24 Jan 2012

Face forward on performance indicators

Financial reports always give too little information too late – using them to work out how to improve strategy or business processes is like trying to drive using only the rear view mirror. What is needed is lead information that suggests what the numbers might be in future financial reports were no action taken now

 Valuable lead information is not just based on financial data but on a treasure trove of other, non-financial data that is easily collectible from business processes. Together, they can reveal where business processes are weakest and give clues about the actions needed to make those processes better.
The most powerful performance measures are key performance indicators and it is well worth management taking time to design and implement a really good company-wide performance measurement system. There are five rules to follow in doing so:

  • Don’t try to measure too much
  • Don’t measure what doesn’t matter
  • Be specific about business goals
  • Don’t get hung up on data availability or integrity
  • Don’t design anyone’s measures without them

Don’t expect the first implementation to be perfect but learn from practising. That way management will gain insightful and actionable lead information faster.

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