Secrets,Developing,Simple,Powe business, insurance Secrets of Developing Simple, Powerful Performance Measures

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In this economic, fiscal crisis it is critical thatorganizations understand what drives their success and how to measureit. Performance metrics tell us how good we are at doing what we do andhelp us reach goals on time and on budget. But in order for them to betruly effective; they must be fully understood and properly applied.Forexample, server availability is a very common measurement for ITdepartments. But what does 99.999% server uptime mean? If you havemultiple servers running in a redundant cluster or server farm, chancesare your servers will be available 100% of the time.But whatgood is an email server that is up 100% of the time if the emailapplication itself is sporadic or if a customer is not receiving all oftheir mail or if transactions are taking too long to process? In thisexample, the metric is not set up from a customer point of view, butinstead from a technical point of view. And thus that metric is notfully understood and adds little value. This article discusses thedifferent types of measurements and how to develop simple, uniquemetrics that drive organizational success.A performance metricis a type of measurement used to quantify the performance of somecomponent of an organization. There are three types of performancemeasures: key result indicators, performance indicators, and keyperformance indicators. Key result indicators (KRIs) are typically longterm measures (monthly, quarterly, yearly) which represent how yourorganization is doing, and are the results of your organization'sactions. They are often used by executive management. Performanceindicators (PIs) are the most common measurements, which are measuredmore frequently (weekly, daily or hourly), and often tell you whatneeds to be done. They are often used by middle management and staff,because they give valuable information of operations and give businessunit management and staff an understanding of what actions need to betaken. Key performance indicators (KPIs) are the measures that focus onthe most critical performance areas within your organization. KPIsreflect strategic value drivers and dictate the success of yourorganization, while metrics represent anything that is measurable. AKPI is a metric, but a metric is not always a KPI. An organization willtypically have many result indicators and performance indicators, butfew KPIs.A question many people have when developing metrics issimply "How do I know what to measure?" A good place to begin is byresearching industry standard metrics. Industry standard metrics arevaluable measurements that are common within an industry. They alloworganizations to compare their performance to other organizations withsimilar service offerings. While industry standard metrics are a goodplace to begin, every organization is different. Sometimesorganizations get too focused on industry standard metrics and fail tofocus on the things that make their service unique to their industry.Otherways to know what to measure are to 1) measure what your customers sayis important, 2) measure areas where there are problems you'd like tosolve, and 3) measure the business objectives you are aiming to achieve.Anothereffective method for creating effective metrics is the SMART test(Specific, Measurable, Actionable, Relevant, and Timely). Your metricsshould be specific and assign ownership, accountability and parametersfor the performance of the metric. They should be easy to measure andcalculate. They should guide actionable steps to be taken if they arenot met. Metrics should guide performance into the direction of theorganizational mission and goals. And they should be up to date andmeasured on time.A way to test if your metrics are SMART is tocreate a SMART table. Your first column will document the function orskill area. Next, you want to a column listing which objectives eachmetric supports. If the metric does not support an organizationalobjective it will be much less valuable and may be costly in terms oflabor and focusing on the wrong things. The next column should documentstandards and parameters for the metrics. Other columns should documentwhether the metrics are agreed upon by all stakeholders, how the metricwill be calculated, whether the metric is validated, realistic and easyto gather, and how often the metric will be reported? If all of thesequestions can be answered and documented, the metric passes the SMARTtest.One major challenge organizations face is identifyingvaluable financial metrics that are meaningful to those responsible forcarrying out the work. For example, net cash flow is a criticalperformance measure for executives; but it probably means very littleto the accounts receivable clerk who has no idea of how theircontribution improves net cash flow performance.Instead the CEOmight focus on net cash flow while the CFO looks at the debt-to-equityratio. The controller might focus on the liquidity ratio, while theaccounts receivable manager looks at days sales outstanding, and theaccounts receivable clerk worries about percent of collections over30/60/90 days. By ensuring that the proper metrics are assigned to thekey people measuring and driving financial performance yourorganization will greatly increase its chances of achieving constantgrowth and success.Get the tools to develop mission drivenperformance metrics and learn how to implement performance managementbest practices within 120 days. Article Tags: Industry Standard Metrics, Performance Measures, Drive Organizational, Result Indicators, Performance Indicators, Industry Standard, Standard Metrics, Cash Flow, Accounts Receivable