Similar to measures of health or well-being such as body temperature, pulse rate or blood pressure,

business measures should be quantifiable and expressed in numbers. That’s what makes a measure a

'metric' – the quantification of a condition.

 

Metrics should be precise and reliable. Two persons monitoring the same performance or attribute should

be able to arrive at the same reading. Metrics should be both effective and efficient in the information they

convey.

 

Why is performance measurement so important for an organization?

 

Performance measures express the priorities of the organization and provide practical guidance for the

work performed every day.

 

If people are matched to a metric or standard, they will try and beat it. Sales goals are a classic example.

e.g. beating last year’s sales figure is a target to measure either success or failure.

 

A start for devising a performance measurement is to look at your organization’s vision. What is it you are

trying to accomplish? What outcomes are you seeking? What behaviours do you need from your people to

achieve them?

 

In the 1990s, Robert Kaplan and David Norton devised a framework for performance measurement called

'The Balanced Scorecard'. Their article pointed to four areas that need to be measured to ensure long-term

growth and success: financial performance, customer assessment, internal business processes, and

learning and growth. All four dimensions of the balanced scorecard are focused on an organization's vision

and strategy.

 

This valuable article may be purchased from Harvard Business Review through their website www.hbr.org

 

Source: Critical Business Skills – Operations, Thomas J. Goldsby.