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"What gets measured gets improved." This is a common theme embraced by many organizations today. But are we measuring the right things? Do we really want to improve what we are measuring? Can we directly affect the things we are measuring? By applying some straightforward recommendations, you can avoid common pitfalls experi­enced when selecting performance measures. Improve performance and morale in your organization through effective and meaningful performance measurement.

Early psychologists studied the reactions of people to measurements. Everyone reacts to how they are mea­sured. This reaction hopefully moves the organization closer to its goals. However, each of us has probably had the experience of being put in a position of choosing to do well on a performance measure that was tied to our compensation or doing what was in the best interest of the company. Deming cautions about using performance mea­surements that can not be directly affected by the worker. These unworkable performance measurement systems strip the pride of workmanship. His classic demonstration with the red beads shows how even the most willing worker cannot excel when the performance measures are invalid. Equally misleading is a reward system that rewards ac­tions not consistent with overall company goals. For example, how many times have we rewarded individual accomplishment when the strategic direction is teamwork? From first hand experience, the accomplishments of some teams are truly amazing when the overall environment is considered.

Creative measures have been developed in an attempt to align performance measures with organizational goals. Schonberger suggests lead time as an inclusive general strategic measure because significant changes cannot be made until improvements are made to the underlying process. Deming decries the use of numerical goals and targets. Whatever the process or environment, perfor­mance measures should focus on providing information and feedback to stay on course in the desired strategic direction.

Effective Performance Measures

Any performance measure chosen for a company should focus on the strategies and goals of the enterprises. Re­sponse to the measure should encourage actions consistent with the overall company strategic direction. Having an established target value provides a goal to strive for. In any journey, knowing where the destination is located is essen­tial to knowing how much addition travel is needed. Or as the great back seat drivers say, "Are we there yet?" Under­stand that some measures have no real end like lead time, inventory, and quality. These measures continuously improve but a target for the next step is essential for successful achievement of that goal. Only when a target is conceived and believed can it be achieved.

Most importantly, the performance measure should fit the process that is being measured. This may sound very simplistic, but many times measures are chosen that do not fit the process or aren't the main focus for the process. This is why performance measures are most effective when chosen by the process owner and are relatively few in number. Many companies proudly display their wall of fame (or wailing wall, as the case may be) that contains 100's of performance measurement charts. Expecting that all these measures are essential to the organization is unrealistic. In fact, only a small percentage have direct impact on the bottom line results. Effective measures provide more than just data, they provide information about the inner working of the business. Just as a physi­cian takes your pulse and temperature at every visit, certain key measures are essential to assessing the health of an enterprise.

To be Continued