Integrated Performance Management starts with a strategy Strategy starts with a Balanced Scorecard with measures needed to assess if the performance processes and plans are actually delivering the planned performance

1. INTEGRATED PERFORMANCE
MANAGEMENT
The importance of performance measures for
Balanced Scorecard Initiatives
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2. Why Measure Performance?
 Strategies are about differentiating between
actions that make a different and actions that
sustain the current processes.
 Strategies are hypotheses and must be tested
 Testing the strategy requires a design of experiment
approach.
 Experiments require measures that verify the results
 These verification require data.
 This data measures performance against the
hypothesis.
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3. Why Measure Performance?
 Improves products and services.
 Improves communication.
 Helps justify programs and their costs.
 Helps to demonstrate Stewardship of resources.
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4. How to develop performance measures
 Basic steps
 Structure of objectives, criteria, and measures
 Balanced scorecard approach
 Use of best practices
 Alignment to organizational objectives
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5. Basic Steps in Developing Metrics
 Assemble the people who actually do the work or are
very familiar with it.
 Identify and focus on a limited number of critical work
processes and internal and external customer
requirements that can be effectively managed.
 Identify and align critical desired results with customer
requirements.
 Develop specific measurements to reflect critical work
processes and results.
 Establish performance goals, standards, or benchmarks.
 Create gradients for rating degree of success.
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6. The POCM Structure
 Performance Objectives: Broad, general areas of review
that generally reflect the end goals based on the
mission of a function. The overall set of PO’s should
characterize the organization’s level of performance in
the functional area over time.
 Criteria: Specific areas of accomplishment that satisfy
major divisions or responsibility within a function. May
be thought of as performance indicators.
 Measures: What is actually being measured. Should be
quantifiable if possible and appropriate. Some cases
include specific goals. Are designed to drive
improvement and characterize progress made under
each criterion.
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7. A Balanced Approach
When developing Performance Measures, use a
balanced approach such as the “Balanced
Scorecard”.
 Operational Effectiveness (Financial)
 Stewardship (Compliance)
 Customer Satisfaction
 Learning and Growth
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8. Operational Effectiveness
Managing cost and performance:
 Focus on cost effectiveness, economy of operations,
and supporting mission productivity.
 Focus on best business practices using tools such as
benchmarking.
 Compare performance against other organizations,
as appropriate, using performance and cost data
plotted over time.
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9. Stewardship
Managing compliance to requirements and
commitments:
 The POCMs, where appropriate, must provide
adequate coverage of the management of
compliance related to contractual, legal, and
regulatory requirements are managed.
 Performance Measures are developed by functional
area teams to assess the effectiveness of managing
commitments jointly agreed upon between senior
leadership and the providing business groups.
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10. Customer Satisfaction
Performance measures are aligned with corporate
and customer needs. The general goal for all POCMs
is to focus on improving the quality of our overall
product in a manner that is timely and aligned to
customer requirements.
Internal customer satisfaction should consider inputs
such as:
 Strategic Plans
 HQ functional area objectives, where available
 Routine customer interaction, interviews and/or
surveys
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11. Learning and Growth
 Managing the workforce to ensures personnel are
qualified and effective.
 Focus on training and making necessary information
available to staff.
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12. Implementing these measures
 The following steps are important, when
implementing a performance measurement
program:
 Give control over implementing changes and designing
the measurements to those held responsible for
performance and improvement.
 Use measurements to promote improvement, not to
identify poor performers or penalize them.
 Train managers in quantitative methods to acquaint
them with what measurements are, what they mean,
and how they relate to customer requirements.
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14. Level of Performance – People
Descriptions Definitions Examples
COST Compensation Acquiring and deploying the skills
of people
 Salary
 Benefits costs
Development Training and education  Training meetings
 Seminars
 Coaching
 Mentoring
Motivation Encouraging people to
continuously improve
 Sharing sessions
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15. Level of Performance – People
Descriptions Definitions Examples
QUALITY Reliability Consistency of performance and
dependability
 Performance to schedule or
promise
 Error rates
Credibility Trustworthiness, believability, and
honestly
 Personal characteristics
Competence Possession of required skills and
knowledge
 Skill level / proficiency
 certification
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16. Level of Performance – People
Descriptions Definitions Examples
TIME Responsiveness Willingness and readiness of
employees to provide prompt
service
 Time to respond to questions,
inquiry.
Resilience Flexibility and positive attitude
toward change.
 Number of skills
 Individual readiness for
change
 Number of suggestions
submitted
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17. Level of Performance – Process
Descriptions Definitions Examples
COST Input Cost of process inputs  Raw materials
 Capital costs
 Cost of sales
 Cost of preparing collections
TIME Velocity Speed of delivery of the process
output
 Cycle time
Flexibility Ability of the process to
responded to varying demands
 Setup time
 Multi–tasking equipment
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18. Level of Performance – Process
Descriptions Definitions Examples
QUALITY Conformance Effectiveness of a
process: usually an attribute
performance
measure of whether the
output of a process
meets and exceeds
customer satisfaction
 Product/Service characteristics
Productivity Efficiency of a process:
doing the right activities in the
right way
 Units produced or processed per
given input (e. g., rate per hour,
number of attempts)
 Process path length
 Number of activities in a process
TIME Velocity Speed of delivery  Cycle time
Flexibility Ability of the process to
respond to varying
demands
 Setup time
 Multi-task equipment
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19. Level of Performance – Organization
Descriptions Definitions Examples
COST Financial Historical financial
information reported
under external rules
 Regulatory reporting
 Stakeholder reporting
Operational Financial information
used to run the
business on a day-today basis
 Sales backlog
 Sales
 Cash balances
Strategic Financial analysis used to support
long–term decision
 Make / buy analysis
 Product cost analysis
 Target cost analysis
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20. Level of Performance – Organization
Descriptions Definitions Examples
QUALITY Empathy Individualized attention  Customer satisfaction rating
 Employee satisfaction rating
Productivity Organizational efficiency  Sales per employee
 Units produced within a time frame
 Outputs divided by input
Reliability Consistent and dependable
performance
 Product returns
 Customer complaints
Credibility Stakeholders’ perception of
organization
 Image surveys
 Public relations scores
Competence Skills required to
performance
 Third-party certification
 Client references
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21. Level of Performance – Organization
Descriptions Defini7tions Examples
TIME Velocity Speed at which an
organization delivers
various outputs
 Order fulfillment cycle time
 New product development time
Flexibility Ability of an organization to
respond to various demands
 Number of organizational levels
and span of control
Responsiveness Ability and willingness to
provide prompt service
 Time to act on custom requests
 Average time it takes to reach a
person.
Resilience Flexibility and positive
attitude towards change
 Organizational change readiness
index
 Number of suggestions
implementations
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22. All performance measurement systems encounter
pitfalls along the way to success.
Understanding these upfront will improve our
changes of success.
Major Pitfalls22

