Understanding Performance Measurement
All high-performance organizations, whether public or private, are, and must be, interested in developing and deploying effective performance measurement and performance management systems, since it is only through such systems that they can remain high-performance organizations. When developing a strategic plan and strategic intent for how you would deliver high-quality products and services to your customers and how you intend to achieve those goals, the best performance measurement, management systems and practices work within a context of strategic planning that takes its cue from customers needs. The performance measurement also needs:
- Leadership is critical in designing and deploying effective performance measurement and management systems.
- A conceptual framework is needed for the performance measurement and management system.
- Effective internal and external communications are the keys to successful performance measurement.
- Accountability for results must be clearly assigned and well-understood.
- Performance measurement systems must provide intelligent information for decision makers, not just compile data.
- Compensation, rewards, and recognition should be linked to performance measurements.
- Performance measurement systems should be positive, not punitive.
- Results and progress toward program commitments should be openly shared with employees and stakeholders.
Performance measurement is the heart and soul of the performance-based management process. Flowing from the organizational strategic planning process, it provides the data that will be collected, analyzed, reported, and, ultimately, used to make sound business decisions. It directs the business function by justifying budgetary expenditures, documenting progress towards established objectives, identifying areas of both strength and weakness, providing an on-going assessment of the current organizational climate, and driving business improvement. In a nutshell, performance measurement supports organizational existence.
Performance measurement systems succeed when the organization’s strategy and performance measures are in alignment and when senior managers convey the organization’s strategic direction to employees and customers. The performance measures give life to the strategy by providing a focus that lets each employee know how they contribute to the success of the company and its owner’s measurable expectations.
Integration places performance measures where they are the most effective: integrated with the strategic, business activity. It makes it possible for the measures to be effective agents for change. If the measures quantify results of the activity, one only need compare the measured data with the desired goals to know if actions are needed. In other words, the measures should carry the message.