Performance Measurements - Are You Measuring Performance Or Performing Measurements?
Most organizations have some sort of performance measurement system in place, whether it’s a formal system or a more informal one. But what do you measure and why do you measure it? In many informal systems it’s more of a process of collecting data to justify making a desired change or to get rid of someone than a performance measurement system. Many formal performance measurement systems are very sophisticated in their capture of data and reporting of results, but that’s it. These organizations seem to be in the business of performing measurements.
A true performance measurement system should serve two primary functions; provide feedback on the results of activities, and guide the behavior of individuals to achieve the company’s goals. The feedback that is provided through the reporting and analysis of the performance measures is very valuable in evaluating the results of the activities being measured. For example, you want to know how successful a change in a particular process is. By measuring the performance of the process before the change and after the change, you have an indicator of the success of the change. Say you want to increase your fill rate, or the number of customer orders you can deliver complete and on time (meaning when the customer wants it). First you need to know what your current fill rate is, so you measure it. This is a performance measure for your planning, production, procurement, distribution, and inventory management and control process. When you make some sort of change in the process, hopefully an improvement, you continue to measure the results. These measurements are an indicator of the success of the improvement activity and are a very valuable feedback mechanism.
But what exactly should you measure? You can’t feasibly measure everything, so you need to focus your measurement activities on those areas or processes that help you achieve your goals. Your measurement system must support the strategic plan and strategic direction of your organization. You need to determine the key factors to success and the key factors that will help you achieve your goals. You then need to develop measures that will help you determine whether you are making progress towards those goals.
If your strategy is to gain market share, one of your goals may be to increase your customer service levels by improving service factors such as increasing your fill rate, decreasing your time to delivery, increasing quality, and decreasing processing errors. Measuring the fill rate, and analyzing the results is an appropriate performance measure to achieve your goal of increasing customer service levels. Measuring the number of picks per hour (how many items were picked from inventory by warehouse employees) may be informative, but it might not be appropriate here because it doesn’t support the goal of increasing customer service. Of course, if the number of picks per hour does affect your customer service, you might want to include that measure. The point is, your performance measures need to support your strategy, not just provide you with interesting information.
There are two classes of measures, organizational measures and individual measures. Organizational measure may be departmental measures, or how a particular group or department is performing. These measures are a reflection on management and on policies, procedures, and processes. Fill rate is an organizational measure. Individual measures are measures of an individual employee’s performance. We love to measure individual’s performance. How many days were they out sick, how many days were they late, how many projects did they complete on time, how many times did they have to redo their work because of mistakes? These things might be important, but do they really serve any useful purpose? Individual performance measures should serve to guide the behavior of the employee to achieve well-defined desired results. Increasing the number of picks per hour might not be the result we want our employees to achieve. Increasing the accuracy of the picks might be a better measurement for us. To guide the behavior of the employee you need to define the results you’re trying to achieve, such as 100% pick accuracy.
You can’t just tell people to do better, or else, and expect them to improve. You need to give them the tools they need to improve, such as training, reliable equipment, and a well-defined process. Then you need to measure their performance. They have the tools they need to do their job, they know their current level of performance, and they know the goal that you want them to achieve. It is also very helpful to tell them why they are expected to meet their goals, to support the goals and strategy of the company, so they know where their efforts fit in the organization.
So are you measuring performance to help you achieve your goals and strategy, or are you just performing measurements to keep yourself busy?
Steve Novak is the founder and President of PPR Management Services. An independant consultant specializing in Business Operations and Strategic Planning, Steve helps organizations improve their performance by improving their operations. Working in a variety of industries, from manufacturing to non-profit, Steve helpls organizations define their goals, develop plans to reach those goals, and execute their plans and measure their progress. Find out more at http://www.pprmanagementservices.com
Steve is the author of the book
Tags: Employee Performance, Metrics, Operational Performance, Performance, Performance Measurement
