Minding Performance Measures Against Objectives
|How often does your company review reported data to measure performance?
Source: Survey of 300 IT professionals directly involved with application performance and integrity tools and practices, Newport Group Inc., July 2002 (*REsponse only in 1999.)
Do sudden changes in customer order rates or ad responses push up red flags in your company? They should. By tracking trend information in your business, you can prevent surprises caused by various events like:
- changes in customer need,
- introduction of competitive products,
- incorrect assumptions in strategy,
- error in data acquisition,
- changes in media coverage,
This is just a sample of some of the external changes that can effect your business. Things you wouldn't notice unless you're regularly monitoring "key success measures" in your business against objectives.
It is important to watch performance measures, but even more important to review them against business objectives. You may want sales volume to go down as long as profitability is going up -- looking at either measure on it's own could lead to the wrong business decision.
In building business relationships, you must understand the relationship between desired action, related measure, and desired outcome. Certain information will provide insights in where your company stands in meeting these objectives. It is your responsibility to develop the right analytical measures for monitoring these points in your business.
Here are several tips to monitor performance measures against business objectives:
- Clearly define business objectives. A business basic, but often missed, clearly defining business objectives so everyone involved understands the desired end result. In addition, by defining all aspects of the objectives, you can uncover challenges that may limit its achievement.
- Invite participation that produces buy-in. The only goals that can be meet are the ones embraced by those involved in their achievement. Get feedback from each individual who will perform the actions required to reach the objective -- the more input they have the greater the buy-in.
- Be clear about responsible parties. When business objectives are defined, make the individuals involved in the definitions responsible for specific results. Before moving toward any objective, make it clear to all involved who is responsible for getting you to that point. This reduces confusion and finger pointing.
- Use common measures of each objective. In every part of your company performance measures must be calculated the same way. Nothing frustrates employees more than when one group calculates X different than how their last group calculated it. Standardize each formula used in performance measures.
- Centralize information collection. While local reporting is helpful in the decision making process, today's technology allows information to be quickly compiled in a central location. Each data element can then be reviewed against trends and overall reduce your data mining costs.
- Use dashboard technology to simplify analysis. Try making data useful to all involved by consolidating relevant information on simple screens or wall charts. Make it easy for everyone in the company (or a functional group) to monitor changes in performance measures.
- Automate collection to eliminate fudge. It's true in all businesses, some managers manipulate numbers to their advantage if they are given the opportunity to do so. Use automated systems to calculate performance measures, even consider collecting this data through process instead of human interaction. Measures are analytical not objective.
- Focus each team on results they control. It is better to measure a team on factors they can influence, you'll get greater buy-in and better results. Group teams together to influence department measures, and departments to influence corporate objectives. When each party works locally it's easier to understand how daily action creates success.
- Define reasonable periods of measure. Depending on your organization you may need to review performance measures against business objectives only a few times a year. Select a period of measure that works best for your company -- if your period is too small, it will be hard to spot trends, too long and you might miss opportunities to correct bad situations.
By Justin Hitt at July 7, 2003 6:56 PM
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