One of the benefits of measuring and reporting business performance is that it allows you to identify policies, practices, processes, or decisions that are working and those that are not working to measure, deliver and manage enterprise performance. In turn, this will enable you re-evaluate your current strategies for positive improvements to take place. What is very important, is the frequency at which you track your measures and also ensuring that you are tracking the right and meaningful measures that tell the bigger story of the business.
Performance measurement and reporting is not about measuring only that which is easy to measure and only for which there is available data. It is also not about having measures which are monitored only once a year. Rather, strategic performance management involves frequent monitoring and reporting of measures. This could be done weekly, monthly, quarterly or on a six month basis for lengthy projects that exceed more than one year. You should view your performance measurement and learning period as a learning curve.
In designing performance measures to track and report on, managers should consider the following factors:
1. Are the measures strategic in nature? Many organizations fall victim of measuring only those measures which are easy to measure or those which they can easily access readily available data but somehow lack any meaningful contribution towards achievement of strategic objectives.
The same applies to the nature of the measurement. Financial measures alone do not tell the whole story. A combination of both financial and non-financial measures completes the whole puzzle. Also, care should be taken that the measures being monitored and reported on are lead indicators as they have the power to tell the future story.
Lagging indicators do not present the bigger picture, they only tell you what has happened in the past. Through the use of business intelligence and predictive analytic tools, you will be able to establish, based on certain assumptions too, what is more likely to happen in the future thereby allowing you to be proactive rather than being reactive.
2. Resource availability: This involves looking at your human resources, time, data availability, financial resources etc. A cost-benefit analysis of measuring and reporting performance is essential to ensure that this does not come at a cost that surpasses the value added. You don’t want to experience a situation whereby, in an endeavour to improve performance, the cost of frequent measuring and monitoring performance is now a burden. Having said that, this does not mean you should allow lengthy periods to pass before you report on performance.
3. Engagement of employees: It is important to involve those individuals who are going to be affected by the measures at the development phase. Not only will this improve performance, but will also help overcome the threat of resistance. Effective performance measurement is not about consultation but contribution. There is therefore the need to develop a culture that is geared towards measuring and reporting performance. Employees should be made understand the benefits of such practices.
4. How urgent: This determines whether there should be frequent provision of performance feedback or not. For example, if sales performance needs to be improved in the next six to twelve months, then, monitoring needs to be done at least monthly. On the other hand, if you intend to embark on infrastructure projects, say, in the next 18 months or so, forecasting the impact of inflation, interest rates, foreign currency movements and other macroeconomic conditions on the total cost of the project should be done on a quarterly rolling forecast basis.
As an organization, you need to regularly review, monitor and manage your performance measuring and reporting capabilities in order to deliver and improve enterprisewide performance. Treat performance measuring and reporting as an ongoing process not a once in a while activity.