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Effective Measurement of Business Performance

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.

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