Framework for Performance Measurement

Performance measurement is a critical tool for guiding strategy execution, decision making, and operational improvement. Every business does track financial results on a regular basis. There is no doubt financial health is important but performance in other aspects of the business is just as crucial. In fact, operational and customer related performances are key drivers for business success. As a result, businesses want to ensure that pertinent outcomes are monitored closely. This requires an effective performance measurement framework.

A solid framework for performance measurement facilitates the development of a proper mindset and approach to measurement. There are four key elements in this framework.

1. Meaningful measures

Measures need to be useful indicators that provide information for gauging progress and filtering choices. This requires an understanding of the business goals and results. There are abundant choices of performance indicators. Determining what is meaningful could take effort especially for measuring qualitative results. To find meaningful measures, keep in mind the need to address the question you seek answers to. Measuring more doesn’t imply relevance. It introduces confusion instead. When you focus on results that are impactful for the business, you essentially hone in on things that are most important. Less is more.

2. Reliable data

People ignore the results when they don’t trust the numbers. This could be attributable to a lack of understanding of how the compilation is done or the source(s) of the data. I have observed in numerous meetings that much time is wasted on debating the reliability of the data used and hence, the results. Recognizing that there might be multiple sources for the required data, it is important to reach alignment on what data would be best. When your team gathers to review results, the focus is on the analytics and follow up actions. As we know well, garbage in, garbage out. You want to identify the source that offers quality data.

3. Clear ownership

A key purpose of performance monitoring is to take action for course correction or optimize what is going well. Without proper ownership assignment, things will fall through the cracks. Many businesses have processes in place for regular high level results review. Then, the departmental managers take ownership of the functional performance. Often, cross-departmental performance receives little attention. It is important to note that collaboration across departments is paramount for a high performance business. Every necessary action generated from any performance review, at corporate, departmental or individual level, needs to have proper follow up and follow through. Clear ownership assignment is the best way to ensure things get done.

4. Receptive culture

The general perception about performance measurement is one that draws fear of penalty. People tend to shy away from reporting poor results because there is a tendency that the messenger gets hammered. In order to foster a healthy culture for performance measurement, your management team needs to work together to foster a healthy culture. To do so, they need to align on the approach to measurement. This alignment would create consistency across all business areas. When people understand how results are used, they become more open to discussing poor results and sharing ideas for fixing problems. Otherwise, there would always be a leaning toward defensive behavior, resulting in poor commitment and accountability.

These four elements for the performance measurement framework are inter-related. By establishing a framework that is supported by all employees, your business has a rigorous tool in place for ongoing performance monitoring. Without the appropriate monitoring, it would be challenging for any business to identify deficiencies and take corrective action.

If you would like to see where your company stands with your performance measurement practice, check out the “maturity assessment of your practice.”