StrategyDriven Organizational Performance Measures Best Practice Article

Diverse Indicators

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StrategyDriven Organizational Performance Measures Best PracticeA picture comprised of only one color is not a picture at all; rather, it is simply a field of color. Likewise, a single performance indicator cannot paint a picture of performance. To acquire complete understanding of the overall performance of products, services, business units, or individuals requires multiple indicators to compare and contrast the various and often complex aspects of their individual and interrelated behaviors.

Performance of an item itself can rarely be characterized by one measure because of the complex array of relationships between an item’s characteristics. For instance, the return on investment of a new product will be influenced by the targets established for its time to profitability and break-even point. All of these measures will similarly be impacted by design decisions that determine the look, feel, functionality, and price point of the product.

Products, services, business units, and individuals interact and influence each other; creating additional demand for multiple measures to characterize overall performance. An example of this is when increasing production of one product limits the availability of equipment needed to produce one or more other products thereby limiting the later products’ availability.

Fundamentally, organizational performance measures drive decision-making and it is here that the power of diverse indicators is revealed. By providing a complete picture of an item’s performance, diverse measures arm decision-makers with the knowledge needed to reduce the uncertainty of their choices and enhance the likelihood of achieving sought after outcomes.

Additional Information

Additional information regarding organizational performance measures can be found in the StrategyDriven whitepaper series Organizational Performance Measures. A more detailed discussion on decision-making can be found in the members-only category, Decision-Making.

About the Author

Nathan Ives, StrategyDriven Principal is a StrategyDriven Principal and Host of the StrategyDriven Podcast. For over twenty years, he has served as trusted advisor to executives and managers at dozens of Fortune 500 and smaller companies in the areas of management effectiveness, organizational development, and process improvement. To read Nathan’s complete biography, click here.

StrategyDriven's organizational performance measures catalogEnterprise Performance Measurement

We can work with you to assess and improve your performance measurement system; yielding metrics and reports that are operationally relevant, organizationally consistent, and economically implemented. The resulting system helps improve managerial decision-making, organizational alignment, and individual accountability. Learn more about how we can support your implementation and upgrade efforts or contact us for a personal consultation.

StrategyDriven Evaluation and Control Program Forum

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StrategyDriven Evaluation and ControlAn organization’s evaluation and control program is a data gathering and action initiation mechanism. This program monitors the external business environments, the internal performance of business units, processes, and individuals, and the output products and services of the organization. Once collected, data is processed to present a picture of the company’s overall performance and to trigger actions in response to conditions representing opportunities or threats.

The evaluation and control program is comprised of several component processes that monitor performance on a continuous, periodic, and event driven basis; driving action when necessary. Component processes include:

  • organizational performance measurement system (continuous and periodic)
  • external environmental monitoring program (continuous and periodic)
  • condition reporting/corrective action program (event driven)
  • self-assessments program (periodic and event driven)
  • benchmarking (periodic)

Outputs from the various monitoring processes are often combined to create a richer understanding of organizational performance relative to both internal performance standards and external benchmarks. Synthesized data drives actions on a day-to-day operational basis and serves as input to the strategic planning process. When predefined thresholds are reached or exceeded, action is prompted to take advantage of opportunities or mitigate threats representing a risk to the business or its operations.

Focus of the Evaluation and Control Program Forum

Evaluation and control program components play a key role in an organization’s learning and growth efforts. They not only identify improvement opportunities, they also identify internal and external best practices that can be used to better existing processes. This continuous growth mechanism is critical to an organization seeking to maintain and advance its position in the marketplace. Materials in this forum are dedicated to discussing the leading practices of companies successfully executing an evaluation and control program in support of strategic business planning and tactical business execution. The following articles, podcasts, documents, and resources cover those topics critical to an effective evaluation and control program:

