If you want a collection of useful and useable performance measures or KPIs that lead to improvement of performance, then certain things must occur:
1. decide on what you should measure and how you will measure it;
2. identify and collect the data for those measures;
3. make the data available to those people and systems that will analyse it;
4. summarise and analyse that data to turn it into performance information;
5. communicate that information to the people who will use it to make their decisions;
6. interpret that information so implications for the business are understood; and
7. use that information in deciding what actions to take to improve performance.
These seven activities describe the process that brings business performance metrics to life. How many of these activities have you been aware of in your business? Do you know who the departments and people are that contribute to these activities? Do you have a good idea about the kinds of resources that are needed to properly perform these activities? Does everyone appreciate how much time and effort is involved in properly performing these activities?
Performance measurement frameworks (such as the Balanced Scorecard) give you a hand with some of the first activity, deciding on what you should measure. But usually these frameworks don’t help you with the practical detail of the other six activities essential to bringing performance measures to life.
Unless you already have processes, skills and resources allocated to the other six activities, these frameworks for selecting measures probably didn’t get you any further than having a document that listed, and maybe defined, your ‘Key Performance Indicators’. Hardly enough of a return on all the time and effort and money you invested with the expectation of having quality performance information to help you manage your business.
Seven essential steps of the performance measurement process all play a critical role in the value that performance measurement can bring to your business or organisation.
These seven steps flow together in an ongoing cycle of measuring, monitoring and applying performance measures. PuMP® is the name for this system of seven phases of the performance measurement process, and each phase is explained below, along with the typical activities that are needed.
STEP 1 SELECT: choose & define what’s worth measuring
Choosing and defining what’s worth measuring for your organisation involves:
• deciding what specific results should be measured
• designing measures that give the best evidence of those results
• defining the measures to specify the operational details of how to bring them
STEP 2 COLLECT: gather data which has integrity
The process of collecting performance data is critical to its integrity and can be very resource intensive. It’s worth giving serious consideration to how you will go about it, so the data can be “fit for purpose”. It involves:
• defining the data requirements for a collection of performance measures you want to report
• designing, improving and implementing data collection systems to optimize data availability and integrity
STEP 3 STORE: manage the data so it’s quick and easy to access
Where and how you store your data directly determines what data you can access, when and how quickly you can access it, how easy or difficult it is to access and how much cross-functional use you can get out it. To avoid the pitfalls of assuming that data is easy to get your hands on, know that the following activities will likely be needed in bringing your measures to life:
• using a data referencing model to make data management cost effective & enable cross-functional use of data
• extracting, integrating and preparing data for analysis
STEP 4 ANALYSE: turn the data into information
Analysis turns raw data into information. Make sure it’s the most appropriate information by adopting the simplest analysis approach that can produce the information in the form required to answer your driving questions. Analysis activities usually include:
• choosing analysis techniques that produce performance information that answers driving business questions
• applying analysis procedures to raw performance data
STEP 5 PRESENT: effectively communicate the information
In communicating performance information, you are influencing which messages the audience focuses on. Take care to present performance measures in ways that provide simple, relevant, trustworthy and visual answers to their driving questions. Activities like the following are usually involved:
• designing graphs that facilitate interpretation and decision making
• designing and developing performance reports or dashboards for the owners and audiences of performance measures
• designing and implementing performance reporting processes
STEP 6 INTERPRET: translate the information into implication
Interpreting your performance measures means translating messages highlighted by performance information into conclusions about what’s really going on. To turn information into implication, you must discern which messages are real messages (e.g. when a trend is really a trend). Two activities are important at this step in the performance measurement process:
• defining guidelines that signal which differences in performance results are real and which are just natural random variation
• drawing conclusions about performance results to decide if action is needed (or not)
STEP 7 APPLY: decide how implication will become action
When you have worked out what is really going on with your organisation’s performance, you are ready to make some decisions about what to improve, how much to improve it by and how to do that improving.
• designing decision making processes which make effective use of performance measures
• identifying the root causes of performance results (getting deeper than the symptoms)
• setting performance targets that encourage sustainable improvement
• using performance measures to link the improvement cycle back to the planning cycle
Lots of people don’t realise that performance measurement is as complex as this, or that each of these activities really does affect the value that performance measures can bring to your decision making. But after all, it comes down to the last bullet point above – without performance measures that really work, you just can’t get better at creating the results you really want to.
ABOUT THE AUTHOR
Stacey Barr is a specialist in organisational performance measurement, helping corporate planners, business analysts and performance measurement officers confidently facilitate their organisation to create and use meaningful performance measures with lots of buy-in. Sign up for Stacey’s free email tips at www.staceybarr.com/202tipsKPI.html and receive a complimentary copy of her renowned e-book “202 Tips for Performance Measurement”.