December 28, 2000, 12:05 PM — If you are using metrics to measure the effectiveness of any system or application, it's important to make sure they give you relevant information. The American Productivity and Quality Center (APQC) recently concluded a study comparing the benchmarking techniques of nine best-practice organizations (partners) with 14 sponsors looking to improve their measurement practices. APQC found that partner companies use a process called the "balanced scorecard," an approach that calls for carefully choosing a limited number of metrics directly tied to a company's strategy. Selected results that follow show that best practice companies involve more employees in choosing what to measure, and they make sure everyone has a stake in positive results.
Best Practices
- Keep it simple. Companies should establish a simple structure and limit the number of items measured so that results will be useful to a wide group of employees. "Companies should break away from the idea that they need to measure everything," says Neil Peltier, a member of the APQC study team. "If it's kept simple, it can be much more than a strictly executive tool." For example, Boeing's customer service group uses a system that includes a performance index that ties metrics for employee and customer satisfaction to financial performance. It uses charts with simple colors -- red, yellow and green -- to rank results.
- Open up the process. When deciding what to measure, invite a wide variety of employees to participate. APQC found that best practice companies were more likely than other organizations to include a cross-functional team when designing a measurement scorecard. GTE HR's metrics team includes a director plus three employees who have been dedicated to the team since the beginning of the balanced scorecare initiative.
- Reward everyone for good results. Although some best practice companies don't tie bonuses or compensation to performance measurement, those that do strive to include employees as well as executives. "The person working the shop floor has had to make changes, so he should reap the benefits as well," says Peltier.
- Create an auditing process. An outside auditor can go a long way toward protecting the integrity of metrics data. "You can make numbers say anything you want if you try long enough," Peltier says. Caterpillar, for example, brought in PricewaterhouseCoopers to audit its data and processes, Peltier added.
