How We Serve You : White Papers
Ten Rules for Developing Management Metrics
Rule 1: Measures Must Relate to the Overall Strategy
The development of metrics requires a structured process. The process of deriving the metrics is just as important as the output – the types of metrics chosen. The process of selecting the metrics can become a powerful means of building a team and obtaining agreement on the direction and the methods for assessing the performance of the company. Figure 1 shows an outline of the process for selecting metrics.
The process begins by evaluating the current situation by doing a Situational Analysis. This is an important step as the management team evaluates company performance along the following lines:
- Who are our customers?
- What are their requirements?
- To what extent does the organization satisfy the needs of the customer?
- What are our major strengths?
- What are our weaknesses?
- Where do we stand relative to our largest competitor?
- What influences could impact our organization?
Answers to the questions above can be performed in a brainstorming exercise carried out by the management team and will form the foundation for the right metrics.
The management team should review the strategic plan and identify the short term and long term objectives. In most companies, there is a strategic plan but it is not clearly communicated to the workforce. Companies where a clear strategy has not been documented can discuss the vision, mission and values for the company. In other cases, the goal of the company may be expressed in terms of financial performance. Either of these cases will help the management team to articulate a framework for the overall direction or future state of the company.
The next step requires the development of Critical Success Factors (CSFs). A Critical Success Factor can be described as events, or circumstances that will differentiate the company from its competitors and will help to close the gap between the current situation and the future state.
Once the CSFs have been defined, the management team can brainstorm the measures that relate to the success factors. At this point the measures selected will relate to the current performance and the expected results. Activities or initiatives emanating from these metrics will have an impact on the financial results and performance of the company.
