Most metrics have a quantitative and a qualitative component. The quantitative components include the hard numbers and the "yes" and "no" decisions. The qualitative components are based on judgment and are subject to different responses from different decision makers. The hard numbers provide one measure of performance that while very useful do so with certain limitations.
All organizations in some form or another and with different degrees of discipline operate by using a budgetary process. The process involves measuring income and expense, comparing budgets to actual performance, and any number of other financial criteria. All accounting systems, regardless of sophistication, measure what comes into the organization, what goes out of the organization, and how much is left at the end of some cycle. Comparisons can be made in relation to people count, revenue per person, investment per person, surplus of revenue minus expense, on-time completion of projects, amount of rework both physical and mental, and many other criteria depending on the type of organization.
There is no one set of metrics that adequately describes the department's and the organization's performance. Every organization has its own set of priorities, its own culture, its own focus, and operates within a limited but specific environment. However, there is more commonality of issues among various organizations than we might expect. Performance can be measured by quantified metrics such as "yes" and "no" if we're only concerned whether the objectives were met. We may also measure project performance by using the three project requirements of meeting specifications, delivery, and cost. Common quantitative metrics include:
Meeting financial targets
Meeting cost reduction targets
Benefits from improving products and processes
Results from effective and efficient use of resources
Improving customer and supplier satisfaction
Introducing new products
Reducing waste and rework
Fulfilling the requirements related to administration, direction, and leadership
Making judgments and decisions
Providing the resources and developing the infrastructure
Developing subordinates
The results from each of these activities can be measured. These metrics may change as the organizational dynamic changes regarding what defines adequate performance.
Quantitative figures tell us what happened in the past. They're figures that we use to predict future performance but they're not realizable at the moment. Every organization hopes their future projections will become real but until they're fulfilled they're only future projections. We have all heard from the financial advisors that past performance is no indicator for the future. The same applies to all organizations. Who anticipated the demise of the dot-coms? Who anticipated the destruction of the World Trade Center? Who anticipated collapse of Enron and WorldCom, the stock market decline, and the downsizing of Silicon Valley? Unanticipated events such as these prevented realizing someone's future predictions of performance. While each of these examples involves negative organizational results, the departments within those organizations played a role because that's where the action took place.
The key is identifying the opportunities and then measuring progress. Look for figures that relate to the subject matter; measurements need not be accurate to the decimal point. We're not planning on sending a man to the moon. Measurements that can be quantified are preferable but we must be aware that what we are counting adds value.
If depending solely on quantitative metrics, keep in mind that today's targets might have been met but future opportunities might have been destroyed. Targets were met but in the process split the organization into various self-serving constituencies. Targets were met but the organization's collegiality was destroyed. Targets were met at the cost of deteriorated relations with suppliers. Targets were met but future government actions may negate the benefits. Laws and directives were abrogated. Targets were met but with questionable ethical practices. Actions such as these can be destructive. So, while meeting targets is absolutely essential in a globally connected world, certain practices cannot be tolerated. Qualitative metrics are judgment calls and provide the added dimension.
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