Articles

Best Practices Articles

Warning Flags Articles

StrategyDriven Expert Contributor Articles

StrategyDriven Podcasts

StrategyDriven Podcast – Special Edition

Resources

Whitepapers

Models

Recommended Resource – The Three Signs of a Miserable Job

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The Three Signs of a Miserable Job: A Fable for Managers (And Their Employees)
by Patrick M. Lencioni

About the Reference

The Three Signs of a Miserable Job: A Fable for Managers (And Their Employees) by Patrick M. Lencioni examines three causes of job dissatisfaction. Focused on the executive and management teams, Mr. Lencioni illustrates the harmful effects of anonymity, irrelevance, and immeasurability on worker performance and ultimately the organization’s success. He then prescribes actions that can be taken to overcome these obstacles thereby increasing employee productivity and engagement which subsequently improves organizational performance.

Benefits of Using this Reference

Employee performance serves as the foundation for the organization’s overall performance. When employee efforts are optimized and aligned to common mission goals, the organization realizes its greatest value potential.

Creating job satisfaction and thereby earning employee engagement and promoting focused, productive work effort is the responsibility of every executive and manager. StrategyDriven contributors like The Three Signs of a Miserable Job because it highlights the fundamental job satisfaction needs shared by all employees and the barriers preventing these needs from being met. As with all of his previous fables, Mr. Lencioni offers actionable steps executives and managers can take in order to eliminate these barriers. Additionally, Mr. Lencioni’s recommended actions support what StrategyDriven contributors believe is key to sustained, superior success; shared vision, focus, and commitment.

As a business novel, The Three Signs of a Miserable Job presents its principles for improving job satisfaction through a believable, vividly illustrated, and easily related to story of two organizations struggling to improve performance. Many of the best practice recommendations found on the StrategyDriven website compliment the actions prescribed in The Three Signs of a Miserable Job; making this book a StrategyDriven recommended read.

New Model Release – Decision-Making Base Model

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StrategyDriven contributors are pleased to announce the release of our fourth model, the Decision-Making Base Model. This model illustrates the concepts of uncertainty and risk associated with hurdle and window decisions. (Hurdle decisions seek outcomes above a defined threshold while window decisions seek outcomes between an upper and lower threshold.) Additionally, the model provides the foundation from which later posts and models will explore how various actions impact a decision’s uncertainty and therefore its risk and the probability of achieving desirable outcomes.

StrategyDriven Resource Management Warning Flag Article

Resource Management Warning Flag 1 – Frequent, Inaccurate Resource Needs Estimation

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StrategyDriven Resource Management Warning FlagAll organizations face the dilemma of limited resources. Some organizations, through the use of deliberate work prioritization and sound resource needs estimation, ensure their resources are appropriately allocated to maximize the organization’s overall value. In other organizations, however, there exists an adversarial relationship between seniors and subordinates that results in inaccurate resource estimation and subsequently diminishes the overall value the organization is capable of producing.[wcm_restrict plans=”40861, 25542, 25653″]

A lack of trust between seniors and subordinates is at the heart of the adversarial relationship problem. Executives and managers often perceive their subordinates as over-estimating the amount of personnel and/or financial resources needed to complete a project or work activity. Subordinates, on the other hand, frequently feel their superiors under-estimate the amount of time and financial or material resources needed to complete the same work. In many cases, members of an organization act on these perceptions making them part of the corporate reality; resulting in both resource over- and under-allocation. Ultimately, this behavior creates a condition where it is difficult for the organization to truly understand its work capacity and make informed decisions regarding resource allocation to maximize value.

Over time, this phenomenon can become a vicious cycle with no perceivable beginning and potentially no end. Subordinates, always feeling the pressure to do more with less, continue to inflate estimates believing the estimates will be cut later by those they work for. Seniors, believing the estimates they receive are always inflated, impulsively cut all resource requests put before them. To break the cycle, improve resource estimating, and increase the organization’s value yield, organization members must first recognize the warning flags and understand the causes of over- and under-estimation of resources.

