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Business performance measurement builds a performance culture

With an effective business performance measurement plan, an organization can improve processes and create a performance culture.

As 2014 came to a close, the American Productivity & Quality Center (APQC) conducted a short survey to better understand the pressing priorities and challenges of business excellence practitioners for 2015. We found that process and performance management were the top two areas that business excellence staff planned to focus on in 2015 (see Figure 1).

Although process and performance management are separate focus areas, process management is often a starting point for organizational performance improvements. For an organization to improve its performance, it first must understand how to get work done effectively. This can include using business performance measurement to assess how the organization performs work and identify the performance and value of each process, as well as pinpointing which areas are underperforming, valueless, redundant or inconsistent with definitions and execution. Hence, all these process concerns link back to performance improvement opportunities.

Practitioners are prioritizing a wide array of challenges tied to performance management, from overcoming governance hurdles (e.g., identifying ownership) to including lagging, in-process and leading measures. These challenges have two main concepts in common: engagement and measurement.

If done correctly, business performance measurement can be the lynchpin of effective engagement. Organizations often will start measurement by assessing the performance and value of its processes, engaging employees in process activities and providing clarity on who does what.

In other words, 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. An organization can baseline its current state in several ways: benchmarking, surveys, workgroups and value stream assessments. The method applied depends on the amount of performance data available, business process maturity and the amount of employee engagement that is necessary.

Overall, when organizations ignore the effect of change initiatives on people, roadblocks arise and intended results fall short of expectations. Many organizations conduct limited workforce engagement for process and performance management. Limited engagement results in employees who do not understand, care about or even agree with the process. Employee engagement creates buy-in with employees and overcomes organizational resistance. Outlining the value of process management in terms meaningful to leadership results in the sponsorship and resources necessary to make process efforts effective.

The greatest challenge for business process management is making it part of the culture and getting employees passionate about it as well. Many organizations face resistance during process rollouts because they don't involve employees in the process. If organizations involve their employees in the current state assessment, they increase engagement because employees feel a sense of ownership in identifying what the key issues are and what measures matter. Including these measures as the value drivers in process and performance improvement business cases establishes the measurement efforts in terms that leadership can get behind.

For example, Elevations Credit Union established a strategic initiative to improve its organizational performance. Its first objective was to address its ad hoc, patchwork processes. Elevations' approach combined current state assessments, employee workshops, process management and tool training, and mapping contests to engage employees in process management and establish a performance culture.

However, Elevations' real breakthrough with leadership came when it started using a performance dashboard to track and monitor its process performance. As the organization's processes and measures grew in complexity and the leadership's need for data to support its decision making expanded, Elevations implemented an enterprise dashboard system that provided access to the organization's key performance indicators (KPIs -- actual, target and variance). A corresponding "drill down" dashboard for each category of the enterprise process map allows leadership to root cause any variations in performance.

According to Elevations, the ability to get real in-process metrics was a fundamental change in how it operated. From that moment on, Elevations' senior leaders bought in on process management and began managing via enterprise dashboards. All of its metrics link back to processes, so it can now figure out what's broken and why by tracing back to the source of the problem.

Elevations' success using performance dashboards comes as no surprise. When discussing performance measurement, most practitioners refer to the type of measurement that helps companies monitor its current and past states. Thresholds, both low and high, for KPIs are set and managed by exception. When data begins to move outside the threshold limits, the performance measurement system can alert management, who then attempt to diagnose the problem and address its causes. Practitioners refer to this type of measurement as diagnostic control systems. Although this type of measurement provides management with "auto-pilot" capability that can keep the organization on target with its goals, it is frequently insufficient for success.

The performance management challenge -- designing and using process measures in the business -- is one reason this approach is not always successful. Most dashboards look at in-process and lagging indicators while overlooking leading indicators that help organizations proactively react to changes in the business environment.

2015 APQC chart of business excellence priorities and challenges
Figure 1. 2015 business excellence priorities and challenges.

Several methods are available for including leading indicators in an organization's performance management. The most widely known is the balanced score card. Normally (although not required), the balanced scorecard is broken down into four sections called perspectives:

  1. Financial -- strategy for growth, profitability and risk (typically the shareholders perspective). The scorecard considers financial measures lagging indicators and includes looking at growth, profitability and shareholder value.
  2. Customer -- strategy for creating value and differentiation (customers' perspective). The customer measures are often leading indicators and include customer satisfaction, net promoter score, brand awareness and market share.
  3. Internal business (operations) -- is the strategic priorities for business processes. Operations measures are usually in-progress, performance-based measures used to indicate how well the business is running (e.g., cycle time, quality, employee skills and productivity).
  4. Learning and growth (people) -- the priorities to create a climate for change, innovation and growth within the organizations. This includes, but is not limited to, employee training, corporate culture, as well as individual and organizational improvement. The measures are typically in-progress or lagging measures that vary but can include employee behaviors and adoption rates.

The important takeaways here are that measurement plays an important part in how organizations can engage employees -- both leadership and frontline -- in process and performance management. By including the right blend of measures an organization can improve its decision making capabilities for improvement opportunities, provide transparency and ultimately establish a performance culture.

About the author:
Holly Lyke-Ho-Gland is program manager for process and performance management research at the American Productivity & Quality Center (APQC), a Houston-based nonprofit that provides expertise on business benchmarking and best practices.

Learn more about how APQC's business excellence research team will incorporate theses top challenges into its 2015 research agenda.

Next Steps

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This was last published in May 2015

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