Fit for the Future
Performance measurement and best practice
By Mindy Wilson
Head of CBI Business Performance Group

Performance measurement is one of the eight key characteristics at the heart of the Fit for the Future national best practice campaign. This campaign serves to promote the adoption and sharing of best practice and, in so doing, sets out to improve business performance, competitiveness and UK productivity. Performance measurement, together with the campaign’s other key characteristics – leadership, people development, customer service, supply chain management, process improvement, innovation and corporate responsibility – provide a framework of the types of issues businesses should address not only to keep themselves in the game, but also to help them win.

Performance measurement must be a key part of any organisation's development strategy because if you are not measuring performance, you are not managing performance. However, even when you are measuring, you may still not be managing to the fullest extent, particularly if what you are measuring is not wholly relevant, not analysed or understood, and if action is not taken. These three factors – relevance, analysis, and action – are the critical aspects of performance measurement.

Relevance

Anything and everything can be measured, whether quantitatively or qualitatively. In order to ensure that nothing important is missed, one solution might simply be to measure everything. This would result not only in lost time, effort and money, but can also de-motivate employees. What you measure must have purpose; that purpose must be understood and related to the vision and strategy at the overall business level as well as the site, unit, and functional levels.

Performance measurement is often focused solely on outputs, particularly financial results. While these are very important, there is now much greater appreciation that, on its own, financial results provide a very limited view of overall business performance. Different stakeholders – shareholders, employees, suppliers, customers, and the local and broader community – will judge business performance on a range of criteria including environmental issues, health and safety, treatment of employees, ethical procurement and so on. In addition, it must understood that financial results are driven by a range of inputs such as culture, leadership, the effectiveness of practices and procedures, and all the relationships that exist between these.

Finally, do not underestimate the importance of softer issues and qualitative measures. Although these may not be easy to assess, they can make all the difference. Thus, performance measurement must focus on outputs, inputs, and a range of other factors, all of which tie into assessing progress against the business strategy.

Analysis

There is absolutely no point in collecting performance data if it is not analysed, understood and used. Analysis not only tells you “what” the overall picture is, but also leads to the question "why?”. A key tool for understanding whether performance is good, bad, or indifferent is through comparison against internal and external reference points; in other words, benchmarking.

Benchmarking comes in many shapes and forms, and using surveys to provide external reference points is, in essence, the simplest form of benchmarking. For example, a company’s level of employee absence due to illness can be compared to those reported in regularly produced national surveys to determine whether they are better, worse, or the same as other businesses in the same sector. Knowing how one compares determines whether action needs to be taken.

At the other end of the benchmarking spectrum is detailed process benchmarking in which the "why?" is analysed in fine detail. Process benchmarking generally involves a small number of businesses that agree to compare a single process, which they then dissect and collaborate on to improve the process and, in doing so, improve performance.

Analysis must also include internal reference points both over time to track change and also between business units in order to identify learning opportunities.

Action

Performance data, at a minimum, must be shared throughout the organisation in a manner everyone can understand, and that includes indicating whether performance is good, bad or average. Sharing information is a simple means of encouraging “buy-in”, along with a feeling of responsibility and accountability, especially when the information is relevant and understood. When performance is good, it should be celebrated with those responsible for delivering it. However, there should also never be complacency as performance could possibly be even better. In situations where performance is not good, it is even more of an opportunity to uncover the “why’s?” and then do something about them.

So, how do you measure up?

Fit for the Future
CBI
Centre Point
103 New Oxford Street
London
WC1A 1DU

Tel: 0870 600 2513
Fax: 020 7395 2596
Email: fitforthefuturequeries@cbi.org.uk
Website: www.fitforthefuture.org.uk