Start with Critical Success Factors

Any measurement process begins with determining the Critical Success Factors (CSFs), and then identify critical and leading measurements to show if the factors are being met.

Design of Goals

• Current level
• The improvement goal
• Intermediate checkpoints
• Prioritization or weighting
• Don't use Indicies
  
• Performance Goals

Measurement

Because measurement by one method usually introduces bias, multiple ways are used. This has been widely covered in the business literature under the topics of 360-degree performance evaluations, or the balanced scorecard.

Areas of Scorecard Measurement

As good as the concept of the balanced scorecard is, it is often used with "lagging indicators," especially when proposed from an accounting frame of reference. A static scorecard measures what has been up until now. I think a dynamic scorecard is needed-- one that captures the change in conditions upon which an organization's success is based. Otherwise, you may be successful even as the rules change and make your performance outmoded.

1. Finance
   The basis of any scorecard must include revenue generation and sources. The core business concentrates resources in one area for maximum effect.
   Some finance measures include:
   • Profit & Loss;
   • Profit for individual product and service lines;
   • Inventories;
   • revenue growth (break down for unit quantity and price changes);
   • gross margin (or contribution over variable costs);
   • return on capital;
   • Economic Value Added (EVA) for capital outlay;
   • Other standard trend and ratio analyses.
2. Marketing
   1. Customers:
      • Define the customer profile.
      • Detail the reasons for purchase:
        • Causes;
        • Needs;
        • Type of purchase;
        • Levels (who decides, purchases, or pays);
        • Customer needs: core benefits.
   2. Market:
      • market segmentation;
      • customer profit;
      • retention.
   3. Macro Demand Drivers:
      • Government regulations;
      • interest rates;
      • material prices;
      • weather;
      • demographics;
      • economic cycles.
   4. Competition-- Comparison grid.
3. Process
   1. Input/Output
      • Worker morale;
        • Rework;
        • Absenteeism;
        • Turnover.
      • Number of transactions/ day; size;
      • Customer satisfaction measures;
        • referrals;
        • Cycle time;
   2. Organization:
      • Technical (IT integration; Y2K needs; etc.);
      • HR (hiring/separation; position needs and requirements);
      • Amount of training (Continuing Educational Units (CEUs); number updated on core technology; etc.).
   3. Internal:
      • process control;
      • distribution;
      • Portfolio management;
   4. How do they make money?
   5. For each step of your process, where does value get created for the customer?
   6. How much value does each department contribute to the customer's overall value?
4. Innovation (Organizational Improvement and Learning):
   Number of:
   • suggestions?
   • New products/year?
   • innovations?
   • Hours of training?
   • Number trained?

This free download page is from Gustafson's Training and Development web site. (C) 1999 W. N. Gustafson. Permission is granted to print or save for personal purposes.