It’s been said that if you don’t measure something, you can’t improve it.
It’s even more important to realize that your choice of metrics bounds your organization’s future. If there is a key success factor and it’s not acknowledged or tracked, it may as well not exist.
Traditionally, businesses have viewed the following financial measurements as indicators of success:
More recently, business publications have recommended using non-financial measurements as well as the more traditional accounting measures to assess, report and drive success. Most notably, the Criteria for Performance Excellence of the Malcolm Baldrige National Quality Award have always stressed:
When done well, measurement of these criteria can indicate whether the elements of success are in place — indicators such as fast, responsive time–to–market; a loyal customer base; outstanding processes for quality and timeliness; and mechanisms that ensure learning, growth and continual improvement.
Sometimes organizations define their own indicators of performance in key areas. Such metrics are often useful because they try to reduce complex measurements and results to a single value that can be tracked, managed and improved. These “shortcuts” can be misleading, however, when used either for process improvement or for other feedback such as promotion, recognition or compensation.
Your business measurements must be carefully managed to make sure that they give right answers, and that the right questions are being asked.
Metrology, or measurement science, contributes to business measurements as well as to more traditional engineering and scientific measurements.
The field of metrology has, within the last 30 years, developed and fielded an approach — measurement assurance — that is analogous to product assurance in manufacturing. Measurement assurance uses management and statistical techniques to evaluate the operation of a measurement system and ensure that it measures the desired quantities to the accuracy and precision required, and to monitor this performance of the measurement system.
Excerpted from Philip Stein’s “Effective Measurement of Business Performance," ASQ Annual Quality Congress proceedings, May 1998.
See how other companies use metrics. Compare your metrics to theirs. (Members Only)