When we assess an organization’s performance review system as it relates to strategy, execution, and management, we typically find a disconnected set of goals, measures, actions, and reviews. This explains why many senior executives express frustration with their organization’s inability to improve performance. Fundamental to this frustration is: what are the right things to measure? How do you know that your chosen performance measures will drive performance improvement? If you don’t know where to begin, we suggest you start by finding answers to these performance questions. Insights gained from these questions will drive performance improvement that delivers increased competitiveness.
1. Do we solve our customer’s problem?
To truly be successful, an organization must offer a strong value proposition, including measurable evidence that demonstrates you know your customer and their painful problem worth solving, and that you offer a unique solution that yields greater benefit than other options. Measuring and evaluating customer value delivered is critical and we find that very few organizations adequately address this need.
2. Do we produce our targeted solution?
Solution quality is measured by the extent to which you produce and deliver the targeted solution defined by your value proposition. The value proposition sets the target solution specification. This question evaluates the extent to which you meet that specification.
3. Do we deliver ACT?
Alongside meeting the target specification, every deliverable carries an associated ACT, which is evaluated on a transaction basis. Is the deliverable accurate, complete, and timely to what the customer desires?
4. Are we important to our customer?
The customer relationship can often be more valuable than the solutions provided. Does your customer consider you to be a mere vendor or an essential partner in solving their problem? This question includes three parts.
Service – What service do you provide to support your solution? Service improves the customer’s experience by helping them meet their needs.
Trust – What level of confidence does the customer have that your organization can be fully trusted, including knowledge, intention, and capability?
Engagement – What level of engagement does the customer desire from your organization? The greater the desired engagement, the more valuable the partnership.
5. Are we efficient?
An organization should understand the efficiency with which it provides its solutions. Less efficient organizations operate at a competitive disadvantage that manifests in many ways, including more bureaucracy, higher costs and slower response times. Efficiency measures areas such as value-added ratios, yield loss, throughput, and cycle time.
6. Are we productive?
Organizations acquire assets to produce profits. Few actually measure the extent to which those assets successfully achieve their purpose. Organization assets include people, tools, equipment, inventory, facilities, information technology, and intellectual property. The productivity of each asset should be evaluated for the value provided versus the cost of acquisition and operation.
7. Are we reliable?
Reliability assesses the extent to which your organization consistently produces and delivers your value proposition. In general, monitoring reliability requires measuring the business processes (and assets) that deliver your customers' solutions.
8. Are we compliant?
Even though the organization may effectively serve its customer at a profit, it must also do so in a responsible and sustainable way. Compliance measurement includes compliance with regulatory requirements, protection of intellectual property, risk mitigation, and active risk management of business processes and systems.
9. Are we profitable?
Alongside building and serving a loyal customer, the organization must deliver a return on invested capital that delivers a successful economic outcome for stakeholders. As they say…. no margin, no mission. Measurements here include revenues, costs, and margins, operating and support costs, and administrative costs.
Performance measures should have a specific role in furthering the organization's purpose. Many organizations measure what is easy and not what is strategically important. By broadly determining the essential elements and then aligning the performance measures with strategic purpose and intent, the organization leader can drive best-in-class organization performance that provides a sustainable competitive advantage.