Development of performance measures
No single performance measure is likely to be able to encompass the range of work undertaken by most offices.
- A range of measures must be used which reflects the main inputs and outputs of the department.
- A 'family' of measures can reflect the work of the department in a way no single measure can.
For example, the key performance measures chosen for a management accounts department might be:
- Reports with Errors / Total Errors
- Actual Cost / Forecast Cost
- Average Report Production Time
- Reports Late / Total Reports
- Number of Reports / Number of staff
- Average Cost of Reports
These measures should encompass the range of inputs used: labor, materials, capital and equipment, and the measures should encompass the factors of quantity, quality, timeliness and cost.
A family of measures such as these, related to the real objectives of the department, allows the level of performance to be measured and monitored over time to establish whether it is stagnating, declining or improving.
It allows the effect of productivity initiatives to be established and focuses managers? attention on the need to improve productivity, the only true way to improve a company's competitive position.
Indexing performance measures
In order to be able to compare dissimilar measures, such as cost and quality, to see the inter-relationships between them, it is possible to index the measures scores, and so convert them to the same scale. If a weighting is applied, an overall productivity index can be created.
The index scale is created by establishing a target performance for each measure. This is useful in itself, as people and work groups should have targets for quality of service so that they know the standards of work that they are expected to achieve. The bottom of the target range is defined as the minimum level of service that can be permitted. Intermediate values are calculated for scores between these ranges. For example see figure 1.
Dissimilar measures can then be compared, and combined to produce an overall performance measure. This is shown in figure 2.
In this example, the volume of output is rising, but the error rate is increasing as a consequence. The relative importance of the measures as defined by the weightings attached and by this standard the overall performance of the work group has declined.
This method of indexing performance measures, and calculating an overall, multi-factor, performance index was developed in the US by the University of Oregon, and is called an objectives matrix.
Computerized performance reporting
This all seems very complicated, but there is a simple computer program for PCs which guides departmental managers through a process of considering the purpose and objectives of their department and company, assists in the identification of customers and their needs, helps in the development of measures, and the collection, calculation and presentation of the data.
An example of the type of report that can be produced by the program is illustrated in the associated Acrobat PDF download.
Using performance measures
Of course, measuring productivity in this way is not an end in itself. A once off calculation is of very limited use. However as data is collected over time, trends can be determined to show where productivity improvements are occurring, and where action is needed to correct stagnant or declining performance.
The effects of action can be progressively monitored, and progress compared between departments. The development of performance measures will focus attention on the need to continually improve productivity in order to maintain and improve the competitiveness of the organization.
This approach to performance measurement has been extensively used in the United States, for office workers at all levels, from clerks to scientists, and also for workers in service industries. A consortium of major companies and government organisations, including 3M, Westinghouse, Northern Telecom, Chrysler Corporation, Nabisco Brands, the US Army, Navy and the departments of Commerce, Education and Justice, developed the software, which is used to assist in this process.
This method of monitoring the performance of office and service staff works. It will enable you to identify your current levels of performance, and where action is needed to improve them.
It will provide feedback of the effects of your actions, and ensure that the performance of your staff continually improves.