4.1 Measurement, Analysis, and Review of Organizational Performance

Purpose

This Item examines your organization’s selection, management, and use of data and information for performance measurement, analysis, and review in support of organizational planning and performance improvement. The Item serves as a central collection and analysis point in an integrated performance measurement and management system that relies on financial and non-financial data and information. The aim of measurement, analysis, and review is to guide your organization’s process management toward the achievement of key business results and strategic objectives and to anticipate and respond to rapid or unexpected organizational or external changes.

 

Comments

- Alignment and integration are key concepts for successful implementation of your performance measurement system. They are viewed in terms of extent and effectiveness of use to meet your performance assessment needs. Alignment and integration include how measures are aligned throughout your organization, how they are integrated to yield organization-wide data and information. Alignment and integration also include how performance measurement requirements are deployed by your senior leaders to track work group and process-level performance on key measures targeted for organization-wide significance or improvement.

- The use of comparative data and information is important to all organizations. The major premises for use are (1) your organization needs to know where it stands relative to competitors and to best practices, (2) comparative information and information obtained from benchmarking often provide the impetus for significant (“breakthrough”) improvement or change, and (3) comparing performance information frequently leads to a better understanding of your processes and their performance. Comparative information also may support business analysis and decisions relating to core competencies, alliances, and outsourcing.

- Your effective selection and use of comparative data and information require (1) determination of needs and priorities, (2) criteria for seeking appropriate sources for comparisons—from within and outside your organization’s industry and markets, and (3) use of data and information to set stretch goals and to promote major, non-incremental (“breakthrough”) improvements in areas most critical to your organization’s competitive strategy.

- The organizational review called for in this Item is intended to cover all areas of performance. This includes not only how well you currently are performing but also how well you are moving toward the future. It is anticipated that the review findings will provide a reliable means to guide both improvement and opportunities for innovation that are tied to your organization’s key objectives, success factors, and measures. Therefore, an important component of your organizational review is the translation of the review findings into an action agenda sufficiently specific for deployment throughout your organization and to your suppliers, partners, and key customers.

- Analyses that your organization conducts to gain an understanding of performance and needed actions may vary widely depending on your type of organization, size, competitive environment, and other factors. Examples of possible analyses include

• how product and service quality improvement correlates with key customer indicators such as customer satisfaction, customer retention, and market share

• cost and revenue implications of customer-related problems and effective problem resolution

• interpretation of market share changes in terms of customer gains and losses and changes in customer satisfaction

• improvement trends in key operational performance indicators such as productivity, cycle time, waste reduction, new product introduction, and defect levels

• relationships between employee and organizational learning and value added per employee

• financial benefits derived from improvements in employee safety, absenteeism, and turnover

• benefits and costs associated with education and training, including Internet-based or e-learning opportunities

• benefits and costs associated with improved organizational knowledge management and sharing the relationship between knowledge management and innovation.