An essential component of an effective performance management system is the performance measurement element.
The Balanced Scorecard
The Balanced Scorecard is a famous method and covers four broad categories of measures, mostly employed at an organisation level:
1. Financial Perspective
2. Customer Perspective
3. Process Perspective
4. People Perspective
Financial measures could include, for example, the obvious ones of revenue, revenue growth, revenue mix, P&L measures, margin, profitability, cost measures, cost reduction, and areas such as productivity improvement, utilisation of resources, etc.
Customer measures (external and internal) could include, for example, the obvious ones of market share, customer retention, customer acquisition, customer revenue/profitability, and customer satisfaction.
Other customer measures could include product/service attributes, customer relationships and image and reputation.
Process measures are based on identifying the internal business processes that are most critical for achieving the goals of the organisation/department. Thus, think about what processes are critical in your department to achieve the goals of the department and the goals of the organisation.
Process measures will obviously be very specific to each department/job e.g. Internal Audit processes will be entirely different to Web Editor processes to Affiliate retention processes.
People measures are relevant for all Managers in that they are measures of, for example, employee satisfaction, employee retention, employee productivity, continuous up-skilling of the workforce, employee capabilities, skills of the workforce, measures of employee motivation, engagement, etc. They also include process measures such as the application of best-practice recruitment, performance management, development and retention strategies.
Other people measures include absenteeism, average years of service, timekeeping, length of time to fill vacancies, employee productivity, time lost through accidents/stress, etc.
Lead & Lag Measures
Lag indicators represent the consequences of actions already taken, while lead indicators are the measures that lead to – or drive – the results.
For example, the number of accidents in the workplace is a lagging indicator. The lead indicator might be, for example, regular safety audits conducted or the score on the safety audit.
Sales is a lagging indicator. But sales may be driven by the number of sales calls made, the number of sales visits made, the number of proposals made or the conversion rate of visists to sales or proposals to sales.
Activity measures include the measurement of activity, for example, no. of Facebook friends, no. of Twitter friends, no. of blogs, no. of blog comments.
For a HR Consultant job they might include:
• No. of Days Training/Consulting with Clients
• No. of Customers in portfolio
For many jobs it is very easy to measure activity and thus very important from an employee perspective that activity measures are included in their Job Measures.
Impact measures are designed to measure the impact or value-add from an activity.
Thus, the question to ask is ‘why are we doing this activity?’ ‘what value-add or impact does it have on the business?’.
Thus, for a HR Consultant, the value-add or impact measures might be:
• Revenue generated per month (and per annum)
• Average revenue per day
• Customer service/satisfaction