Performance Measurement: Key Principles
Two different sets of Principles are provided below. Choose the set or mix that best fits your industry...
The First Set:
Confront Reality: The notion that what we have built will continue to flourish is seductive. However, reality is that new models arise, making current practices less effective.
Focus on Strategic Contexts: Know where to invest in change—where to seek improved performance. Focus, through thorough analysis, on areas where the payback is greatest.
Summon a Strong Mandate: Change must be supported by a strong mandate from senior management, amplified by the voice of the client.
Set Scope Intelligently: Scope that is too limited may achieve nothing. Setting the scope beyond the sphere of influence of the change "champion" may bring about failure. Focus on measurably improving performance where it matters.
Build a Powerful Case for Change: The need for change is not equally obvious to all people—including employees. Consequently, the case for change must be strong and worked toward relentlessly.
Let the Client Drive Change: The needs of clients, rigorously examined, are a powerful driver for change.
Know the Stakeholders: Powerful individuals and groups—including employees—have stakes in change. The needs and motives of diverse stakeholders need to be segmented, understood and prioritized.
Communicate Continuously: The case for change and the style of communication must resonate with all stakeholders and in particular those who have to change. Clear, succinct messages will be understood. Honest messages will be believed.
Reshape Performance Measures: Build the vision, then design new measures consistent with change strategies and goals. Dismantle old measures if necessary.
Use all the Levers of Change: Large-scale change can be achieved only when all the levers of change are brought to bear in a coordinated way.
Think Big: Small thinking dominates many projects, with predictable results. People need to feel free to "take the lid off the box", to surface some ideas that may not work in order to come up with a few that will.
Leverage Diversity: Draw on multiple sources, disciplines, cultures and types of people. Frequently, it is difficult to think of sources "outside the box" because we built it and, at the time, it was a good box.
Build Skills: Invest in human capital. Broaden the technical, problem-solving, decision-making and leadership skills of those "in the trenches". Make skill building a performance measure for all employees.
Plan: Develop a documented and detailed action plan for change, covering all major actions including changes in processes, systems, people, culture, structure and training needs.
Integrate Change Initiatives: An unplanned patchwork of change initiatives will promote bitter competition for resources, confuse employees and reduce positive impact. Therefore, maintain a consistent, integrated rationale for the whole pattern of change.
(Above is Adapted from Better Change: Best practices for Transforming Your Organization, Price Waterhouse 1995, published by Irwin, New York, NY)
The Second Set:
1. Performance measurements should be supportive of enterprise's goals and strategies. Enterprises must have clearly defined business strategy. The business strategy of an enterprise in modern business conditions focuses on issues like quality, reliability, flexibility, innovation, customer service, and environmental responsibility. There are three reasons for keeping performance measures in line with the business strategy:
The first reason is obvious. An enterprise needs to know how well it is performing. It should choose a few measures the managers can use to assess progress.
The second reason is that people focus on what is measured. The choice of performance measures can direct the management process in enterprise. The chosen measures show everyone the enterprise's priority.
The third reason means that measures provide feedback to help people and teams to do their jobs and to improve performance.
2. Performance measurements should be quantifiable and appropriate for graphical or other visual display.
3. Performance measurements should be simple and easy to use. The person who performs or manages the activity should easily and quickly understand the measure and easily explain it to other people.
4. Performance measurements should induce beneficial behavior. Those who are being measured must have confidence in the accuracy and relevancy of the measure. Appropriately selected performance measurements give a clear signal to all employees about the priorities of the enterprise.
5. Performance measurements should focus on the positive aspects as well as the problems. As a rule, all performance measures should point out what has been done right, rather than emphasize the negative.
6. Performance measurements are intended to foster improvement rather than serve as monitors. In other words, they should show clearly where improvement has been made and where more improvement is possible.
7. The number of performance measurements should be reasonable. Namely, the efficiency of measures is lower if their number grows. Too many performance measures often can confuse employees.
8. Performance measurements should be non-financial. The financial measures show only actual situation in enterprise, without direction towards improving the results. The changed business conditions require not only financial measures, but also non-financial ones. Since management's goals are both financial and non-financial, performance measurements that reflect both of these goals need to be developed.
9. Performance measurements should provide fast feedback of information. Successful enterprises fix problems when they happen, not waiting for month-end or year-end. The performance measures must help improve performance and to do this the information is needed fast. Fast feedback can be gained by continuous measurement.
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