Performance Measurement: Correcting Measurement Myopia

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Persons with myopia, or near-sightedness, are unable to see distant objects clearly. In the U.S. , around 70 million people are myopic. For individuals, myopia is readily corrected. For corporations, measurement myopia, or nearsightedness, is not so easy to cure. In fact, it can be fatal. So why do so many organizations continue to focus myopically on just the traditional measures of performance: revenues, profit, cash flow, and departmental actual-to-budget comparisons? Those organizations that focus exclusively on traditional metrics risk the dangers both of near-sightedness and hind-sightedness. Business process management practices can provide the corrective lenses for organizational measurement myopia. The implementation of process management principles requires firms to view the business from the customer's point of view -- from the outside-in, as well as from the traditional, internal perspective. The first step in viewing the business from the customer's point of view involves identifying, measuring, and monitoring the firm's performance in terms of delivering what customers really want. As the table on the side illustrates, it is should not be too difficult to identify what customers really want. Yet, recent research indicated that only about 35% of respondents could demonstrate that their firms took a rigorous approach to identifying, measuring, and monitoring the firm's performance in terms of delivering what customers really want. Along the same lines, at a recent conference workshop, participants from a regional bank reported that their firm monitors loan volume and the value of the loan portfolio but does not monitor the mean cycle time to execute a typical retail loan. Participants from a regional insurance company reported that their firm monitors a series of financial metrics on claims processing but does not monitor or manage how long it takes to settle the average claim. Yet, that is precisely what customers care about -- fast service, right the first time. Why is it that many organizations are afflicted with such measurement myopia? Many leaders have a strong functional bias and view the business from the perspective of their prior functional experience. As the COO of a major healthcare institution said, "In healthcare, the org chart gets in the way of care delivery." Another traditional obstacle to viewing the business from the customer's point of view is that leaders are seldom accustomed to working together in a deliberate and collaborative way. But that is precisely what is needed for proper focus, as it is the firm's large cross-functional processes that deliver what customers want. Many executive teams act more like a group of talented individuals than a team. This becomes an even more fundamental issue when a firm employs process management to go beyond simply identifying and monitoring performance to making improvements and introducing innovations. Consider this. EbizQ recently reported that when CIOs were asked, "What most hinders your company's ability to achieve better business performance management?" nearly half (45.83%) cited a corporate culture that is resistant to change as the principle impediment. Business processes (37.5%), technology (33.33%) and a shortage of people and skills (29.17%) were the other reasons cited. So, if you suspect that your firm suffers from measurement myopia, put on those process management corrective lenses to see clearly what customers want. As management guru Peter F. Drucker said, "You can't manage what you can't measure!"

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