Steps of a Performance Measurement System

To manage effectively, we need to measure performance.

Because we can't manage what we can't measure, it is important to establish a performance-measurement system that provides the right data. A successful performance-measurement system is based on measuring only what it important, focusing on customer needs. Involve employees in the design and implementation process of the performance-measurement system, as this encourages ownership. Unlike the addition-recovery-systems which all have 12 steps, various performance-measurement systems have different numbers of steps but basically address the same issues.

Instructions

1. Define your business or organization's objectives. Focus on three to five objectives that are attainable and can be measured, as too many objectives will confuse both staff and management. Measurable objectives might be "Reduce absentee rates by 25 percent" or "Increase sales for each department by 10 percent."

2. Identify the critical success factors for each objective, beginning with an actionable verb. Let people know how the objectives will be measured. If, for example, your objective is to "Reduce workplace accidents," you can address this with "Train workers in health and safety issues."

3. Translate critical success objectives into performance metrics. If, for example, a critical success factor is "Increase sales in each department," your measurement might be the percentage of sales increase in each department.

4. Set measurable success target baselines. Draw up a three-point range of minimum, moderate and "stretch" targets. If you set the goal as the number of staff who complete training by the end of the year with a passing grade of 80 percent, you could set the minimum at 75 percent of employees, moderate at 85 and stretch at 95 percent.

5. Collect measurable performance data from a number of sources. As well as immediate sources, gather data from HR departments, managers from other divisions or by bringing in an outside training consultant.

6. Analyze performance data. Review the measurable data you have collected, and identify where there is a gap between the goal and the result. Too large a distance between the target and the actual performance may indicate the measurable objective was unrealistic.

7. Test your measurement system to see how well it met the set goals. Juxtapose your objectives with the data collected and identify where your targets have to be redefined. An abrupt alteration in performance data may indicate a need to revise or redefine your measurable objectives.

References

• Harvard Manager Mentor: Performance Measurement
• Orau.gov: DOE/Nevada Family Quality Forum Approach
• IQPC: Steps in Performance Measurement