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Effective Measurement of Business Performance

Effective Measurement of Business Performance

Publication:
World Conference on Quality and Improvement
Date:
May 1998
Issue:
Volume 52 Issue
Pages:
pp. 414-417
Author(s):
Stein, Philip
Organization(s):
P.G. Stein Consultants, Pennington, NJ

Abstract

Measurement science or metrology has tools to support performance measurement in business. These tools can help businesses cover both financial and nonfinancial measurement. A basic tool is to understand natural variation and the subsequent interpretation of data. It also is important to know the qualities of good measurement: definition of purpose; determination of performance indicators; identification of the variable or unit being measured; an operational definition of the measurement process; and a plan for data analysis. Metrology and statistics provide improvements for inadequate aggregation methods typically used in business. The problem is that a weighted sum indicator might hide a significant change in one of its components. To prevent being misled by aggregated data, a warning indicator is needed to identify unusual patterns in individual data items. Another tool is measurement assurance, which assesses how well a measurement system meets its specifications for precision and accuracy.

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