by Stacey Barr- Performance Measure Specialist
If you want a collection of useful and useable performance measures that lead to improvement of performance, then certain things must occur. You must:
decide on what you want to measure;
decide on your methodology of measurement;
collect relevant data for the measures;
discuss these measures with stakeholders;
analyse that data to turn it into performance information;
communicate that information to the people who will use it to make their decisions;
interpret that information so implications for the business are understood; and
use that information in deciding what actions to take to improve performance.
Decide what specific results should be measured. Usually these things are decided through the strategic and operational planning processes and end up being written as critical success factors, or objectives, or goals or priorities. The language will depend on your organisation.
Design measures that give the best evidence of those results. Brainstorming, just seeing what you can do with the data you already have, measuring what you’ve always measured, benchmarking to find what others measure and hiring consultants to tell you what to measure are all approaches you want to avoid, at least until you have really thought through the kind of evidence that will let you know the degree to which your results have been achieved.
Define performance measures to specify the operational details of how to bring them to life. For each measure, before you can bring it to life, you need to formulate how it is calculated, identify the data you need, decide its reporting methods, define its signals and agree how to take action, know who is best to own it.
Define the data requirements for a collection of performance measures you want to report. Extract from the measures’ definitions the specific items of data, where the data is and how to extract it. It’s like an action plan for gathering the data that will go into the performance report.
Design, improve and implement data collection systems to optimize data availability and integrity. Not all the data you need for your measures will be available, and even if it is, it might not be accurate or reliable enough. Designing data collection systems is a fairly big task and to do it without great waste and cost, expert knowledge or assistance should be sought.
Choose analysis techniques that produce performance information that answers driving business questions. You need to be able to clearly articulate the questions you designed your measures (in phase 1 SELECT) to help you answer, because that’s the key to choosing the right analysis method. Don’t create totals for each department of your organisation if your question is about change over time. Instead you’d need totals by week or month so you can examine the time series.
Apply analysis procedures to raw performance data. Working again with your spreadsheet, this means summarizing your raw data into totals or averages or ratios for each time period, such as week or month. It might also mean performing some analysis on this summary data, such as a correlation analysis, trend analysis or statistical process control.
Design graphs that facilitate interpretation and decision making. Spreadsheet software, like Microsoft Excel, doesn’t really know what is the best thing to do with your performance measures. So its default charts are not something to take for granted. For example, use line charts for trend information, use bar charts for comparisons between things like departments, use Pareto charts to focus on the biggest reasons or causes.
Design and develop performance reports for the owners and audiences of performance measures. Reports shouldn’t just contain the measures. They need to contain all the information that the audience needs to understand the context of the measures, how to interpret what the measures are saying, and how to respond to what the measures are saying. There is a bit of science and bit of art needed here.
Design and implement performance reporting processes. Reporting measures on a regular basis (like weekly or monthly) takes time and effort, and designing and mapping the process that does this can make it more controllable, more consistent and more able to be improved as you learn how to do it better.
Define guidelines that signal which differences in performance results are real and which are not. Traditional approaches like comparing this month to last month are dangerous. They often lead to over-reacting to trends that just aren’t there, or under-reacting to trends that are small but very significant.
Draw conclusions about performance results to decide if action is needed (or not). Organisational protocols on how to prioritise which performance results need attention, and which need to be left alone, are very important to develop. Scarce resources and time quickly passing through the hourglass mean we have to be very deliberate and focused in how we spend our action.
Design decision making processes which make effective use of performance measures. If your decision process doesn’t make obvious and effective use of performance information, then it needs some fixing.
Identify the root causes of performance results (getting deeper than the symptoms). Having the skills and approaches and tools for root cause analysis is what will make the difference between reducing the symptoms of a problem that keeps recurring, or fixing the problem for good.
Set performance targets that encourage sustainable improvement. Target setting is much more than just plucking a number from thin air (or any other place). The goals for improvement that you set need to motivate those that will do the improvement, need to be a worthwhile return on the effort and time that will be invested to achieve those goals, and need to be easy to maintain once the goals are reached.
Use performance measures to link the improvement cycle back to the planning cycle. A feedback loop is needed, via using measures in decision making processes, to check if investments in improvement action are really working to achieve the results set out in your organisation’s plans.
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