1. PART 3- MEASURING PROGRESS
TOWARDS GOALS
• The measurement of Speed, Accuracy, Volume and
Investment
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2. Introduction
• Performance measurement is the most neglected and yet
critically important element of the management cycle.
• Now in section 3, we will do two things, we will learn
how to measure progress, and we will learn how to
motivate progress.
• Measuring progress is a scientific model of capturing
change in performance areas that are desirable.
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3. CHAPTER 10, PERFORMANCE MEASUREMENT
AND PERFORMANCE MANAGEMENT
• Things could be
worse, suppose
your errors were
counted and
recorded every day
like a baseball
player
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4. Introduction to Chapter 10
• Figure 10.1, The Management Cycle
Operating plans
and budgets
Project
management
Needs
Assessmen
t
Performance
Measureme
nt
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5. LINKING PERFORMANCE MEASUREMENT
TO STRATEGIC PLANS
• WHY IS MEASUREMENT NECESSARY?
– To show progress towards achieving strategic goals.
– Show evidence as to the performance gaps in areas where
strategic outcomes are not being met
– Show evidence to let superior performance be recognized and
rewarded.
– Show evidence to let poor performance be recognized and
corrected.
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6. AN OVERVIEW OF PERFORMANCE
MANAGEMENT
• Figure 10.2, levels of performance management
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7. Figure 10.3, An Overview Of Performance
Measurement
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8. Building a Measurement System
• The first effort in performance
measurement will be to develop measures
of results and outcomes
• we can then translate the strategic goal into
an operating goal,
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9. Building a Measurement System
• two principal dimensions.
– We need to measure activity
– Hour spent, materials consumed, overhead
used.
– We need to measure results and outcomes.
– Things built, customers satisfied, money made
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10. •Financial Efficiency
•Sustainability in the economic
system
•Stewardship of the natural
environment
•Safety of employees and the
• Figure 10.4, public
• Input and Output Measures •Satisfaction of customers
High Level SAVI™ Measures
for each of the strategic goals
INPUT MEASURES OUTPUT
Materials, labour, overhead, time and MEASURES
talent etc.
Investment Returns
Customer Satisfaction
Measures of resources used to
Social and Other Benefits.
track the efficiency of the
Measures of the effectiveness
utilization of resources
of the use of resources
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11. Figure 10.5, Example Output Measures
OUTPUT MEASURES
MOST FREQUENTLY USED SOURCES OF
CATEGORY MEASUREMENT CONCEPT
INFORMATION
Financial Returns Total profits and % rate of return on investment
Investment Returns
Budget and actual cost information supplied by
Financial Efficiency financial services is equated to the volume of work
done using “unit measure” concepts
Internal customers, (intermediate results Data mining internal information about
such as on scope, on time, on budget) effectiveness at the intermediate level
Customer Satisfaction
External customers (public perceptions Opinion survey of external users which captures
of value, quality, function etc.) their perception of the value of the program
Non-financial social returns that are not
being measured in the satisfaction “Data Mining” existing information within the
Social Benefits category. (Environmental impact, value organization and among comparable organizations
of recreation to the health care system from outside
etc)
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12. Figure 10.6, Example Input Measures
INPUT MEASURES
MEASUREMENT
CATEGORY MOST FREQUENTLY USED SOURCES OF INFORMATION
CONCEPT
Direct tracing of materials and labour consumed to the
Materials and labour performance area using the financial system
Financial Operating
Resources
Allocation of overheads using an accounting allocation method that
Overhead
reflects the use of overheads by the performance area.
Capital investment in The accounting system will break out the capital investments in
Financial Capital Resources
operating assets each performance area
Non-financial
Management estimates of the resources of talent and energy and
Other organizational resources consumed
resources other non-financial resources that have been dedicated to this
by the performance
performance area.
area
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13. Two Kinds of Data
• Measures that come from observations of events are
called “Counting” measures,
• Measures of opinion are called “Judgement” measures.
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14. Developing SAVI™ measures
• Regardless of whether you are developing input or results
measures, and regardless of whether you are developing
high level measures for directors or operating level
measures…..there
is one framework for the
development of the performance measures.
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15. Figure 10.7, Four Dimensions of Measurement
Do what you do at the right speed.
“Speed” means on time, not fast!
Do what you do with accuracy.
This is the quality dimension of your work
Do what you do in the right volume.
You need to meet the needs of all of your customers.
Soundly manage investment in resources,
in terms of efficient and effective allocation of money, assets and
people.
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16. Four Dimensions of Measurement
• Speed
– Speed, an output measure, refers to the timing of the delivery of the
product or service, not necessarily ‘how fast’..
• Accuracy
– Accuracy, an output measure, is the quality dimension of your results.
• Volume
– Volume, an output measure, refers to the quantity of goods and services
provided.
• Investment
– Investment, an input measure, refers to the efficient utilization of total
organizational resources to get the job done.
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17. The Bus Ride.
• Riders on a bus will be happy when the bus arrives on
time S, it is clean and the driver is safe A, everyone at the
bus stop is picked up V, and the fare is fair I. If any one
of the dimensions is out of line, satisfaction declines.
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18. The Budget Process.
• Internal customers, senior management, will be happy
when the deadline is met S, the budgets are accurate A,
all divisions have prepared the budget V, and there was a
minimum investment made I in preparing the budget
because the process was simple.
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19. The Restaurant.
• Customers will be happy when the service is prompt S,
(fast at the drive through, slow at the romantic
restaurant), the food is good quality A, the portion was
the right size V and the price was fair I.
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20. The Grocery Store.
• Customers are happy when the store is open at convenient
times S, the goods are fresh A, there is enough selection
of products V and prices are low I.
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21. The Car Dealership.
• Customers are happy when the model they want is
available immediately S, it is clean on delivery A, it is
reliable for the first five years V, and the price was fair I.
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22. Chapter Summary
• In order to effectively manage performance we need to
have good measures of performance. To have good
measures we need the commitment of the organization to
make improving performance a high priority, and a ‘safe’
thing to do.
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23. Good performance measures should be:
• Measurable
– The data management system must be able to locate and report
performance information in an accurate and timely fashion.
• Observable
– There is a cause and effect relationship between data reported and
desired performance such that when the data shows improvement,
performance has actually improved.
• Reliable
– The goal and its measurement system should offer consistent and
uniform reporting.
• Controllable
– The variables that cause change in a performance area must be in the
manager's control.
• Active
– The goal must relate to an active business process that is in the realm of
the manager's routine. 23

24. Closing Remarks
• This chapter introduced the concepts of measurement,
chapter 11 will present performance measurement
examples in detail (this should make us ‘able’ to do it),
and chapter 12 will cover the human side of measuring
and managing performance, (this should make us willing
to do it).
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