‘What gets measured gets managed and what gets managed gets done’. This simple phrase is often quoted but few organizations rarely carry it out with meaningful effect. Too many companies continue to rely on backward looking measures – mainly because this is what the shareholders want to see – for example ‘sales achieved versus budget’.
Business Managers have a requirement to do 2 things;
‘To know’ and ‘to do something about it’
Without a good set of performance measures in place how else will you know what is happening in your business. Good measures drive good behaviours while bad measures can lead to cover up and blame. Good measures have a link to business strategy; they measure process performances not just focusing on the result.
These good measures should not just be about the finances such as sales to plan but more about how well each section, area or person is performing in relation to the whole business. This is often referred to as the business scorecard.
A set of good measures can consist of;
Customer Service Delivery Performance (OTIF)
Demand Forecast Accuracy
Lead Time Reduction
Schedule Adherence (several based on manufacturing, sales, new products etc)
Waste reduction (Process waste – not physical)
Each measure should have a full definition, and an owner who is a senior leader to ensure the measure is properly applied.
At the same time as measuring performance many companies fail to make them visible to the whole business; often they are used at year end appraisals without prior warning to the employees. It is vital that the company scorecard is published and cascaded to the workforce. It may be that some individual measures will be required to support the main scorecards again these must be applied in an open style across the business.
Based on our direct experiences, ISPM can support companies to develop and implement performance measures which are relevant to the business strategy and direction.
We do this by helping to define a strategy map, linked to the key business processes which will deliver the strategy and produce a scorecard of results to see where the business is heading.