What is a performance measure? In business, government and non-profit organisations we measure a multitude of things. We hope this will help improve our processes. Unfortunately, this is not often the case. Where we think we have a decent set of performance measures, actually we have a hotchpotch of tasks, objectives and projects with a few badly described metrics.
A Performance Measure is something that can be counted and compared, it provides evidence of the degree to which an objective is being attained over a specified time.
At this point it should be noted that ‘Performance Measure’ is not a standard term and is often used interchangeably with terms like: key performance Indicator, KPI, performance metric, performance index, results indicator and many others. This is perfectly valid, the key is the definition, if KPI is term you generally use and it meets the definition above, then use it.
The definition includes a set of words that, for absolute clarity, need further explanation to ensure the definition is fully understood:
Counted: This may seem a little trite, however, counted means that a quantity can be assigned. A real number or value. It does not mean a percentage achievement. One of the most frequent mistakes in setting performance measures is to create a project and assess its success through how much work has been done. Just because an e-mail marketing campaign has been active for three weeks out of four does not mean it has been a success. Success is dependent on the outcome not the activity.
Compared: A real number or value may be interesting but it only becomes useful when it is compared to what is optimal, acceptable or unacceptable. Every performance measure must have a comparator or benchmark. Using an industry benchmark gives an objective quality to the comparator, objectivity is not required, but it is desirable. In the better performance management systems, for every performance measure a set of ‘thresholds’ has to be set to enable the system to display at least a red/amber/green status. Scores are often assigned to allow multiple performance measures to be rolled up to provide an overall department, division and company status
Evidence: The evidence will fall out of ‘counting’ and ‘comparing’ correctly. It is important to strive for a measure that will be observed in the same way by all stakeholders. The evidence should be clear and have specific meaning.
Objective: A performance measure only has significance if it is contributing to an objective. If there is no objective, why is it being measured in the first place? This does not mean we should ignore all operational measures; they still need to be in place – however, as sub-measures they should still contribute to the objective.
Specified Time: Everything is time bound; progress towards meeting an objective and therefore a strategy must be measured over a specified period of time.
The simple process of defining performance measures correctly can make a huge difference to the way an organisation manages its business. It will provide much greater clarity about what is important and therefore point people in the right direction. It will ensure that time is not wasted on those things that are unimportant and therefore save money. It should also provide the means to see things in a different way providing trends, patterns and movements that were not evident before.
For more information on Performance Measures look at our white paper: Developing Meaningful KPIs