Keys to Success

Keys to Success
American Productivity & Quality Center

Although simple in concept, performance measures are not easy to introduce into an organization. Once sources of data are identified, it may take months to introduce new measures. The process can be slowed down by data gathering problems, inadequate benchmarks, a lack of internal history, or fear of what might be shown. Such barriers can be overcome with a strategic approach to the design, implementation, and communication of a performance measurement system. The most crucial observed strategic strength by far is sponsorship by senior executives. Top-level management, who are key users, need to be involved in the initial design and subsequent modification of the system.

Designing the Performance Measurement System
Performance measurement systems vary but must be simple and easy to use for those gathering and analyzing data. Consider the alignment that occurs in truly integrated measurement systems, as well as predictive measurement, employee buy-in, and methods of data gathering and reporting.

Establish a strong correspondence between performance measures and the strategy by incorporating predictive measures into the system. Simple structures will yield the most effective performance measurement systems. Focus the measurement system on a single idea or theme one that is easily grasped theme or represents a key goal to ensure that the organization comprehends the link between performance measures and the business strategy. Consider a continuous, or closed-loop, measurement system.

Align measures at the operational, or local, level in the organization and across processes. Most successful performance measurement systems include measures that can be "rolled up" from local levels. Local measures are more actionable, and employees have a better understanding of their importance.

Use a variety of approaches to obtain buy-in. Malcolm Baldrige National Quality Award criteria, for example, can communicate measures and motivate employees. Gather information for performance measurement systems from outside sources, such as customers, distributors, suppliers, etc.

Implementing and Operating the Performance Measurement System
Performance measures provide data to support other internal quality systems that enable change. The analysis of accessible, real-time data is the actual source of competitive advantage not the measure itself. So executives must be actively involved in reviewing the measures and leading the implementation effort. Dedicate top-notch resources to the implementation and operation of the performance measurement system.

A high level of accountability must also exist at the operational level; employees need fully understand the company's goals and their relationship with performance measurement. Routinely review the measurement system so that it evolves with changing needs. Continuous two-way communication regarding the status and results of the measurement system, possibly through training, is important in terms of continually improving the system.

Automate data gathering. Have systems and processes to ensure the integrity of the measures. Simple, intuitive tools are most effective for managing and communicating performance measurement information.

Communicating and Driving Behaviors
Formal communication at all levels is key to develop links between employee tasks and corporate goals and measures. Enhance employee understanding and support for performance measurement through customized, ongoing communication. Publications, special meetings, success stories, and simple graphics convey measures and results. Use incentive compensation to manage individual performance or contribution to balanced scorecard goals.