While not all inclusive, the three lists below, Warning Flag Behaviors, Potential, Observable Results, and Potential Causes, are designed to help organization leaders to recognize whether a problem exists with resource over- and under-estimation and if so, what is driving the problem. Only after a problem is recognized and its causes identified can the needed action be taken to move the organization toward improved performance.

Warning Flag Behaviors

Behaviors suggesting over-inflation of resource estimates include:

  • frequent inflation of personnel and financial resource estimates by subordinates during business and/or project planning
  • resource requests made without reasonable justification
  • resource estimates are made assuming the least qualified or least experienced worker will perform the activity
  • resource estimates include beyond normal/reasonable delays or reserves

Behaviors suggesting under-estimation of resource needs include:

  • frequent, across the board cutting of personnel and financial resource allocations by seniors during business and/or project planning often without explanation
  • resource cuts applied equally to all activities regardless of complexity, priority, or risk
  • resource estimates are made assuming the most qualified or most experienced worker will perform the activity
  • some resource consuming tasks are discounted when estimating the resources needed to perform an entire activity
  • few or no allowances are made for normal/reasonable delays or reserves

Potential, Observable Results

Indications that resource estimates may be overinflated include:

  • frequent, significant under-spending of either or both personnel and financial budgets with all work completed on schedule and at the desired quality level
  • frequent, end of fiscal cycle purchases; especially of nice-to-have or unfunded items
  • excessive water cooler time, frequent long lunches, late arrivals, and/or early departures all with on schedule, on budget work completion at the desired quality level
  • excessive time spent on personal emails and/or personal phone calls with on schedule, on budget work completion at the desired quality level
  • benchmarking consistently reveals higher competitor capacity and/or lower costs
  • excessive, perfectionist standards applied to all work with on schedule, on budget work completion
  • products having additional out-of-scope features while being completed on time and on budget
  • work transferred to a lower level employee completed on or ahead of schedule and with equal or greater quality

Signs that resource estimates may be understated include:

  • frequent budget overruns caused by expenses that should have been anticipated
  • frequent material shortages; the need for which should have been anticipated
  • work is frequently behind schedule or excessive overtime is used by a team of efficient employees
  • organizational policies mandating unpaid overtime
  • resource planning process assumes a greater than 40 to 45 hour workweek
  • resource planning process discounts known over time
  • business planning process targets 100% or greater employee utilization
  • project management process does not allow for buffers or reserves

Potential Causes

Executives and managers may perceive their subordinates are over-estimating the amount of personnel and/or financial resources needed because:

  • additional resources will more likely ensure on time and on budget work completion improving the perception of the subordinate’s performance
  • additional resources make work performance easier and less stressful for the same level of compensation
  • they believe they accomplish the same work with fewer resources when performing the tasks earlier in their careers
  • they believe subordinates should be able to perform these tasks more efficiently than they did earlier in their careers given the availability of new, more sophisticated tools

Subordinates may perceive their managers as under-estimating the amount of personnel and/or financial resources needed because:

  • fewer resources lowers costs and improves the organization’s bottom line performance
  • fewer resources consumed on one activity means additional activities can be performed enhancing the organizations bottom-line performance
  • improved corporate performance in-turn enhances the pay and bonuses received by executives and managers

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[/wcm_nonmember]Additional Resources

StrategyDriven Contributors recommend the following resource as a guide to the common methods used to estimate resource needs for an activity or project:

A Guide to the Project Management Body of Knowledge, Third Edition
by the Project Management Institute

About the Author

Nathan Ives, StrategyDriven Principal is a StrategyDriven Principal and Host of the StrategyDriven Podcast. For over twenty years, he has served as trusted advisor to executives and managers at dozens of Fortune 500 and smaller companies in the areas of management effectiveness, organizational development, and process improvement. To read Nathan’s complete biography, click here.