The Right Way to Measure Business Performance

Measurement, Analysis, and Knowledge Management

By Tim Connor, Rodeo! Performance Group, Inc.

All business leaders monitor something in their organization, but many limit measurement to financial areas. Why? Because financial measures are easy to set up. How well does this approach work, though? Wouldn’t it be a vast improvement if you could predict performance instead of cussing about it a month after the fact?

Know What Performance Is for your Business

Sounds kind of basic, huh? But this is the part leaders don’t take the time to do, even though it’s foundational to the rest of the process. But let’s face it: if you can’t define high performance for your business, you sure can’t measure it!

Sounds kind of basic, huh? But this is the part leaders don’t take the time to do, even though it’s foundational to the rest of the process. But let’s face it: if you can’t define high performance for your business, you sure can’t measure it!

Where do you begin, then? Begin by thinking about the products or the services, you deliver to customers every day. This is important, because the customers are the ultimate designators of ‘high performance’ for your business’s output. What do they want? (Here’s a hint, listen for recurring complaints when they don’t get what they want!).

For Products:

• Want it on time?
• Want it right?
• Want the right amount of it?

For Services:

There are others, of course, but you get the idea. The point is that your starting point for figuring out measures is the end of your business’s process – what customers are actually paying your for.

Know the Difference: In-Process Measures vs. Outcome Measures

Once you know your customers’ desired outcomes, you can figure out actual measures for them. As already mentioned, that really has to be done first or you can’t come up with the process measures that support the outcomes. It might be a good idea to explain this a little more.

An Outcome Measure is a measure at the end of the process. It is built from the desired outcome the final user of the product or service wants. What are some well-known examples of an outcome and the measure that comes from it?

By the way, if you’re wondering how “sales volume” could be a measure of whether Federal Express’s service is fast, here’s the train of thought:

Fed Ex knows from customer input that speed is a main requirement of their service
Therefore the business is built around the hub concept, guaranteeing turnaround speed
If people continue to purchase (and even buy more of) their services
Then they must be meeting the outcome requirement of fast (enough) service. Not too hard to do, huh?

OK, here’s another one. Lincoln Electric is so competitive that international competition has never made significant inroads into their U.S. markets – no competition from Japan or anywhere else. How do maintain such a state when every other industry in the country is overrun with global competitors?

The answer is innovation.

Lincoln identified innovative products, and the supporting meeting changing customer requirements as being key to their competitive advantage. They focus hard on innovation and customer feedback, and if they do it right, they aren’t going to lose customers. Therefore the measures % Customer Retention and Sales Volume are accurate measures of a good outcome.

A Process Measure is an up-line measure that acts as an alarm system: it tells you before the product moves on that everything is either OK or Not OK – before it gets to the end of the line and messes up the outcome.

What are some common process measures?

• Cycle Time: tells you how long it takes to make something, or whether it’s on time
• Completeness: tells you if all the parts are attached (or in a document, completed).

As mentioned above, process measures allow you to catch problems before they get to the customer, and they’re important.

Report Ongoing Results to the People Who Do It

You’ve got staff involved throughout your company who are producing your product or service. They know the steps needed to produce ‘the right stuff’ (after all, some of them have been producing it for years). They can make a big difference in the outcomes your company produces if they have a way to catch problems before they get too far along. For that reason, giving them access to process measures will let them monitor their own area.

Reporting on outcome measures, on the other hand, will let them know how things are going overall, and they can often find ways to improve outcomes by working upstream (in their area) – but only if they are told how the outcomes are going.

So, it’s beneficial to find ways to keep your people up to date with company progress through having and reporting measures, and it can be done for any company.

Hospital Diagnosis: Staff Communication Complaints

Measurement, Analysis, and Knowledge Management

By Tim Connor, Rodeo! Performance Group, Inc.

What can a hospital executive do when “poor communication” continues to come up as a staff complaint?

Intractable Pain

It’s aggravating isn’t it? You’ve written for the hospital newsletter, sent out memos, presented your case to the management staff, maybe even set up a phone message that updates staff as to what’s going on. Why do they keep complaining about communication – what is their problem?!

This is a very common issue, and yet it’s important to address because so many things related to staff morale and productivity hang on it. Lots of executives are conscientious in passing on information to the company, but very few understand what employees consider critical to communication – which is, “Have you heard me?”

Is Anyone Up There Listening?

Being heard is a very basic need in all human beings, and is most noticeable in children. Ever had one of your kids trying to tell you something while you’re busy reading, and when you keep reading have the little tyke grab your arm and say “DAD! Will you look at me and listen?!” Try to ignore it and you’ll learn what “persistence” can really mean!

Sam Walton, the founder of Wal Mart stores, really had a handle on the challenges in this matter. Here was a guy worth billions, running a company that set the world standard for retailing, who probably had reports and data by the gigabyte coming into his office every single day. And what did he do? Sam made it a point to pop in and visit stores and distribution sites throughout his organization personally.

Sam would drive up to a loading dock at 3 AM with several dozen doughnuts, pull the staff off the job for 30 minutes, and sit and ask them about the problems and issues they were having. He would listen, make notes, and when he got back to his office make sure that what he had heard was addressed, and that the staff knew it. Now, what did that accomplish for him?

First, it endeared him to the ones in the company who had to make things work. Is that important? Well, consider what a difference it would make in your organization if the nurses, techs, billers, and support staff had the opportunity to talk informally with you, especially if they knew you were going to act on what you heard.

Second, it verified the official information Sam was getting up through the formal lines within the company. How much more honest do you think those reports were when management staff knew their reports were being checked against firsthand information?

Two Parts to the Treatment

There are two key parts to this: not just the listening and noting, but also acting on what’s been heard. That doesn’t mean you have to do everything suggested – staff don’t expect that. But it DOES mean you report back to them how their concerns were considered and what WAS done with the information. And you have to be consistent about doing that.

A top-notch executive will work these activities into his or her schedule, and make sure they’re done regularly. Such an executive will drive up company performance, while finding communications complaints dwindling into the category of minor issues.