The 7 Deadly Sins of Performance Measurement

1. The 7 Deadly Sins of Performance Measurement By Michael Hammer

2. Business Intelligence “Business Intelligence consists of sourcing the data, filtering out unimportant information, analyzing the data, assessing the situation, developing solutions, analyzing risks and then supporting the decisions made.” Accuracast in Bergerou(2005) Event Drive BI monitors three classes of events in operational and Business Intelligence content – notification, performance and operation events – looking for key changes

3. Business Intelligence Information delivered to users by BI solutions typically correspond to various performance measures and should support related decisions (Lecture Notes) Performance Measurement is a key aspect of business intelligence.

4. Performance Measurement Performance Measurement Definition “The process of quantifying the efficiency and effectiveness of past actions.” Neely (2002) “evaluating how well organisations are managed and the value they deliver for customers and other stakeholders” Moullin, (2002)

5. Challenge of Performance Measurement Performance measurement is connected to an organisations mission. Challenge is how to match and align performance measures with business strategy and mission. Challenge of designing an effective Performance Measurement System How to measure non-financial performance What measures to choose and why How to use performance measurement and what to do with the results

6. Performance Measurement Performance Measurement Tools include: Balanced Score Cards (BSC) Key Performance Indicators (KPI’s) Computerised Dashboards

7. Article Highlights: Performance measurement is key to improving organisational performance. belief that performance measurements in operation measure the wrong amount of information or are the wrong type of metric for that purpose Organisations make mistakes when defining metric which affect how well performance measures work. Explains 7 sins that companies fall prey to when creating performance measurements and gives four steps to purge these sins.

8. 7 Deadly Sins 1) Vanity – Use performance measurement to make the organisation look good. 2) Provincialism- Organisational boundaries and concerns dictate performance metrics 3) Narcissism- Measuring from the organisations point of view rather than that of the customer 4) Laziness – Assuming that one knows what is important to measure without adequate investigation.

9. 7 Deadly Sins 5) Pettiness- Only measure a small amount of what matters. 6) Inanity- Implementing metrics without thinking about the consequences. 7) Frivolity- Not being serious about metrics. Consequence: Organisations will not be able to increase their productivity and performance.

10. Purge your Sins Must be a commitment to performance management and improvement in all levels including Senior management. Must become apart of the culture. Commitment to performance improvement involves a commitment to designing and utilising effective operational metrics.

11. Redemption 1)Selecting the correct things to measure (a). Emphasise processes or activities that create customer value (b). Identify processes that affect processes 2) Correct the correct measurement metric- definition must be precise, include units employed, range and scale of measurement 3) Metrics must be used in a disciplined manner – multiple metrics 4) Create organisational culture which encourage disciplined use of metrics- accountability

12. Phases of a Performance Measurement System http://www.performance-measurement.net/news-detail.asp?nID=192

13. Conclusion Performance measurement should not be viewed in isolation. Performance measurement is an integral aspect of an ongoing program of performance analysis and improvement. “Seven deadly sins are symptoms of cultural short comings, of a lack of what is important to enterprise success and of a fundamentally unstructured approach to performance management and improvement.”