When discussing performance, it is important to understand a few definitions. A metric is “a standard of measurement used to monitor performance (APICS Dictionary, 16th edition). It must be verifiable, and defined in either quantitative or qualitative terms. Performance criterion is “the characteristic to be measured” while a performance measure is “the actual value measured for the criterion” (APICS Dictionary, 16th edition).
Without performance metrics, organizations cannot expect to function effectively or efficiently. Metrics help keep processes under control, provide communication and reporting mechanisms for stakeholders, and highlight opportunities for learning and improvement. When someone’s performance is being measured, they are much more likely to perform better, and focus on where improvement is needed. Measurements must be clearly aligned with the desired outcomes so that individuals and organizations are made aware of what behaviors and improvements are preferred.
Benefits of Using Performance Measurements
Here are some of the benefits to using performance measurements:
- Priorities. Measurements convey what is important to an organization, and what priorities should be focused on.
- Quality improvement. Measurements identify and correct issues that need quality improvement.
- Motivation. Measurements communicate and direct behavior towards those areas the company deems important, and can be used to reward performance and as motivation.
- Transparency. Measurements provide stakeholders with a demonstrable assessment of the company’s performance in particular areas creating transparency.
- Comparability. Measurements provide the ability to compare against competition.
- Success. Companies using performance measurement systems are more likely to succeed in their industry, create value, and handle change successfully.
It is important to remember that measurement itself is not the objective – a metric is just a number. The goal is to use the data from the metric to identify areas that are lacking, and to make improvements.