STEPS FOR IDENTIFYING PERFORMANCE MEASUREMENT TARGETS

How does one build a set of performance measures that are consistent with the strategic goals of the firm and provide feedback on the activi­ties critical to the business?

1. Determine what is needed to manage the business successfully. Focus should be on those activities that contribute to the success of the vision, and measurements of those activities should be consis­tent with, and support, those policies and practices that will achieve company objectives. Ask "why" five times to make sure the mea­surement is far enough into the process to facilitate improvement.

2. Decide on the source of information to be used, and the who, what, when, where, and why of collecting the data. Selecting measures that are easily attainable ensures that they can be started quickly, and continued without difficulty.

3. Clarify and simplify the measures. There should be a clear under­standing of what is expected and agreement that the measure is meaningful. The process should be made as mistake-proof as pos­sible, and the process of measuring made simple to ensure that re­sults can be generated easily and consistently. A process that is not well understood by everyone is difficult to measure and improve.

4. Involve or co-develop the measures with the people who partici­pate in the activity being measured. Actual participants usually have the best feel for what activities would-be improved by measuring. Managers should be made accountable and delegate resources and authority to those doing the measuring. The work force must take ownership and responsibility for the measurement.

5. Relate local, or functional, measures to global measures, to ensure the activity is consistent with strategic goals of the firm. The mea­sures should be integrated throughout the company so various func­tional areas are working together for the good of the organization.

6. Establish performance goals that are out of reach, but not out of sight, both short-term and long-term. People respond to challenges, not impossibilities. Milestones should be set that demonstrate progress made toward the ultimate goal. Achieving milestones vali­dates change and improvement.

7. Collect information for a trial period, and evaluate its effectiveness at both local and global levels. This ensures that data and collection procedures are available. If the information being collected is not meaningful, change it.

8. Examine every process and activity that is being measured. Ask the following questions: Does measuring contribute significantly to control of the process or improvement of the activity? What would happen if we discontinued this measure?

9. Celebrate achievements of every milestone and goal, resetting the goal to the next level. Successes should be rewarded, and failures coached for success in the future. Seeing progress toward a goal improves morale, garners support, and increases total participation in all improvement activities.

EVALUATING PERFORMANCE MEASUREMENT EFFECTIVENESS

Once the performance measurement system is in place, it should be audited to ensure its effectiveness. World-class organizations use the following characteristics to evaluate performance measurement sys­tems.

• The cost of the measurement should not exceed the benefit derived.
• Measurements must be simple and easy to use, understand, and report.
• Those being measured should clearly understand the relationship between measurements and goals, and should be involved in the selection of the measures.
• Measurements must be accepted and trusted as valid by those who use them.
• Feedback should be provided in a timely manner to both operators and managers, in order for performance to be adjusted toward goals.
• The measurement should convey meaningful detail that can be used and understood at all levels of the organization.
• Measurements must be based on readily and continuously avail­able data, and usable at all levels of the organization.
• Measurements should provide operational as well as financial measures.
• Measurements should be easy to change, as needs change.
• Measurements must focus on improvement and corrective action, rather than monitoring or control.
• Short- and long-term goals are established for each measurement.
• Measurements should always be expressed as a positive, such as yield of good product rather than reject rate. People are more moti­vated by upward trends.
• Accomplishments achieved should be visible, and recognition given for those accomplishments.

To Be Continued