Wednesday, September 28, 2011

Performance measurement (part 2)

Principles of performance measurement
All significant work activity must be measured.
§  Work that is not measured or assessed cannot be managed because there is no objective information to determine its value. Therefore it is assumed that this work is inherently valuable regardless of its outcomes. The best that can be accomplished with this type of activity is to supervise a level of effort.
§  Unmeasured work should be minimized or eliminated.
§  Desired performance outcomes must be established for all measured work.
§  Outcomes provide the basis for establishing accountability for results rather than just requiring a level of effort.
§  Desired outcomes are necessary for work evaluation and meaningful performance appraisal.
§  Defining performance in terms of desired results is how managers and supervisors make their work assignments operational.
§  Performance reporting and variance analyses must be accomplished frequently.
§  Frequent reporting enables timely corrective action.
§  Timely corrective action is needed for effective management control.

If we don’t measure ……
§  How do you know where to improve?
§  How do you know where to allocate or re-allocate money and people?
§  How do you know how you compare with others?
§  How do you know whether you are improving or declining?
§  How do you know whether or which programs, methods, or employees are producing results that are cost effective and efficient?

Common problems with measurement systems that limit their usefulness:
§  Heavy reliance on summary data that emphasizes averages and discounts outliers.
§  Heavy reliance on historical patterns and reluctance to accept new structural changes (or re-design of processes) that are capable of generating different outcomes, like measuring the time it takes them to do a task.
§  Heavy reliance on gross aggregates that tend to understate or ignore distributional contributions and consequences.
§  Heavy reliance on static, e.g., equilibrium, analysis and slight attention to time-based and growth ones, such as value-added measures.

Performance Measurement topics
Most of us have heard some version of the standard performance measurement cliches: “what gets measured gets done,” “ if you don’t measure results, you can’t tell success from failure and thus you can’t claim or reward success or avoid unintentionally rewarding failure,” “ if you can’t recognize success, you can’t learn from it; if you can’t recognize failure, you can’t correct it,” “if you can’t measure it, you can neither manage it nor improve it," but what eludes many of us is the easy path to identifying truly strategic measurements without falling back on things that are easier to measure such as input, project or operational process measurements.
Performance Measurement is addressed in detail in Step Five of the Nine Steps to Success® methodology. In this step, Performance Measures are developed for each of the Strategic Objectives. Leading and lagging measures are identified, expected targets and thresholds are established, and baseline and benchmarking data is developed. The focus on Strategic Objectives, which should articulate exactly what the organization is trying to accomplish, is the key to identifying truly strategic measurements.
Strategic performance measures monitor the implementation and effectiveness of an organization's strategies, determine the gap between actual and targeted performance and determine organization effectiveness and operational efficiency.
Good Performance Measures
§  Focus employees' attention on what matters most to success
§  Allow measurement of accomplishments, not just of the work that is performed
§  Provide a common language for communication
§  Are explicitly defined in terms of owner, unit of measure, collection frequency, data quality, expected value(targets), and thresholds
§  Are valid, to ensure measurement of the right things
§  Are verifiable, to ensure data collection accuracy

Several performance measurement systems are in use today, and each has its own group of supporters. For example, the Balanced Scorecard (Kaplan and Norton, 1993, 1996, 2001), Performance Prism (Neely, 2002), and the Cambridge Performance Measurement Process (Neely, 1996) are designed for business-wide implementation; and the approaches of the TPM Process (Jones and Schilling, 2000), 7-step TPM Process (Zigon, 1999), and Total Measurement Development Method (TMDM) (Tarkenton Productivity Group, 2000) are specific for team-based structures. With continued research efforts and the test of time, the best-of-breed theories that help organizations structure and implement its performance measurement system should emerge.
Although the Balanced Scorecard has become very popular, there is no single version of the model that has been universally accepted. The diversity and unique requirements of different enterprises suggest that no one-size-fits-all approach will ever do the job. Gamble, Strickland and Thompson (2007, p. 31) list ten financial objectives and nine strategic objectives involved with a balanced scorecard.

Problems in Performance Appraisals:
§  discourages teamwork
§  evaluators are inconsistent or use different criteria and standards
§  only valuable for very good or poor employees
§  encourages employees to achieve short term goals
§  managers has complete power over the employees
§  too subjective
§  produces emotional anguish

§  Make collaboration a criterion on which employees will be evaluated
§  Provide training for managers; have the HR department look for patterns on appraisals that suggest bias or over or under evaluation
§  Rate selectively(introduce different or various criteria and disclose better performance and coach for worst performer without disclosing the weakness of the candidate) or increase in frequency of performance evaluation.
§  Include long term and short term goals in appraisal process
§  Introduce M.B.O.(Management By Objectives)
§  Make criteria specific and test selectively{Evaluate specific behaviors or results}
§  Focus on behaviors; do not criticize employees; conduct appraisal on time.

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