To effectively measure your organization’s performance you need to eliminate a “silo” approach to measurement and measure the right things.
Measuring performance is a vital part of monitoring an organization’s progress. It comprises measuring the actual performance outcomes or results of an organization against its intended goals. This requires a top-down approach to setting performance criteria rather than a bottom-up approach that I often see occurring in many organizations.
The strategic plan provides performance targets for the organization; it sets the corporate direction. Yet how often does the strategic plan set performance measurement target for all levels of the organization? The answer is, not often. As a result, performance improvement opportunities to support delivery of the organization’s strategy get overlooked and the organization’s progress is stymied.
Here are 4 opportunities for leaders to identify and increase their organization’s effectiveness when measuring organizational performance:
1. Identify the Strategic Measurements Right Down to Departmental Level
When it comes to performance, it is always a challenge to determine what to measure and of course how to measure it. In many organizations we find that one department will determine what they should measure (For example, average hours an employee works each week) and another department will determine that these are not important areas to measure; they may determine that measuring an employee’s output or extent to which their work performance is met, to be of greater importance. As a result, the organization misses out on getting an overall performance measurement with performance improvement opportunities.
The senior leadership team creates the strategic plan. The departmental heads cascade this plan to their employees. This communication may include how the strategy’s success will be measured, but usually, this is at too high a level, resulting in each department interpreting this information and creating their own systems of measurement.
To avoid this problem, we worked with one of our clients to help their senior leadership identify strategic measurements for delivery of the strategic plan, right down to the departmental level. This client wanted to include “innovation” as one of their strategic imperatives in their strategic plan. They identified the number of new and/or significantly improved products and services they required as their measurement of success. Then, each department identified various measurements to reach the innovation goal. These included: the number of new ideas generated, the number of innovation teams, the amount of time taken to go through each innovation gate, potential sales or revenue that each innovation would generate, and so on. As a result of creating department level performance measurements to achieve the overall strategic plan the organization was able to realize its overall measurements for success.
2. Simplify Your Performance Measures
We often hear the phrase: “What gets measured gets done.” Organizations that successfully measure their performance achieve superior results. Conversely, organizations that over complicate their performance measures find it more difficult to measurably know the extent to which they’ve realized their goals. You don’t have to measure everything; keep to the essentials and keep in mind that performance measures must be defined for each level of performance accountability. That is, for the key business processes within the organization.
For example, a CEO and the executive leadership team may be ultimately accountable for the strategic measure of “overall customer satisfaction.” An operations manager and their field supervisors can only be held accountable for a customer satisfaction rating from the feedback of the customers they service and the processes they manage. What ultimately defines success for the top level customer satisfaction index will be the collection of data from all departments and their staff engagement in customer interaction at each level of accountability. The activities and processes necessary for systematically defining, deploying and linking measures throughout an entire organization need to be well-timed and carefully orchestrated. This will involve the engagement of senior executives, managers at all levels, technology support and front-line employees.
3. Measure the Right Things
Performance outcomes are more important measures of work than output. Outcomes are benefits or changes that result from the work being performed. They are the measurements of work performed that makes a difference to the organization and is in keeping with achieving the strategic organizational and departmental objectives. This work performed will be the key business processes.
Establish criteria to determine the key business processes. For example; use the measurements of the impact on customers, the bottom-line, the sales, the profits and so on. This will determine which organizational processes are the key business processes and which are the ones that support or fit into, the key business processes. Identify all of the key business processes throughout the organization. Ensure that their performance measurements are measuring the right things so that management can create a “desired results or outcomes” list of key organizational performance measures.
4. Eliminate “Silo” Thinking
While dividing organizations into departments may have some advantages, it can also be highly divisive and can prevent organizations from realizing performance synergies and collaboration. This is evident when directors, departments, managers, teams or staff may be high performers individually, but fail to choreograph their activities to create peak performance for the organization. This symptom is so widespread that it is often accepted as an inevitable problem within all organizations; except that it is not inevitable. Some pervasive drivers of “silo” thinking are competition among functional and structural groups over resources such as: money, budget, credit, equipment and workforce.
To reduce the impact of “silo” thinking it is important to allow data and information to flow across the organization and reduce competition for resources through prioritization of initiatives in accordance with the organization’s strategic direction and planning. But when cross-functional problems occur, it is important to make efforts to successfully tackle them though collaborative problem solving. Put simply, nothing drives people back into their silos more quickly and effectively than unresolved problems, and conversely, nothing brings people out of their silos more quickly and effectively than tackling problems together as a collaborative group.
Measuring Your Organization’s Performance
Create your strategic performance measures, communicate these through all departments, identify the key business processes, eliminate a “silo” approach to measurement and measure the right things. There are certainly other opportunities for leaders but we wanted to present you with some clear, concise, high impact opportunities that you can implement immediately.