Performance metrics
Encyclopedia
A performance metric is a measure of an organization's activities and performance. Performance metrics should support a range of stakeholder needs from customers, shareholders to employees. While traditionally many metrics are financed based, inwardly focusing on the performance of the organization, metrics may also focus on the performance against customer requirements and value
. In project management
, performance metrics are used to assess the health of the project and consist of the measuring of six criteria: time, cost, resources, scope, quality, and actions.
Developing performance metrics usually follows a process of:
A criticism of performance metrics is that when the value of information is computed using mathematical methods, it shows that even performance metrics professionals choose measures that have little value. This is referred to as the "measurement inversion". For example, metrics seem to emphasize what organizations find immediately measurable — even if those are low value — and tend to ignore high value measurements simply because they seem harder to measure (whether they are or not).
To correct for the measurement inversion other methods, like applied information economics
, introduce the "value of information analysis" step in the process so that metrics focus on high-value measures. Organizations where this has been applied find that they define completely different metrics than they otherwise would have and, often, fewer metrics.
There are a variety of ways in which organizations may react to results. This may be to trigger specific activity relating to performance
(i.e., an improvement plan) or to use the data merely for statistical information. Often closely tied in with outputs, performance metrics should usually encourage improvement, effectiveness and appropriate levels of control.
Performance metrics are often linked in with corporate strategy
and are often derived in order to measure performance against a critical success factor
.
Value (marketing)
The value of a product is the mental estimation a consumer makes of it. Formally it may be conceptualized as the relationship between the consumer's perceived benefits in relation to the perceived costs of receiving these benefits...
. In project management
Project management
Project management is the discipline of planning, organizing, securing, and managing resources to achieve specific goals. A project is a temporary endeavor with a defined beginning and end , undertaken to meet unique goals and objectives, typically to bring about beneficial change or added value...
, performance metrics are used to assess the health of the project and consist of the measuring of six criteria: time, cost, resources, scope, quality, and actions.
Developing performance metrics usually follows a process of:
- Establishing critical processes/customer requirements,
- Developing measures,
- Establishing targetsTargetsTargets is a thriller film written, produced and directed by Peter Bogdanovich.-Plot summary:The story concerns a quiet insurance agent / Vietnam veteran, played by Tim O'Kelly, who murders his young wife, his mother and a grocery delivery boy at home and then initiates an afternoon shooting...
which the results can be scored against.
A criticism of performance metrics is that when the value of information is computed using mathematical methods, it shows that even performance metrics professionals choose measures that have little value. This is referred to as the "measurement inversion". For example, metrics seem to emphasize what organizations find immediately measurable — even if those are low value — and tend to ignore high value measurements simply because they seem harder to measure (whether they are or not).
To correct for the measurement inversion other methods, like applied information economics
Applied information economics
Applied information economics is a decision analysis method developed by Douglas W. Hubbard and partially described in his book How to Measure Anything: Finding the Value of Intangibles in Business . AIE is a method for the practical application of several proven methods from decision theory and...
, introduce the "value of information analysis" step in the process so that metrics focus on high-value measures. Organizations where this has been applied find that they define completely different metrics than they otherwise would have and, often, fewer metrics.
There are a variety of ways in which organizations may react to results. This may be to trigger specific activity relating to performance
Performance
A performance, in performing arts, generally comprises an event in which a performer or group of performers behave in a particular way for another group of people, the audience. Choral music and ballet are examples. Usually the performers participate in rehearsals beforehand. Afterwards audience...
(i.e., an improvement plan) or to use the data merely for statistical information. Often closely tied in with outputs, performance metrics should usually encourage improvement, effectiveness and appropriate levels of control.
Performance metrics are often linked in with corporate strategy
Strategy
Strategy, a word of military origin, refers to a plan of action designed to achieve a particular goal. In military usage strategy is distinct from tactics, which are concerned with the conduct of an engagement, while strategy is concerned with how different engagements are linked...
and are often derived in order to measure performance against a critical success factor
Critical success factor
Critical success factor is the term for an element that is necessary for an organization or project to achieve its mission. It is a critical factor or activity required for ensuring the success of a company or an organization. The term was initially used in the world of data analysis, and business...
.
See also
- Figure of meritFigure of meritA figure of merit is a quantity used to characterize the performance of a device, system or method, relative to its alternatives. In engineering, figures of merit are often defined for particular materials or devices in order to determine their relative utility for an application...
- Performance-based logistics
- Performance indicator
- Technical Performance MeasureTechnical Performance MeasureTechnical performance measures was a term used by the US military to refer to key technical goals that needed to be met, where the technical goals were vital for the functioning of a system in its environment....