To remain competitive in today's marketplace, companies must develop performance measurements that will reveal current baseline values, high­light opportunities for improvement, and drive operational strategies. This presentation will focus on understanding the need for performance measurements, identifying overall performance measurement targets, and applying sound measurements, which satisfy organizational objectives. Information will include the importance of aligning measurements with strategies, converting to new types of measurements, and utilizing spe­cific measurements to achieve world-class goals.

UNDERSTANDING THE NEED FOR PERFORMANCE MEASUREMENTS

Performance measures are not new. We have been aware for some time that you cannot effectively manage that which you cannot measure. What is new is the recognition that improved performance is necessary for the continued survival of many companies. Today's global compe­tition mandates that manufacturing organizations strive for excellence through continuous improvement in order to remain competitive. Cur­rent trends of continuous improvement include viewing inventory as a liability that covers up underlying problems, changing to a more flex­ible workplace, considering rejects as unacceptable rather than inevi­table, learning to respond immediately to customer demand changes, and elimination of all waste.

Why measure? Customer requirements are more stringent than ever, placing tremendous pressure on everyone within the organization. Higher quality, lower prices, rapid product development, and reliable service are changing the way we perform. Achieving best-of-class has become the focus for many of us, but how do we answer the question, "Are we there yet?"

Performance measurements are the yardsticks that tell us how we've done, where we are, and where we need to arrive. They help us make decisions on what to change, and on what to change to. They are a checkup on the vital signs of the organization, and serve as communi­cation mechanisms for expectations downward, and results upward. Performance measures themselves cannot change an organization's culture, but can be a powerful catalyst for change, by promoting team­work, establishing accountability, and making performance visible.

Performance measurements also motivate us to improve. If a com­pany chooses to measure a process, it is placing priority on that activ­ity, and people will concentrate on improving the process. It is foolish to assume we can continue to repeat the same activity, yet expect to get different results.

Taking measurements identifies and focuses attention on those ar­eas that need improvement. Changing the mindset that uncovering prob­lems is good, not bad, is the responsibility of management, but once this is achieved, the workforce should begin to support the idea of be­ing measured. Everyone reacts to how they are measured, and relating a performance measure to an organizational goal helps people better understand the purpose of the measure and why it is important.

Another reason for establishing measurements is to ensure support of an objective. Performance measures are an excellent way to com­municate a company's strategy throughout the organization. The first step in the process is to establish that goal or objective, then arrive at a strategy that drives the organization toward achieving the goal. Perfor­mance measures assure continuing progress toward that goal, encour­aging actions that are consistent with the company's strategic direc­tion, as well as identifying unnecessary activity that can be eliminated.

Whatever the impetus behind the measurement, the relationship between performance measures and the strategies they are intended to support should be clearly understood by all. How can performance be measured when only one or two individuals know the company's op­erational strategies? A formal system allows everyone to work toward a mutually understood goal.

To Be Continued