Effective Measurement of Business Performance
- World Conference on Quality and Improvement
- May 1998
- Volume 52 Issue
- pp. 414-417
- Stein, Philip
- P.G. Stein Consultants, Pennington, NJ
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.