Why Do We Measure, Anyway?

by Stacey Barr - Date: 2007-04-18 - Word Count: 689 Share This!

Why do we measure organisational performance? The first answers that pop into your head might be:

* you can't manage what you don't measure
* what you measure gets done
* we have to be accountable
* they have to be held accountable
* they told us to

These aren't the answers to the question this article asks. The reasons why so many organisations - particularly high performing organisations - measure things are more authentic, more fundamental and more motivating than those listed above.

to avoid knowing too late

At a government agency executive meeting I attended, participants were evaluating whether an end of year revenue target had been met. No it hadn't, and they did have lots of reasons why, most of which were how the market was changing and all their competitors were facing similar revenue downturns. If they'd had this kind of conversation more frequently throughout the year, perhaps they would have had time to create some strategies to better understand what was happening in their market and find new avenues of revenue generation.

Annual evaluation, or end-of-project evaluation is always too late to give you choices about changing your course. Are targets just about playing numbers games, or do they really represent important changes to ensure future health? The above organisation is no longer in existence. Perhaps if they'd treated their revenue target more seriously, they might still be around.

Frequently reported measures can give us early warning signs about whether what we are doing is actually making the differences it's supposed to, early enough that we have the chance to modify or stop doing it if the intended results are not forthcoming.

to avoid knowing too little

My friend works in a wholesale technology business that operates out of two cities over 1000km apart, with a staff of about 25 people and they sell approximately 50 product lines. The directors of this company only measure typical balance sheet stuff. Their staff complain incessantly about product returns, warranty service workload and availability of spare parts. Do they measure any of these non-financial things? No. They reckon they don't need to, because it's a small business and they can see what's going on by walking around. But the same simple problems that plagued them six years ago are still plaguing them.

Can you be everywhere at the same time, all the time in your organisation? Of course not. Most of what goes on in our organisations our physical senses (sight, hearing, touch, etc...) can't absorb or even detect with sufficient reliability for us to understand them.

A small suite of performance measures help us know far more about what is going on with the health of our organisation's processes, than our own eyes and ears ever could, with any reasonable amount of reliability.

to know the right things

A manager in the rail freight industry faced a typical problem for that industry several years ago: they were running out of capacity to move all their customers' produce. The typical solution to this problem is to invest in more rollingstock. Millions and millions of dollars worth. But he didn't take the typical solution. Instead, he measured and studied the way the system worked until he discovered that it wasn't how many wagons you had, but how quickly you could cycle those wagons through, that impacted the capacity. So he didn't need to buy new wagons because he did find a way to cycle the wagons through the system much faster, ending up with even more capacity than they actually needed.

How well do the decision makers in your organisation learn about what works and what doesn't work in fixing performance problems? Trial and error? Following traditional, already-proven strategies? How much real learning do they do about the real leverage points of unacceptable performance?

Well chosen performance measures, that monitor the root causes of the most important organisational health results, are measures that focus us on the things we really need to know. They help us break away from knowing things that really don't make much of a difference.

why do you measure performance?

If you aren't measuring to know enough about the right things, and frequently enough to do something about them, then perhaps you're not actually measuring performance?

Related Tags: metric, business goals, kpi, balanced scorecard, performance measure, key performance indicator

Stacey Barr is the Performance Measure Specialist, helping people to measure their business strategy, goals and objectives so they actually achieve them.Sign up for Stacey's free mezhermnt™ Handy Hints ezine at www.staceybarr.com to receive your complimentary copy of her e-book "202 Tips for Performance Measurement", and make your business goals more achievable.

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