Measuring Organizational Performance
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Is Your Company Performing at Its Highest Level?


Measuring Organizational Performance - Why Bother, Takes Too Much Time

Simply, measuring organizational performance shows quantified progress toward the attainment of targeted business objectives, such as "a 10% improvement in business cash flow".  Measuring performance also provides a type of "early warning system" that objective attainment may not be occurring as planned. In addition, your use of business performance metrics enables you to predict or forecast future performance.

The process of measuring organizational performance is essentially 4 steps:

  1. Establish the measurement standards and metrics, aligned with specific business objectives and based on financial and operational metrics
  2. Measure performance (there are three different techniques)
  3. Compare actual performance to planned achievements (showing scoring and progress trends)
  4. Take corrective action - then re-measure performance and compare to planned

 

The use of performance metrics and actively measuring performance progress is effective in providing a "point-in-time" view of business objective attainment - are we achieving our objectives, within the constraints of budget, time, and resources.



3 Techniques for Measuring Performance

There are three basic methods for measuring organizational performance:

  1. Variance Analysis - Typically cost and schedule variances are used to compare actual progress results to planned or expected results, at a point in time
  2. Trend Analysis - Looks at results over time to determine if performance is improving or deteriorating
  3. Earned Value Analysis - This is a technique focused on project performance and integrates scope, cost, and schedule metrics for analysis of project objective attainment.

Variance and Trend Analyses are most used as business performance measures - finance and operations measurement techniques.  These are typically used to show variances in actual versus budgeted expenditures and the overall trending of business performance measures, such as revenues, COGS, business cash flow, operational expenditures, EBITDA, etc.

Earned Value Project Management Analysis (EV) is most used to measure project performance and forecast effects on budget and schedule through the project completion.  

 

To establish a useful, pragmatic set of EV metrics, work with members of the finance and operations teams and focus on metrics that align with your overall business objectives.



Measuring Corporate Performance - How to...

There are two old adages regarding metrics and measuring objective attainment:

  • "What gets measured, gets managed", and
  • "If something cannot be measured, it has little value"


Once a set of business performance measures are established for a related set of "SMART" objectives, whether for your entire enterprise, a functional area, or a project, the stakeholders of those objectives and metrics must agree on a clear set of success criteria. In other words, what should the business performance measures, and progress toward achieving the objectives, show for the stakeholders to consider the objectives successfully achieved? 

Remember, measuring corporate performance and progress will not be successful unless you have clear, unambiguous objectives and success criteria.

Along with the metrics, objectives, and success criteria, a schedule or timing for measuring performance should be established and communicated to all stakeholders.  Consider distributing an information checklist so that everyone is clear what information must be provided and by when.  This is a continual process throughout the fiscal year for your business and for the duration of each of your individual projects.

Each time the information is gathered and the measurements analyzed, questions regarding whether there are deviations from attaining objectives will be answered.  If deviations exist (reaching agreed-to thresholds) senior management must then determine if corrective actions should be implemented, such as:

  • Re-planning (and perhaps changing course to fit the new plan)
  • Reallocating resources and/or funding
  • Changing the technologies and/or processes being used; or
  • Cancelling the initiative or project.


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