At the Centre for Business Performance here at Cranfield University School of Management, our team have many decades worth of combined experience in researching and advising organisations on performance measurement and target setting. We have tapped into this expertise and distilled for you what we consider the critical elements of creating, reviewing, and acting on performance measurement information.
Please let us have your comments below.
A. Creating Performance Measurements
- Only measure what is important for your organisation’s success. Ensure all operational measures and targets are aligned with your strategic targets. Don’t create more than about 5 (10 tops) at any level.
- Know what you’re using the measures for. Is it for compliance with someone’s needs? To check on a situation? To challenge the status quo?
- Check that all measures are achievable. Never impose a target without a test-drive on the shop floor. Also make sure they are clear to everyone tasked with achieving them – check back with everyone on this.
- Use both qualitative and quantitative measures together. This will reduce the risk of gaming.
- Know how much it costs to measure. Is it worth it?
- Tell everybody in the organisation what the measures are for and why they matter.
- Measure at least these: customer satisfaction, employee engagement, and operational effectiveness.
B. Reviewing Performance
- Review performance against measures regularly and formally. Do this at least once per year.
- Give clear, constructive and timely feedback. Check back that your feedback was received as you intended it.
- Involve not only managers and supervisors in reviewing performance. Get everyone involved in reviewing performance: of their own performance, of their peers, of their supervisors.
- Don’t just review people’s performance, also regularly and formally review the measures you use.
- Involve those tasked with achieving targets in this process also. Invite feedback on measures, and communicate the results from this process to everyone in the organisation.
- Remove all outdated or unhelpful measures as soon as you discover they are no longer appropriate.
- Introduce rewards only when the performance measurement system is sufficiently robust. Use them to strengthen the message that measures matter.
C. Acting on Performance Information
- Use measures to learn how to improve performance in the organisation as a whole. Use this information to ask better questions, not only to help answering any specific questions you already have.
- Update all your people (at all levels and departments) regularly on performance: good and bad.
- Don’t blame individuals – it is invariably the system at fault. Ultimately, you are responsible for creating a system that enables performance.
- Remember: change takes time. Set achievable targets, including those for shaping an effective Performance Measurement System.
- Celebrate your organisation’s success widely.