Ultimately, the goal of performance metrics is to drive improved results. Otherwise, why bother? Data show better performances among companies that employ performance metrics more frequently, and poorer performances for those that never or rarely leverage metrics to improve performance.
A well-designed performance management system, enables a company to develop and utilize a coherent set of performance measures or key performance indicators (KPIs) that are translated into concrete and operational terms that can be measured, communicated, and used to drive reporting, analysis, decision making, and action at both the business unit and individual levels.
Continuous process improvements establish the basis for enabling better operating performances. A performance scorecard builds upon strategy maps by identifying both financial and nonfinancial measures and targets to assess both strategic and operational performance. It balances short-term objectives with longer-term strategic goals, using both driver (i.e., leading) and result (lagging) measures.
Many companies have multiple stand-alone improvement projects that are not prioritized, linked, or tied to business strategy. The performance scorecard requires management to evaluate and select those initiatives, and other improvement projects, needed to achieve targeted performance levels and rates of improvement.
In selecting measures, three important notions are:
Select a critical few.
Seek a balance between leading and lagging measures as well as financial and nonfinancial ones.
Ensure alignment with strategies, operations, and organizational roles and responsibilities.
The secret of success is not in the KPI. The secret of success is in the actions taken to move the KPI towards the goal, not in the measurement itself. Focus on the actions, get value, get success, and get momentum. True improvement only comes from creating a process, not doing an event. Write out the path of progress and create a KPI dashboard that works for the team.