Performance measures guide
- 3. 2 Source: protiviti Table of Contents PERFORMANCE MEASURES GUIDE: SAMPLE 1 ..................................................................................................3 PERFORMANCE MEASURES GUIDE: SAMPLE 2 ..................................................................................................4
- 4. 3 Source: protiviti PERFORMANCE MEASURES GUIDE: SAMPLE 1 • Develop a corporate strategy that uses the input of the leadership of the organization, the expectations of the various stakeholder groups and best practices (e.g., maintain customer loyalty through new product development versus lowering prices). • Communicate the strategy and need for a new performance measurement system (e.g., one-hour companywide meeting). • Develop goals (e.g., get products to the market 50% faster over the next two years). • Identify the critical processes. − Identify the major process of the organization. Start with an understanding of what the customer receives from the organization and work backward to the organization. This distinguishes the primary, support and management processes. − Identify the critical process by using the goals of the organization as the criteria. • Design and develop output measures. − Identify customers. − Identify and understand customers’ expectations of the process. − Filter and prioritize customers’ expectations based on the goals of the organization. − Select output performance measures. − Set targets. • Identify key activities in the new process. − Define the process (e.g., where it starts and stops and the inputs to the process). − Document the process (e.g., process mapping). − Identify critical tasks in the process. • Design process performance measures for each key activity. − Examine the goals of the organization. − Use the cost, quality and time criteria as a guide in the selection of the process performance measures. − Determine what and how to measure (e.g., early supplier involvement – have suppliers involved by a specific date). − Validate these process performance measures. − Determine whether the performance measures are attribute or variable. Measurement is simple with attribute measures (yes or no). Variable measures are used to continuously improve the process or to elicit the reasons for a “no” attribute measure. • Implement and continuously improve. − Gain management signoff. − Present the plan to process employees or include them in aspects of this effort. − Start measuring and reporting.
- 5. 4 Source: protiviti PERFORMANCE MEASURES GUIDE: SAMPLE 2 The first part of this guide identifies twelve common problems with individual or group performance measures. During a review of performance measures, this guide can alert an internal auditor about potential problems to watch out for. The second part of this guide is a performance measurement matrix that helps an organization understand and develop several performance measures (cost, quality and time) across multiple levels (organization, process and people). The matrix illustrates how quantum performance is achieved by providing optimum value, which is measured using cost and quality measures. Optimum service is measured using quality and time measures. The guide can help you create a systematic approach to developing, implementing and using performance measures. The audit team should emphasize that performance measures should only be developed after the organization has articulated its strategy, identified its critical processes and set its goals. PERFORMANCE MEASURES ARE NOT BALANCED Measures must be balanced across the types and the levels in the performance measurement matrix (below). Cost measures used alone could motivate employees to reduce quality along with costs. Customer satisfaction measures without any other balancing measures could deteriorate profits. PERFORMANCE MEASURES ARE NOT ALIGNED WITH COMPANY OBJECTIVES People act as they are measured. The performance measures must be consistent with company objectives. PERFORMANCE MEASURES ARE INACCURATE The measures may be calculated wrong, exclude certain data, etc. This is a simple problem for auditors to test and identify. PERFORMANCE MEASURES ARE NOT KNOWN One of the most common mistakes is that employees may not be aware of the performance measures. Measures may not have been distributed or posted and are not taken seriously. PERFORMANCE MEASURES FOCUS ON OUTPUT ONLY The measures may focus only on the end product instead of on the process. The end defects in a manufacturing process may be measured without measuring the number of steps required, the number of people trained or the number of engineering changes. This does not help identify or diagnose problems. THERE ARE TOO MANY PERFORMANCE MEASURES Too many performance measures are confusing. People are unable to focus on any of them. PERFORMANCE MEASURES ARE NOT QUANTIFIABLE "Good" and "fast" are not quantifiably measurable. PERFORMANCE MEASURES: TWELVE COMMON MISTAKES
- 6. 5 Source: protiviti PERFORMANCE MEASURES ARE NOT CONTROLLABLE Employees must be able to affect the measure by changing (i.e., improving) their performance. PERFORMANCE MEASURES ARE NOT ACTED ON The performance measures may not violate any of the above but may simply be ignored or explained away without determining the root cause. PERFORMANCE MEASURES MAY FOCUS TOO MUCH ON THE SHORT TERM Focusing on the short term is an easy mistake. The quality of training should be measured by surveying participants at the end of the session and assessing how the training improved performance on the job. PERFORMANCE MEASURES ARE TOO COMPLEX The measures may be so complex and difficult to understand. Employee surveys can help determine this. PERFORMANCE MEASURES ARE NON-EXISTENT There may not be any measures at all or only measures at the people level, for example. Quantum Performance Value Service Cost Quality Time Organization • Financial • Operational • Strategic • Empathy • Productivity • Reliability • Credibility • Competence • Velocity • Flexibility • Responsiveness • Resilience Process • Input • Activities • Conformance • Productivity • Velocity • Flexibility People • Compensation • Development • Motivation • Reliability • Credibility • Competence • Responsiveness • Resilience PERFORMANCE MEASUREMENT MATRIX