Business Performance Measures
What are Business Performance Measures?
Business performance measures are a set of quantifiable metrics taken from various sources that together with an appropriate analytical process, allows the management of a business to track and assess the current status of a specific business, project or process. Business performance measures may be compared with pre-set goals and objectives or form part of a balanced scorecard that assesses financial or non-financial performance in the four primary areas of financial, learning/growth, internal processes and the customer. Business performance measures may also be known as organizational performance, results or key success indicators and are closely related to an organisation’s key performance indicators (KPI).
What is the purpose Business Performance Measures?
The purpose of business performance measures are tools that help managers optimise the interaction of high level strategy with day-to-day decision making and organisational learning. Business performance measures are used by business to initiate improvements and to help management focus resources on achieving the key targets and objectives. These business performance measures provide information for management in relation to the past position, the future direction, if something has gone wrong and when the business has achieved its goal. This information derived from the business performance measures, allows people to manage performance proactively and gives employees of a business a clear understanding of what success looks like and what the management is prioritizing. So, these business performance measures create a crucial link between the overarching strategy and day-to-day operations of a business.
What are Business Performance Measures like?
Business Performance Measures are like the gauges on the dashboard of a car giving the driver constant and up to date information about their compliance with the speed limit, the fuel resources that have remaining and if anything is going wrong with the engine, as displayed by the temperature gauge. Business performance measures provide similar information to management on the compliance, resource levels and problems associated with the business.
What tools are used in Business Performance Measures?
Some of the business performance measures examples are:
- Budgeting – Developing an annual financial plan for the business for the coming year that explains in detail how a business will achieve its financial objectives and monitor its results.
- KPIs (Key performance indicators) – are small target key indicators and navigation instruments that are clearly liked to the business strategy. They make complex strategic goals more meaningful and understandable to everyone in the business.
- The Balanced scorecard – A top down management tool designed to convert strategic objectives into executable performance measures and action plans. The Balanced Scorecard categorises business performance measures by Financial, Customer, Internal processes and Learning and growth.
- Benchmark – Used by businesses to compare their performance with a best practice performance metric typically developed by industry associations or research companies and government agencies.
- Six sigma – Six Sigma is a tool that measures the stability and predictability of process results with a goal to limit process errors to no more than 3.4 errors per one million opportunities.
Performance dashboards – A performance dashboard is a one page visual overview of the key results areas within a business that looks at the business overview as well as key business units. Typical dashboards display metrics covering sales, financial, HR, operations and production.
- CRM (Customer relationship management) – These business performance measures track the interactions and relationships with the existing or potential customers of a business and reports on the customer satisfaction with sales activities, customer service and customer support.
Most companies want to make sure they not only have satisfied customers but that they turn their
- People performance appraisals – These business performance measures typically annually assess the job performance of individuals in a business. While often conducted by the line manager alone, many businesses today use the 360-degree review system that also includes peers, subordinates and other stakeholders in the review process.
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