1.6 the functions of performance measurement

Even if we don’t always measure well, we tend to measure often. That’s why this book is about how to measure both often and well.

You would be amazed to know how many times on an average workday you are involved in some form of measurement. It is the ubiquity of measurement that makes it almost invisible, and we have come to think of it as routine – as part of the standard infrastructure of the organization – and it has been allowed to evolve. But this is a mistake. Organizational performance measurement is much too important to leave to chance and evolution. Measurement at work serves a great many vital purposes, and the extent to which it serves those purposes is the extent to which organizations like yours will realize its true value.

Let’s look at some of the major functions of performance measurement:

– Measurement directs behavior. According to Eliyahu Goldratt, author of the business classic, The Goal, all behavior can be

predicted by what is being measured: “Tell me how you measure me, and I will tell you how I will behave.” The most frequent question I get from clients is: “What can we do immediately to improve performance in our company?” My response is invariably: “Change one key measure that is currently driving the wrong behavior.”

– Measurement increases the visibility of performance. You can’t manage what you can’t measure. Because most of what happens in organizations (processes, capabilities, and performance) is not directly visible, measurement then becomes “our eyes.” This book will show you how to measure anything – even those difficult to measure intangibles like innovation, relationships, and knowledge – so that everything important in your organization can be effectively managed. In our far-flung and virtual enterprises, where onsite managing is becoming increasingly difficult, measurement is what makes the “virtual organization” and self-management possible.

– Measurement focuses attention. Because people are faced with so many competing demands on their time and resources, what is measured tends to get their attention – particularly when what is measured is linked (even tangentially) with the reward system. Furthermore, in the absence of good measurement, it is human nature to pay attention to the unusual or the annoying. That’s why the squeaky wheel often gets the grease – even if it’s the wrong wheel.

– Measurement clarifies expectations. One of the most important roles of management is to communicate expectations to the workforce. It is well known that people will do what management inspects (measures), not necessarily what management expects! Too often management is vague about what it expects, resulting in considerable confusion:

“We want our supply chain to be more agile!”
“We are committed to being the most innovative company in our industry!”
“We aim for maximum customer service and total customer satisfaction.”

What do these statements mean? Twenty people will interpret them in twenty different ways. Some people are adamant that “I’ll know it when I see it!” But, will they really? As we will see, well-defined measures cut
Through the layers of vagueness, and get right to the point.

– Measurement enables accountability. Accountability is really nothing more than “measurable responsibility.” Measurement tells you how well you and your employees are performing against commitments – the essence of accountability.

1.6 the functions of performance measurement