St is relatively easy to measure costs, quantities and minutes, these are not always the most appropriate units for evaluating performance. Performance measurement is indeed always closely linked to the strategy pursued. Presented in this way, the subject seems perfectly logical, yet in companies the metric is not always chosen with the necessary accuracy. In other words, quite often we measure anything.
If you don’t do it excellently, don’t do it at all. Because if it’s not excellent, it won’t be profitable or fun, and if you’re not in the business for profit or fun, what the hell are you doing here? Robert Townsend
Although the term performance is rehashed over and over again in business and elsewhere, it is not a simple concept. Let’s start with a bit of theory.
Effectiveness, efficiency and relevance
efficiency can be defined as the virtual measure of the distance between the results obtained and the objectives sought. This measure alone is not enough, it is still necessary to have the necessary means to achieve the said objectives (relevance). The measure of economy of means to achieve results is defined in terms of efficiency.
A global measure
To ensure effective management, performance must also be assessed more globally by extending the problem a little beyond this simple diagram:
effectiveness – efficiency – relevance.
It will be a question of taking into account not only the extent of the achievement of the objectives targeted but also the expected end: satisfaction of the customer, partners, employees, the public…
Again, the definition of the metric is somewhere the key to the problem. The metric must be defined according to the objectives pursued.
See on this subject:
- Stakeholder theory or how to design and deploy a strategy that does not leave aside the performance ambitions of the company’s other direct or indirect players.
- Refer in particular to the precise study of the measurement axes at the bottom of this article.
Cost, productivity and…
Companies are used to measuring performance in terms of costs and productivity. It is important today to go beyond this heritage of the industrial-Taylorian enterprise. It is no longer a question of observing the financial results filtered by the accounts at a fixed date, but of providing all the decision-makers with the means to manage their units, their teams, their tasks according to the strategy of the business. Our ways of working are changing.
The Internet and networks induce new processes integrating the customer as a major actor. E-commerce and all its variations are currently visible signs of this. No need for long demonstrations to expose the ineffectiveness (and perversion!) of traditional techniques for measuring the various added values and expressions of performance.
Companies are aware of this and are waiting for new measurement systems. On the other hand, we should not either follow the current trend and overload decision-makers with information from more or less diverse backgrounds.
Dashboard, performance and management
To get closer to the customer and be ready to face the competition, companies today are fragmented, globalized, integrated within an alliance system, a true network of partners.
It’s time to adopt proactive management
Decision-makers do not make their decisions all over the place. The company chooses a direction of evolution to guarantee its sustainability, growth and profitability. This direction is expressed in a concrete and palpable strategy which, itself, is declined with each unit of the company, with each actor, in concrete objectives representing locally the orientation to be followed. Under this light, each actor measures his performance.
In other words, they forsake a little (anyway they should) the traditional planning to open your ears wide and thus be totally available, ready to seize the slightest upheavals of the market.
If this is not a revolution, it is in any case a real mutation of the piloting systems.
The dashboard to manage sustainable performance
This change in the steering system involves a fundamental reform of ancestral organizational principles and management methods.
The decentralization of decision-making centers as close as possible to the field and the accountability of an ever-increasing number are the most visible aspect of this. For many actors in the company, the role of decision-maker comes in addition to the productive task.
Performance is not exclusively financial
Performance is protean
Performance measurement cannot be reduced to its simple financial dimension. To ensure effective management, it is important to also measure all other forms of making a significant contribution to global competitiveness. Value is created as much in the sense of the shareholder as of the stakeholder, subsequently referred to as “stakeholder”.
The 7 axes of measurement
In total, we consider 7 main axes of measurement, characterizing the main forms of performance:
- 1. Customer axis
- 2. Partners Axis
- 3. Personal axis (including CSR)
- 4. Public Axis and Sustainable Development
- 5. Shareholders axis
- 6. Internal Process Axis (and Quality System)
- 7. Information system axis
The global management system for sustainable performance
1) Customer focus
The importance of measuring customer satisfaction to ensure sustainable business success is well established. But customer orientation is not an empty word. Switch from a product logic: “We do what we know how to do” to a client logic: “We do what customers expect” is a real revolution in itself.
2) Partners Axis
The concept of the “split” company has singularly reinforced the importance of the links between the company and its partners, whether they are subcontractors or suppliers. Until recently, only low value-added activities were outsourced. This is no longer the case and the company is refocusing on its increasingly narrow core business. Important activities are thus entrusted to partners. The overall performance of the company is closely linked to that of the global subcontracting chain.
See in particular in addition: Logistics performance and the logistics dashboard
3) Personal Axis
The viability of the reactive company is directly dependent on the participation of all its internal actors. Motivation has thus become a constant concern for the modern manager. It is also important to assess the true value of the quality of internal cooperation.
4) Public Axis & Sustainable Development
The “ethical” potential, which can be expressed in terms of requirements in terms of Sustainable Development and Corporate Social Responsibility, rightly takes on a leading importance. This “Public” axis encompasses the notion of performance as it is perceived by civil society.
5) Shareholders axis
This axis, far too privileged today, deserves to be put into perspective with reference to the other aspects of performance. We must not lose sight of the fact that the purpose of a commercial enterprise is to make a profit. The investor expects a return (see the EVA indicator). It should be noted that in a cooperative of the SCOP type, the employees are also the shareholders. Read on this subject the file “Self-management, adult business”
6) Internal processes axis (and quality system)
The “customer-oriented” process approach has seriously reformed the perception of the company. The transition from vertical and hierarchical design to horizontal and responsible design has opened up the field of possibilities in terms of continuous improvement. Measurement within everyone’s reach is now essential.
7) Information System Axis
The information system is the keystone of the integrated company. The relevance and quality of the information exchanged from the customer to the last supplier condition the viability of the whole.
On this subject, see also
- What can a dashboard be used for?
A dashboard is not a display of management ratios. We have known this for a long time or at least we should know. A dashboard is also not used to make decisions for you. That, I have the impression that we know less. In fact, it’s simple, a dashboard is an instrument for monitoring progress. It is used to measure improvement along a chosen axis of development. It thus makes it possible to judge the relevance of the actions undertaken. That’s what a dashboard is for. Let us now clarify with the help of a concrete example.
- Measure to improve performance
Improve performance with the new management dashboard, an essential decision-making tool. The dashboard is an instrument of progress and not of control or observation.
- Roles and functions of the management dashboard
To better design the dashboard and thus better use it, it is more than useful to know the 5 essential roles of the dashboard: -1- Reduce uncertainty -2- Stabilize information -3- Facilitate communication -4- Boosting reflection -5- Controlling risk
To each his own dashboard
With the development and democratization of Business Intelligence for all, and the rise of solutions such as Excel and the BI office tool originally, there is no longer any real obstacle to equipping as many users as possible with tables. on board. But we can only transform the business and make it responsive after we reform the systems, methods and habits of performance measurement.
Innovative Manager Dashboards
A 7-step process to facilitate team decision-making
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