Effective organizational management is based on a foundation of effective measurement because measurement determines what management does.
You get what you measure. Most individuals and organizations don’t get what they want because they don’t measure what they really want.
If you measure wrong things, you will take your company farther and farther away from its mission and strategic goals. Wrong measures trigger wrong activities and wrong activities generate the wrong results no matter how well-executed the activities are.
Performance measurement is a lot more than tables of numbers and scorecards. It is also about perception, understanding and insight.
In the end, when measurement is done well, it can have an enormously positive and transformational impact on the organization. The “context of measurement” will largely determine its effectiveness.
When measurement is used for the purpose of improvement rather than to make judgements or place blame, and when it is focused on the right measures, its true power is revealed.
In his book, Transforming Performance Measurement, Dr. Spitzer identifies the following performance measurement functions:
- Measurement directs behaviour.
- Measurement increases the visibility of performance.
- Measurement focuses attention.
- Measurement clarifies expectations.
- Measurement enables accountability.
- Measurement increases objectivity.
- Measurement provides the basis for goal setting.
- Measurement improves execution
- Measurement promotes consistency.
- Measurement facilitates feedback
- Measurement increases alignment
- Measurement improves decision making
- Measurement improves problem solving
- Measurement provides early warning signals.
- Measurement enhances understanding
- Measurement enables prediction
- Measurement motivates.
As seen from above, performance measurement has the potential to be a very powerful, highly functional and extremely positive force in organizations.
Unfortunately, when used poorly, not only does it not live up to its positive promise, but can be highly dysfunctional.
Source: Transforming Performance Measurement: Rethinking the Way We Measure and Drive Organizational Success by Dr Spitzer