Performance Measurement & Reporting: An Initial Guide
Performance measurement and reporting provides information that is factually based and measures progress, effectiveness of a process while monitoring if outcomes are being achieved. In this article, we discuss 1) business performance management, 2) performance measurement process, 3) performance measures, 4) performance reporting components, and 5) benefits of performance reporting.
BUSINESS PERFORMANCE MANAGEMENT
Business performance management is a set of management processes that analyze and enable a company to achieve set objectives. The purpose of performance management is to improve work performance and encourage individual productivity in organizations, as well as to identify and eliminate ineffective performers as well as recognize strong performers. When a business performance initiative is successful, it helps the organization achieve its desired results with the resources the company has on site.
Business performance management has three main activities:
- Selection of goals: Goal setting improves work motivation. Goal acceptance is necessary and so is moderation of goal setting efforts as well as the progression from setting to attainment.
- Consolidation of measurement information: Measurement information collected and analyzed has to be relevant to the organization’s progress as compared to the goal. There is no use, for example, in measuring what sales tactics are accomplishing if the company objective is to become more customer-oriented.
- Interventions made by managers: As with any other goal, there are times when strategies will not align with tactics, and as such, business managers can intervene to ensure the performance is in line with the goals and objectives decided on by the company.
PERFORMANCE MEASUREMENT PROCESS
A company’s performance measurement process is vital to the decision-making process. As written in Orau.gov handbook you cannot control what you cannot measure and you cannot change what you cannot control. So deficiencies and outdated systems can only be corrected and updated if they are examined and measured against the company’s objectives and desired standards. Measurements then are used by a company for assessment of the processes, reduce variations and control methods, continuously improve the systems in place and manage assessment to ensure goals are being met with efficiency and effectiveness. Companies implementing a solid performance measurement system should follow these principles:
- Measure what is important, and customer satisfaction is always important.
- Be customer oriented and focus on meeting those needs. Customers give great feedback, and this can help the firm decide what to measure.
- Involve your workers in designing and setting up a measurement system, this will help them to feel involved and they will more likely want to uphold the standards and aim to accomplish the goals you set together.
There is a cyclical approach to performance measurement that starts with the management of expectations by outlining the process and defining the expected outcomes. Next, steps should be taken to outline what is important to be measured, what will be impacted and the desired outputs. Following that the managers should continue with the collection of data and develop a strategy that will follow and link levels of performance to the set goals. And once those steps are taken the final part of the cycle is to create an image of what the performance looks like and what is being done whether for maintenance or improvement. Broken down below is the cycle in the form of steps. Once a company follows this route, it will be easier to see how daily acts performed by the company are either adding to the process or deviating from the important objectives.
1. Outline the direction the process will take
Identifying the direction of the process will offer an understanding of what you are about to measure. Select the processes that impact the business and the customers and start there.
2. Identify the important activity and measure it
The focus should be on key areas and business components, not people. This needs to be controlled because of the impact on productivity, efficiency and quality of other units of measurement
3. Establish company’s performance goals, objectives or standards
Goals and standards need to be established to be able to compare logically what is being accomplished. They should be established for various aspects of the company and measured based on the standards set. They should also be attainable, economic, applicable, consistent, cover all interrelated department activities, understood by those trying to reach them, stable and established, and most of all adaptable so if need arises they can be added to or subtracted from, based on what is required by the customers.
4. Establish ways in which to measure performance
Each measurement system should contain a unit of measurement, a sensor (evaluation of actual performance) and a consistent frequency (number of times measured).
5. Name the key department managers involved
In this step, the decision makers must be labeled and put into place. Various decisions should be made such as how and what data will be collected, who will analyze and report the performance, how to compare the goals and performance and what needs to be done if corrective action is needed.
6. Collect relevant information
In order to support the goals and have cohesive information, useful, and relevant data must be collected. Once collected, however, the leader in charge of data retrieval will need to extract all the necessary information to find all the answers to the questions that will lead to performance measurements. There are two types of data to be collected in this particular process: (1) variable or measured and (2) attributed or counted data.
Measured data takes on different values and shows a numeric picture of the business’ process. An example would be the number of hours spent working on a problem.
But counted data on the other hand does not necessarily present in numeric form. An example of this type of data would be the answer to the question was the solution to the problem found, yes/no?
7. Examine and report performance
The point, of collecting the data, is to gather new insights and draw conclusions. But before this happens the data has to meet the following criteria:
- ensure data collected answered original questions,
- locate and remove any bias in the collection process,
- ensure the correct number of observations were accumulated, and
- finally ensure the data is enough to come to meaningful conclusions.
The next part of this step is to analyze. Remember, collected data is not necessarily a true reflection of actual performance, so there will likely need to be more than one raw data input to get the true picture. Once the raw data is put into the analytic system, it needs to be grouped into a simple readable and understandable form, either tabular, statistical, graph or in a singular chart as the data needs to be easy to draw conclusions from. Then finally the information and conclusions will be developed into a report.
8. Compare goals and performance measured
In this step, the responsible party has to compare the report to the goals outlined from the start. Are there variances to be corrected? If so, the leader will create his or her report and send it on to the person in charge of making the changes.