23. Content
 Develop a lexicon of performance measurement
terms.
 Discuss generic stages of performance measurement
process.
 Discuss possible pitfalls that can arise at each stage
of the measurement process.
 Segue to an example of an integrated
performance-based measurement system.
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24. Performance Measurement Lexicon
 Critical Outcomes = Critical Few = Strategic Goals:
High level outcomes necessary to support strategy
and continuous organizational improvement
 Performance Objectives = Objectives: Desired
results necessary to assure progress toward Critical
(Few) Outcomes
 Performance Indicators = Measures: Specific
indicators of performance; outcomes or results
 Metrics = Criteria: Quantifiable performance
targets or goals.
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25. Steps in Generic Measurement Process
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26. Pitfalls When Determining Objectives
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27. Pitfalls When Determining Objectives
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28. Pitfalls When Determining Objectives
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29. Pitfalls When Monitoring Progress
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30. Pitfalls When Monitoring Progress
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31. Pitfalls when Evaluating Data
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32. Pitfalls When Determining Improvements
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33. Pitfalls When Determining Improvements
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34. Performance Measurement Systems
 There are a number of performance measurement
pitfalls to watch out for
 They can arise at any stage of the performance
measurement process
 It is critical to understand what the data will look
like, when it will be collected, at what frequency, by
whom and what it means, up front.
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35. Integrating performance management processes
requires several steps to be taken upfront.
Here are some examples of how understand the
characteristics of a successful performance
measurement system.
Integrated Performance Measurement35

36. Example Performance Measurement System
Characteristics of Integrated Performance
Measurement Systems:
 A balanced set of measures
 Selection of a set of “Critical Few” measures
 Accountability for all measures
 Vertical integration of measures
 Horizontal integration of measures
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37. Characteristics Of The Systems
 Balanced Scorecard (Kaplan & Norton, HBR, 1992)
- proposes 4 “perspectives” views of business:
Financial, Internal Business Processes, Learning &
Growth, and Customer Perspectives.
 Mark Graham Brown (Keeping Score, 1996) -
proposes 5 views of business: Financial
Performance, Process/Operational Performance,
Customer Satisfaction, Employee Satisfaction, and
Community & Stakeholder Satisfaction.
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38. Characteristics of the systems
Selection of a set of “Critical Few” measures - At all
levels
 Too many high-level measures tends to distract
Senior Management from those most “critical” to
managing the company.
 Too many supporting Objectives may indicate that
the Critical Few are not specific enough to clearly
link to strategy or that the strategy is not clear.
 Best Practices companies tend to agree that 3 to
15, at each level, is a manageable number.
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39. Characteristics of the systems
Accountability for all measures
 Highest Level measures (or groups) need a
Champion and are the responsibility of Senior
Management.
 Objectives usually the responsibility of Mid-level
managers.
 Individual Performance Measures usually the
responsibility of midlevel managers, trickled down
to staff.
 Staff must know they are accountable and must be
given the resources necessary to do their jobs.
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40. Characteristics of the systems
Vertical integration of measures
 Aligns lowest level of performance measures with
the strategic goals of the organization.
 Focuses attentions and efforts of all staff on
organization’s strategic objectives.
 Critical Outcomes (Strategic Goals) are 3 to 5
years out n Objectives are can be completed in 1 to
3 years.
 Performance Indicators must be completed this fiscal
year.
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41. Characteristics of the systems
Horizontal integration of measures
 Breaks down organizational “stove piping.”
 Measures of horizontal integration tend to focus on
management systems/processes.
 Assures optimization of work flow across
organizational boundaries n Improvements tend to
affect the entire organization.
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42. Source Materials
 Major Pitfalls of Performance Measurement Systems -
Module V, Randy R. LaBarge, Senior Performance
Systems Analyst, PBM-SIG Fall ‘99 Meeting,
Washington D.C., November 17, 1999.
 Integrated Performance Measurement The Importance
of Performance Measurement & How to Develop
Performance Metrics, James F. Koonce Jr., Executive
Director Laboratory Administration, University of
California Office of the President
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