When developing business performance metrics, focus should be given to creating measurements that give insight for making the most appropriate decision, whether that is to take action or leave things as they current are. Developing performance metrics should involve the creation of an entity that is measurable, sustainable, auditable, and consistent.
Reliable and effective performance key performance indicators (KPIs) and other metrics have the following attributes:
- business alignment
- time-series tracking
- honest assessment
- repeatability & reproducibility
- involves tracking those metrics where action would be taken, if appropriate
- peer comparability
Developing Business Performance Metrics Opportunities
When developing business performance metrics, businesses gain much when the good-metric objectives are achieved.
For achievement of the above goals when developing business performance metrics, organizational measurements need to be established so that they will provide a long-lasting, truthful assessment of the outputs from processes and how to improve the metrics that benefit the business as a whole. This objective is accomplished through the 9-Step Integrated Enterprise Excellence (IEE) business management system.
In IEE, business metric report outs are through an IEE value chain (step 2) and strategic process improvement efforts are addressed through process improvement efforts using techniques such as lean Six Sigma (step 7).
An IEE value chain can describe in one “clickable” location what an organization does and how it measures what is done. In the IEE value chain below, functions are displayed as rectangles, while metrics have an oblong entry. The main functions (rectangular boxes) for a business are connected using arrows, while support functions are not.
Metrics for each function give focus to answering the question what is a good metric for this function relative to a criteria of quality, cost, and time.
Additional points that need to be addressed for the achievement of the above “good metric” goals when developing performance metrics are:
- Selected measurements should have over-time continuity and not change when there are new organizational charts, leaders, and/or strategies.
- The format when reporting the measurements needs to be able to provide statistically-determined predictive statements when appropriate. Organizations benefit gain much when this approach is applied to tracking their key performance indicators (KPIs).
- Metrics following the above developing performance metrics should have consistency in reporting. What is meant by this is that one person does not provide a process-response output using a pie chart while another uses a stacked bar chart. It is best when everyone provides an IEE measurement statement that is predictive, when appropriate. Predictive performance reporting is accomplished through a 30,000-foot-level report-out.
- The result of developing performance metrics using this approach is that a corporate IEE value chain can be drilled down throughout the organization via Enterprise Performance Reporting System (EPRS) software. This value-chain presentation can provide up to date predictive performance metric status along with information about the measurement’s associated processes.
- A result of developing performance metrics using this approach is that the organization chart would be a means to execute the fundamental process map of the business and its related performance measurements. One advantage to this business process management approach is that an organizational change can result in metric ownership reassignment; however, the basic measurement format would still remain consistent.
- The simple setting of goals for performance measures does not make mean that those objectives will be achieved. This approach to management could be considered management by hope. Everyone in an organization needs to keep in mind that a process’ output is a function of the process’ inputs and its steps. Organizations benefit when they analyze their performance measurements collectively so that they can establish goals for their IEE value predicatively-reported metrics, which are most important to the business relative to meeting its financial and operational goals.
- For value-chain functional metrics, process improvement goals (as part of developing performance metrics objectives) should be established from an analytical-enterprise assessment of the business as a whole. In this effort, business constraints, among other things, would be evaluated. One example of this is giving focus to marketing and sales metric improvement, if the organization has excessive capacity, and there is a financial goal to grow the business.
- Organizations benefit when they blend analytics with innovation to select targeted strategies that result in focused projects for financial goal achievement. These selected strategies would then result in operational metric improvement goals and that, when completed, positively impact the business’s financial goals. With this system for developing performance metrics, metric improvement goals create a “pull” for projects that have the most benefit to the business in its entirety.
Developing Performance Metrics and Performance Measurement System
The first item in the following was just described relative developing performance metrics in a performance measurement system. Other items that need to be considered are items two and three and four:
- Developing performance metrics
- Performance management system
- Performance dashboard
- Enterprise performance management software
For additional information for integrating performance measurements into a business process management (BPM) system see:
- Business Process Management Execution: IEE Articles, Webinars, Videos, Books
- Performance Measurement System
What can be Gained through an IEE Approach for Developing Performance Metrics and their Improvement System?
The IEE business management system for developing business performance metrics and their improvement addresses the issues described in a 1-minute video on traditional business scorecards and their improvement.
Developing Performance Metrics Application Assessment for Your Situation
Contact Us to set up a time to discuss with Forrest Breyfogle how your organization might gain much from an Integrated Enterprise Excellence (IEE) approach for developing business performance metrics and their improvement.