9. Ensure corrective measures are taken
This step has to do with making a decision; does the leader take action, toss out the recognized variance or make a new set of standards? The leader can either change the objectives or change the process taken to get to the objectives. A root cause analysis will help to determine what is the best possible solution whether the process is redundant or the goals unrealistic.
10. Bring process and goals in line with each other
This cycle is also known as the feedback loop, and it will close off once the goals and the steps taken are in sync. There is a number of actions that can be taken to ensure the two are working together to bring about the best results. The desired result is always to remove defects and improve the process to achieve the main objective.
11. Establish new goals if needed
The step is pretty self-explanatory; if it doesn’t work then it needs to be adjusted. Keep these three features in mind when designing a new performance measurement goals.
- The degree of success in previous attempts.
- The changes applied to the process.
- The ability to adequately communicate improvement relative to the work process.
Keep in mind also that goals need to be challenging but achievable and that if previously set standards were impossible to meet then consider adjusting expectations. Do the reverse also for objectives that were easily exceeded. And finally, if there was extensive revamping done to the work process, then there needs to be new performance measures set.
Performance measures explain how well product, services and processes are working together to keep customers satisfied. According to Wikipedia, performance measures include the study of processes within a company to see if output is in line with objective.
These tools help companies to understand, control and improve or maintain their internal operations. Performance measures tell companies how well they are doing, how satisfied or dissatisfied customers are, whether goals are being met and what if any improvements are necessary. A performance measure is a number and a unit of measurement, the number, which is called a magnitude, measures how much is being done and the unit tells what is being done. These measures are usually tied to a target (the company’s goals) and can be measured in units such as hours, years, and the number of reports or number of errors. Most of the performance measures used, however, can be placed into one of the following categories.
- Effectiveness – measures if the right steps are being taken or, in other words, answers if the product is meeting the requirements.
- Quality – evaluate the degree to which the company’s service or product meets, fails or exceeds customer requirements.
- Efficiency – indicates if the company is doing things right, or in other words are the designated processes producing the desired outcome.
- Productivity – measures the value that is added to a company once it considers and calculates the cost of labor and capital needed to complete the process.
- Safety – is an overall measurement of the health of the organization and the surrounding work environment for employees.
- Timeliness – measures if work was done efficiently and as scheduled. Each unit of work must have set guidelines for timeliness to meet the needs of the customers.
PERFORMANCE REPORTING COMPONENTS
Performance reporting is the process of collecting raw data, deciphering the coherence between the goals and process and creating and distributing performance information to stakeholders. According to Anticlue.net, there is an added aspect of reporting and that is the clarification of the use of resources to obtain the goals that have been set. In a performance report clarification should be done alongside the information provided on scope, cost, schedule quality and procurement, as well as the following inputs should be taken into consideration.
- Data on work performance: This information outlines the work that is being performed, completed recently and what the follow up steps will be.
- Units of Performance measurement: These measurements include schedule variances, cost variance, cost performance index, schedule performance index and planned value among others. These values help with reporting unbiased and relevant quantifiable information, thus making better reports.
- Completed forecast: This measure is the predictor of future roadblocks in the process. Forecast completion, or completed forecast is often expressed using two factors: estimate at completion and estimate to complete, which gives time and amount predictions for completing a project.
- Measures for quality control: Activities that compare results to quality standards and processes are called quality control measures. These are put in place to ensure the product provided is of the highest quality.
- Project Management Plan: This contains the performance measurement baseline, which is the basis for approved management control.
- Requested changes approval: In the change request approval input, any changes that have been approved are ready to be put in place. After project changes have been approved, they need to be placed in front of stakeholders so these changes can be communicated and implemented.
- Produced actions: These refer to all the actions, results, products associated with producing and completing the task.
BENEFITS OF PERFORMANCE REPORTING
Performance reports help companies to define, set and achieve better performance goals and helps stakeholders manage the risk in investing in this company. The technology-driven process that can be put to analyze the raw data collected and turn it into actionable strategies to help companies with their decision-making process. It comes with a lot more benefits, but it needs to be a main focus of the company that wishes to improve its process. The report should cover every aspect of the company’s operation from concept to distribution and cover the lifecycle of the business. Various studies that should be included in the report are employee health and safety, social and environmental responsibility, safety of the processes being undertaken and quality and security practices of the company. By focusing on those areas and including the fundamental components of leadership, risk management, improvement and implementation, while involving the elements of an established structure, an overview of each section of the report, a statement of purpose and set of expected outcomes, business will benefit greatly from their performance reports. Listed below are just a few of the immediate benefits that businesses with continuous performance management and performance measurement, evaluation and reporting can expect to experience.
- Getting the most out of business practices internally
- Improved decision-making process
- Operational facility improvements due to changes
- Allows the team to analyze the status of the schedule and budget
- Continuous feedback to team members and managers
- Encourage effective communication with upper management and customers
- Early identification of variances to be addressed
- Quick implementation of corrective measures
- Access to new business and, therefore, new revenue
- Beating out the competition
- Spoting business problems that need to be addressed
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