Recognising their organisation’s current performance measurement systems were based mainly on financial factors, measuring monthly revenue, profit and total costs against last year and budget, leadership decided there had to be a change. Most of their performance measurement frameworks focused on the needs of the owners and non-executive board members. Even their customer information was being collected to be reported upwards, not to aid in building stronger relationships with customers. It was clear these monitoring systems were no longer acceptable.
These performance measurement frameworks were too limiting, rigid and inflexible. Leaders felt they needed measurements enabling rapid shifts to the organisation’s strategies, resource-allocation, process-development and capability-building; shifts which would help them tackle the volatility, uncertainty, changes and ambiguity in social, economic, political and technological environments.
The needs of other stakeholders such as employees, customers and suppliers had actually been forgotten, or at best, not systematically reviewed. The leadership did an about-turn in how they thought about other stakeholder groups, particularly employees.
All stakeholders, not just owners and the board, expect something from the organisation but the organisation also wants something in return. Performance measurement should therefore consider whether such stakeholders are delivering for the organisation and its needs and whether the leadership of the organisation is delivering for the stakeholders.
These leaders recognised they were not measuring the right things; what they were actually measuring were results. They reviewed some of the more common performance measurement tools, such as Six Sigma, Balanced Scorecards, Activity Based Costing, Total Quality Management, certain ISO Standards and the Five Prism Model. All these are renowned strategic management performance measurement approaches attempting to improve companies’ performances.
Some of them are very detailed and data-heavy in their attempts to reduce the number of errors in individual business processes by using statistical measurements to find errors, then attempt to remove the problem. Deciding to develop their own measuring processes based on a management-by-objectives approach, the leadership team believed most of the reviewed models were unsatisfactory.
They developed their own quantitative tools included using hard measures to determine how well the company was tracking over time to achieve explicit goals as well as qualitative analysis relying more on personal judgments from their experienced key managers and supervisors; releasing knowledge which exists in the enterprise and stimulating a learning-organisation approach.
Through goal-setting, employees and managers agreed realistic objectives to help focus on concrete action plans, with key performance indicators explicitly outlined, ensuring measurement of activity was possible when reviewed.
Alignment of employees against goals and objectives, their morale, individual competencies, how well they worked together and skills-gaps became the most important strategic performance management issues, linked with improvement of internal activities and processes.
Reviewing those factors which were outside the company’s power to influence became part of the organization’s culture. This ensured early warning systems for both threats and opportunities from changes in the social, technological, political and economic influences on the company, particularly those of high importance, immediacy and impact.
Delivering, delighting and exciting customers became common language in the company, not just customer-satisfaction. Suppliers were treated as partners, not as enemies to be fought. Measuring quality of delivery and implementing incremental improvements became part of the company-culture, not because it was dictated from above and because a form needed to be filled in but because employees cared, management gave them freedom to act.
Strategic performance management involved the leaders taking a detailed look and re-setting specific goals and objectives for divisions, departments, managers, and employees, and then gathering information to measure performance, making changes and improving performance with the involvement of employees who are key players in achieving results for all stakeholders.
