“Some people achieve the top of the ladder and only then realize it was standing against the wrong wall”, Stephen Covey
Measuring performance is an important part of an effective management. It can be best understood through considering the definitions of the words ‘performance’ and ‘measurement’ according to the Baldrige Criteria:
- Performance refers to output results and their outcomes obtained from processes, products, and services that permit evaluation and comparison relative to goals, standards, past results, and other organisations. Performance can be expressed in non-financial and financial terms.
- Measurement refers to numerical information that quantifies input, output, and performance dimensions of processes, products, services, and the overall organisation (outcomes). Performance measures might be simple (derived from one measurement) or composite.
The challenge for organisations today is how to match and align performance measures with business strategy, structures and corporate culture, the type and number of measures to use, the balance between the merits and costs of introducing these measures, and how to deploy the measures so that the results are used and acted upon.
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Below an article from BPIR’s partner New Zealand Business Excellence Foundation (NZBEF) about the importance of aligned results and measures written by Shara Curlett.
In this article we will explain the importance of the correlation between results and measures, relevant to any organisation going through the strategic planning process.
What Separates the Winners from the Rest?
The Awards programmes in New Zealand are an indication of those organisations that are striving to be the best. To be the best, they need to demonstrate this in what can be considered a very brief snapshot, attempting to encompass everything the organisation does.
During the Awards evaluation process, the evaluator/s will often look to the results section as a clear indicator of performance. If an organisation is performing well, it means that more often than not, they are doing the right things to get there.
However – the trained evaluators cannot be easily fooled! Results can be skewed, and meaningless to the organisation’s strategic objectives. An organisation can only demonstrate improvement based on what they are measuring, and if those measures are meaningless or irrelevant to the organisation’s primary vision and key objectives, then this represents a gap in the organisation’s alignment. They simply “paint the right picture” to the untrained eye.
Therefore, the most common section of an award application that separates the winners from other candidates are those organisations that can demonstrate a clear correlation between their business objectives, their measures and their results.
Alignment is a strong component of an organisation’s success. It indicates how well the organisation has consistency among plans, actions, analysis and results that support organisational goals. Results can be portrayed in any way an organisation chooses, however we only need to look at the number of research studies that present positive results which are based on limited data, thus proving that results do not always necessarily reflect success (or even accuracy).
How does an organisation find out if its measures are aligned with its results?
We need to go back to basics.
At the crux of any organisation is its strategic plan. Depending on the company / organisation – this could be a one-pager written on a napkin or a 20-page official document. Regardless – your strategic plan should have a clear vision. i.e. “Why are you in business? What is your ultimate goal?”
This vision is what drives your organisation, and you achieve this through your key strategic objectives. The general rule of thumb is 4 – 8 objectives. Studies suggest that any more than this and an organisation tends not to achieve any objectives due to lack of focus / overwhelm.
The objectives should follow a formula such as the traditional SMART objectives model:
Depending on your organisation, these objectives may be all you need, or you may drill down further, defining specific measures under each objective, by department or otherwise.
The Importance of Meaningful Measures
It is by these measures (i.e. those that support the strategic objectives and / or the strategic objectives themselves) that your organisation defines its success or otherwise. Therefore when setting these measures, an organisation should be able to demonstrate the following:
- They are applicable and meaningful to the organisation. Can you trace a path back up to the vision?
- They are a true measure of success / improvement. A measure that is static does not necessarily reflect progress in the organisation – therefore if we go back to #1 – is it relevant?
- They are benchmarked. Who else is doing what you do? What other organisations can you benchmark against?
- They are against targets relevant to the organisation. Alongside a benchmark, what is your goal? Some benchmarks are good to aspire to, however do not always reflect a target – e.g. the benchmark could be lower than your organisation’s standards, or alternatively you could be a start-up with Year 1 and 2 targets that are much lower than the industry benchmark.
What are Results Really About?
Results are all about transparency.
Results will show clearly whether or not an organisation is on the right track. If the results are not positive, then they may indicate clear opportunities for improvement, keeping in mind that some of these opportunities may actually be out of an organisation’s control.
Results should clearly show:
- A trend, or the beginnings of a trend. You only achieve a trend by measuring data over time. This takes dedication and continual measurement of the same data. Therefore if an organisation is continually changing its objectives and measures, it will be difficult to gauge any type of improvement over time.
- Results against benchmarking data and targets. However this is presented, i.e. graphs, charts, or tables, the results only have meaning if they have context. This context is provided by the benchmarking data from the industry and/or other similar organisations, alongside targets.
- Comments on significant impacts. As mentioned, some results can be out of an organisation’s control, therefore it is important to note how and why the organisation was impacted.
Why is Alignment Important?
One important reason for aligning a company / organisation’s measures with its results is for team buy-in. The workforce want to know that what they do has meaning, that they are doing well, and that they are recognised for their efforts.
If the results that reflect their performance are linked back to the vision and mission, this can have a significant impact on their morale and motivation – provided the vision inspires them.