How do you Assess the Perfomance of your Business?
When assessing the performance of a business, firstly it important to define what performance is? Lebas & Euske defined performance as “Doing today what will lead to measured value outcomes tomorrow.”
When measuring performance, it may be measured to some benchmark within your own business or an external business for example of a competitor in a similar space to your business. The measures may be of an objective or subjective nature. Deciding on the type of measure will vary from business to business. Objective measures can be verified and independently measured whereas a subjective one cannot. Measures are typically grouped as financial and non-financial. Financial measures will look at accounts, cash-on-hand, and stock. Non-Financial measures will include customer satisfaction or product quality scores.
One of the most common frameworks for measuring business performance is the balanced scorecard which was introduced by Robert Kaplan & David Norton in 1992. The framework appeals to strategy builders within an organisation as it measures performance categories directly related to the organisation's strategy.
The framework may be broken out into 4 four main perspectives as seen below:
The financial perspective - Measures the strategy for growth, profitability, and risk from the owner/investors perspective.
The customer perspective - Measures the strategy for creating value and differentiation from the perspective of the customer.
The internal business perspective (Operations)- Measures the strategic priorities for various business processes that create customer and owner/investor satisfaction.
The learning and growth perspective (People) - Measures the priorities to create a climate that supports organizational change, innovation and growth.
Quite often performance and process management changes are linked as process management may be the starting point for an organisation's performance improvement. When an organization is looking to improve its performance, it needs to be clear on how to get work done effectively. Throughout the process management review, the organisation is consistently looking to identify areas to improve upon. Hence, all these process challenges link back to performance improvement opportunities.
If done correctly business performance measures will create a culture for greater employee engagement with the process, thereby gaining more clarity on who does what within the organisation. Having a more engaged culture creates greater buy-in to the process thereby building a more robust and effective team.
Not enough businesses spend the time and resources to create a baseline of measures. Sometimes the business owner may be blind sided by a perceived opportunity to stand back and actually take stock of how their business is truly performing. Business owners need to determine what is the baseline of performance across the Organisation? Assessing an organization's current state helps provide a baseline for determining and prioritizing process improvement opportunities, identifying measures for performance management, and engaging employees to think in process terms.
My top three tips are as follows:
Develop a performance culture within your organisation
Identify the appropriate measures and benchmarks
Create a climate of growth & development within your team
The important message is that the organisation's who take the time out to measure how they can engage with employees -- both leadership and front-line -- in process and performance management will reap the rewards by a multiple of their original investment.