How We Serve You : White Papers
Ten Rules for Developing Management Metrics
Introduction: Achieving Targeted Results
The use of measurements has long been the basic tenet of quality improvement efforts. With the wide use of the Malcolm Baldrige Quality Award criteria and the requirements in ISO 9000, the use of data as an important part of managing a company has been emphasized. The challenge that companies now face is identifying and developing appropriate metrics that will drive company performance.
Every organization has a reason for its existence and is expected to achieve targeted results. Management is beginning to ask:
- What measures would ensure the achievement of financial results?
- How can measures be used to communicate the vision and direction of the company?
- How will the measures selected ensure organizational alignment?
- How can we select the appropriate measures that will ensure customer satisfaction?
In the business world, it is not always clear what should be measured. In many cases, organizations have resorted to two main approaches for selecting performance measures. The first approach involves selecting the right measures by brainstorming and then identifying the ones that can be considered as most important for the company. The second approach involves benchmarking the measures used in other companies.
Both of these methods may result in the selection of performance measures that may not fit with the overall direction of the company. The result is confusion in the workforce as everyone seeks to respond to the initiative that is the “flavor of the month.”
Others such as Kaplan and Norton, in their Balanced Scorecard book, have described a process for developing a group of measures which should fall into four categories – financial, customer satisfaction, process, and learning and growth.
This article describes ten rules that if considered and used in any organization will form the framework for developing and using effective performance metrics.
