Developing Metrics That Drive Decisions

Developing Performance Metrics that Drive Decision Making : 

Developing Performance Metrics that Drive Decision Making

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Performance Measurements and Metrics… A performance measurement is a comparison of actual returns against a pre-specified benchmark. A performance metric is a type of measurement used to quantify the performance of some component of an organization.

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3 Types of Performance Measures… Key Result Indicators Performance Indicators Key Performance Indicators

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KPIs versus Metrics… A KPI is a metric, but a metric is not always a KPI Metrics are the detailed measures that feed and augment the KPIs KPIs reflect strategic value drivers while metrics may represent anything that is measurable

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KPI Metric Flow…

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10 Characteristics of a Good KPI… Reflect strategic value drivers Defined by Executives Cascades throughout organization Based on organizational standards Based on valid data Easy to comprehend Must be relevant Provide thresholds, targets and benchmarks Empower users Lead to positive action

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Common Executive KPIs…

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Industry Standard Metrics Industry standard metrics are common measurements that are deemed to be valuable within an industry. They are metrics an organization typically implements in order to see how they compare to organizations with similar service offerings.

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How to Know What to Measure Measure what your customers say is important Measure areas where there are problems you’d like to solve Measure the business objectives you are aiming to achieve

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Basic Rules for Developing Metrics Focus on desired outcomes Keep the metrics simple Involve all of the participants Base metrics on organizational objectives and key processes Challenge employees to act immediately

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SMART Metrics Specific Measurable Actionable Relevant Timely

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SMART Metrics Table

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Common Financial Performance Metrics Return on Net Assets Ratio Net Operating Revenues Ratio Viability Ratio Debt Burden Ratio Primary Reserve Ratio Customer profitability metrics

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Additional Financial Metrics – Financial Performance Ratios

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Additional Financial Metrics – Liquidity Ratios

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Additional Financial Metrics – Activity Ratios

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Additional Financial Metrics – Leverage Ratios

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Additional Financial Metrics – Profitability Ratios

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Additional Financial Metrics

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5 Steps for Identifying Data Quality Metrics Identify the key data assertions associated with business policies Determine how those data assertions relate to quantifiable business impact Evaluate how the identified data flaws are categorized within a set of data quality dimensions and specify the data rules that measure their occurrence Quantify the contribution of each flaw to conformance with each business policy Articulate and implement the data rules within a drillable reporting framework

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Data Quality Metrics Accuracy/precision Completeness Reliability Availability Timeliness Consistency

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Basic Rules for Developing Metrics Focus on desired outcomes Keep the metrics simple Involve all of the participants Base metrics on organizational objectives and key processes Challenge employees to act immediately

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The Performance Lifecycle

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Linking Corporate Strategy to Executive, Managerial, and Individual Goals

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Aligning Business Units to Organizational Objectives

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Aligning Workforce Performance to Organizational Objectives Functions within workforce performance management include: • Recruit and Hire Management • Compensation Management • Incentive Management • Goals Management • Learning Management • Competency Management • Performance Measurement

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Aligning Workforce Performance to Organizational Objectives (cont)

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Aligning Financial Performance to Organizational Objectives Steps to Maximize Financial Performance: Identify which divisions within your organization are most responsible for carrying out the success of each metric. Examine the processes for each those divisions Redefine the processes that are out of date, or those which tools exist for automation or process improvement Baseline the performance for the processes that have the most effect on the outcome of the financial metric Set performance measures for those processes and monitor how the improvement of those processes affects the overall financial metric over time

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Aligning Financial Performance to Organizational Objectives Common Financial Metrics Return on Net Assets Ratio Net Operating Revenues Ratio Viability Ratio Debt Burden Ratio Primary Reserve Ratio Customer Profitability Metrics

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Additional Financial Metrics – Financial Performance Ratios

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Additional Financial Metrics – Liquidity Ratios

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Additional Financial Metrics – Activity Ratios

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Additional Financial Metrics – Leverage Ratios

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Additional Financial Metrics – Profitability Ratios

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Additional Financial Metrics

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Aligning IT/Systems to Organizational Objectives

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Questions to Ask Regarding IT Strategic Alignment Which of your business unit’s processes support the organization’s mission the most? Do the metrics we report on drive those processes? Are you satisfied with the current performance throughout your organization? Do our metrics address the company's critical needs? Do our reports provide the required information to make business decisions? Do they identify areas of misalignment? Do IT initiatives appear to be prioritized appropriately?

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Common Pitfalls to Avoid When Aligning Performance to Strategy Inflexibility Insufficient vertical alignment Insufficient horizontal alignment