Setting Digital Performance Measurement/Management Principles

The real purpose of performance management is to provide business insight and monitor the progress of strategy management.

Enterprise performance management is about how organizations manage performance at both strategic and operational level to achieve the setting business goals and objectives. Selecting performance metrics is the main challenge in establishing a performance management framework. It is vital that there is a shared consistent understanding of performance measurement and how to set common digital performance principles for improving enterprise performance management effectiveness.

Selecting the right set of performance indicators is one of the most important steps in performance measurement: As the old saying goes, you can only manage what you measure. The process to select the right set of performance indicator includes to answering why you are choosing that, how you will use them and whether you have enough resources to manage information and capture the business insight via them. The big "WHY" behind your selection is critical because the indicators will differ based on the reason/underlying purpose for measuring performance. If the big WHY is not clarified, and decision is not made correctly, it will not contribute or help in improving the business result and overall performance management effectiveness, and it will lead to KPI calculation and presentation only. Often you can see problems in using metrics when people aren't clear about what information they want to collect and how they intend to use the information to support decisions. This can lead to people trying to measure everything they can think of and display the information in every way possible, with no apparent reason for any of it. So to put simply, you can measure everything, but it’s crucial to measure what really matters, and measure them right.

The Key Performance Indicators need to be aligned with strategic and operational priorities:

The struggle for performance measurement or key performance indicator selection is that they sometimes need a number of measures around the same issue to gain a complete picture (Triangulation - use varying sources, measures, and methods of collection/analysis for each.) And then the other pitfall could be that the volume of metrics become unmanageable, turns to be the end itself. The performance metrics are suppose to be the means to the end, and the end is how well the business achieve its goals. Otherwise, they will distract the business from laser focusing on the most critical business issues. Hence, it is critical to map metrics clearly to a strategic goal or object. It shouldn’t create ambiguity or conflict in the mind of the accountable party. And don’t forget to drill down the priorities into all of the business units so they can be aligned to business purpose through workflow, technology/systems, people, measurement as well.

Metrics shouldn’t motivate a team to game the data: One of the biggest problems with metrics, in general, is that, once you have them, The effective performance measurement approach should enable business managers or professionals keep track of the progress made toward the predefined set of goals, in a consistent matter. It is important to complementing qualitative insight with quantitative insight which can sometimes give you a better picture of reality so they can make better decisions and get better outcomes. The metrics shouldn’t motivate a team to game the data, or they filter and even distort qualitative result and prevent the business from seeing a real holistic picture. Hence, the well-selected performance indicators should be based on the alignment of strategy management and performance management as well as the comprehension of decision-management and performance management continuum.

Keep in mind, measurement is not just numbers, but stories: Selecting the right KPIs is one of the most important steps in measurement because this process includes to answering why you are choosing that, how you will use them and whether you have enough resources to manage data. And who are accountable to improve those performance results. Hence, it should tell an information-based comprehensive story. It tells you how well you implement business strategy; how smooth you manage changes; how fair your talent management is; how effective you make decisions, how bold you manage innovations, how productive your staff is, and how mature is the overall business manageability.

Enterprise Performance Management is an overarching umbrella for other management disciplines: Corporate Performance Management is a management control from strategy till shop floor. Performance management is not isolated management practices, managing performance means to translating strategy into operational terms, and mapping collective goals to individual tasks, to make the  strategy everyone’s everyday job and a continual process. It needs to be accompanied by an agreed standard, defining tolerances (upper and lower) for variation.  It needs to be fully defined with specifications detailing its meaning, intent, relationships to other measures, calculation, requirements, reporting requirements and ownership. It has to be manageable -if the result or outcome it is measuring improves, it doesn’t cause another result or outcome to get worse, to ensure the business as a whole is superior to the sum of pieces.

The real purpose of performance management is to provide business insight and monitor the progress of strategy management. It can tell the vivid data-based story based on “5W+1H” business navigation. The well-selected performance indicators can provide the rational view of strategy execution & business manageability and make continuous improvement both and create synergy in the qualitative and quantitative way.

Posted in: Digitalization,Principle/Practice