I commonly receive questions from and have discussions with business owners in regards to performance measurements. Discussions focus mostly on business owners that are not using them, have stopped using them, or they aren’t sure how to use them. Regardless of where you stand on measuring performance, let’s explore why performance is measured and how these measurements can help your business.
Performance measurement involves determining what to measure, identifying data collection methods, collecting the data, and using the data for a specific purpose. Evaluation involves assessing progress toward achieving performance expectations, usually to explain the casual relationships that exist between program activities and outcomes. Performance measurement and evaluation are components of performance-based management, the systematic application of information generated by performance plans, measurement, and evaluation to strategic planning and budget formulation.
Why We Should Measure Performance
Performance measurement improves the management and delivery of products and services, as well as communications internally among employees and between the organization and its customers. Knowing how the different areas of your business are performing is valuable information in its own right, but a good measurement system will also let you examine the triggers for any changes in performance. This puts you, the business owner, in a better position to manage your organization’s performance proactively.
Performance measurement improves the bottom line by reducing process cost and escalating productivity and mission effectiveness. A performance measurement system allows a business to align its strategic activities to the strategic plan. It permits real deployment and implementation of the strategy on a continuous basis. With it, a business can quickly get feedback needed to guide the planning efforts. Without it, the business is flying blind.
Measurement of process efficiency provides a rational basis for selecting what business process improvements to make first. It allows you to identify best practices and expand this utilization elsewhere. Collection of process cost data for historical operations or past projects allows you to learn how to estimate costs more accurately in the future
The visibility provided by performance measurements supports a better and faster mechanism to making budget decisions and control of process in the organization. This means it can reduce risk. Visibility also provides accountability and incentives based on real data, not anecdotes and subjective judgments. This serves for the reinforcement and motivation that comes from competition. Utilizing performance measurements permit benchmarking of process performance against outside organizations.
One of the key challenges with performance management is selecting what to measure. There are many things and ways to measure, but the priority here is to focus on quantifiable factors that are clearly linked to the drivers of success in your business and sector within the industry. For example, you may want to measure your quality of customer service, operational efficiency, or productivity. Once you have decided upon what to measure and found a way to measure them, the next step is to start setting performance targets to give everyone in your business a clear sense of what they should be aiming for. Strategic visions can be difficult to communicate, but by breaking your top level objectives down into smaller concrete targets, you will make it easier to manage the process of delivering them. This method creates crucial links between your organization’s strategy and day-to-day operations.
Performance measurements have the ability to help you, the business owner, measure productivity, outcomes, and financial performance. You will be able to improve efficiency and effectiveness of your service or product delivery as well as make better decisions for short-term and long-term planning, and will be able to identify areas of weakness and make improvements much more quickly. It sounds complex, but in reality it is fairly simple. Identify what you want to measure, decide how to measure, collect the information, and use the data to support the success of your business.
April Salsbury, MBA is a strategist, an analyst, an operational guru, a recognized leader and C-suite global healthcare executive with drive and focus for competitive markets. Co-host of The Business Forum Show and regular contributor to various business journals, she possess multi-functional and multi-national competencies with more than 15 years experience in business and healthcare. Her expertise is in invigorating revenue growth and infusing value of lean practices in growing companies through improvements to cash flow and operations management.
Fueling revenue, growth and profit, Salsbury & Co. is a consultancy firm focused on helping businesses and healthcare organizations achieve excellency. Our specialists have executive experience combined with deep functional expertise to provide our clients with services that drive real impact and results.
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