Why Do We Measure Performance, Anyway?

Measure

Why do we measure organisational performance? The first answers that pop into
your head might be:

* you can’t manage what you don’t measure

* what you measure gets done

* we have to be accountable

* they have to be held accountable

* they told us to

These aren’t the answers to the question this article asks. The reasons why
so many organisations – particularly high performing organisations – measure
things are more authentic, more fundamental and more motivating than those
listed above.

To avoid knowing too late

At a government agency executive meeting I attended, participants were
evaluating whether an end of year revenue target had been met. No it hadn’t, and
they did have lots of reasons

why, most of which were how the market
was changing and all their competitors were facing similar revenue downturns. If
they’d had this kind of conversation more frequently throughout the year,
perhaps they would have had time to create some strategies to better understand
what was happening in their market and find new avenues of revenue
generation.

Annual evaluation, or end-of-project evaluation is always too late to give
you choices about changing your course. Are targets just about playing numbers
games, or do they really represent important changes to ensure future health?
The above organisation is no longer in existence. Perhaps if they’d treated
their revenue target more seriously, they might still be around.

Frequently reported measures can give us early warning signs about whether
what we are doing is actually making the differences it’s supposed to, early
enough that we have the chance to modify or stop doing it if the intended
results are not forthcoming.

To avoid knowing too little

My friend works in a wholesale technology business that operates out of two
cities over 1000km apart, with a staff of about 25 people and they sell
approximately 50 product lines. The directors of this company only measure
typical balance sheet stuff. Their staff complain incessantly about product
returns, warranty service workload and availability of spare parts. Do they
measure any of these non-financial things? No. They reckon they don’t need to,
because it’s a small business and they can see what’s going on by walking
around. But the same simple problems that plagued them six years ago are still
plaguing them.

Can you be everywhere at the same time, all the time in your organisation? Of
course not. Most of what goes on in our organisations our physical senses
(sight, hearing, touch, etc…) can’t absorb or even detect with sufficient
reliability for us to understand them.

A small suite of performance measures help us know far more about what is
going on with the health of our organisation’s processes, than our own eyes and
ears ever could, with any reasonable amount of reliability.

To know the right things

A manager in the rail freight industry faced a typical problem for that
industry several years ago: they were running out of capacity to move all their
customers’ produce. The typical solution to this problem is to invest in more
rollingstock. Millions and millions of dollars worth. But he didn’t take the
typical solution. Instead, he measured and studied the way the system worked
until he discovered that it wasn’t how many wagons you had, but how quickly you
could cycle those wagons through, that impacted the capacity. So he didn’t need
to buy new wagons because he did find a way to cycle the wagons through the
system much faster, ending up with even more capacity than they actually
needed.

How well do the decision makers in your organisation learn about what works
and what doesn’t work in fixing performance problems? Trial and error? Following
traditional, already-proven strategies? How much real learning do they do about
the real leverage points of unacceptable performance?

Well chosen performance measures, that monitor the root causes of the most
important organisational health results, are measures that focus us on the
things we really need to know. They help us break away from knowing things that
really don’t make much of a difference.

Why do you measure performance?

If you aren’t measuring to know enough about the right things, and frequently
enough to do something about them, then perhaps you’re not actually measuring
performance?

Stacey Barr is the Performance Measure Specialist, helping people to measure
their business strategy, goals and objectives so they actually achieve them.

Sign up for Stacey’s free mezhermnt™ Handy Hints ezine at http://www.staceybarr.com to
receive your complimentary copy of her e-book “202 Tips for Performance
Measurement”, and make your business goals more achievable.

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