Centre for Strategy and Performance

Business Performance Measurement

Business Performance Measurement is concerned with:

• measuring the efficiency and effectiveness of actions;
• aggregating and standardising information;
• setting appropriate targets.

The development of performance measures plays an important role in formulating and clarifying plans and strategies and setting targets for employees, project teams and business units. Performance measures should be part of a consistent performance measurement system which connects measures for top management, different business units, middle and lower management and sometimes even individual projects and employees. A performance measurement system should also ensure that a limited and manageable number of measures is chosen and that the measures are balanced in terms of:

• financial and non-financial measures;
• leading and lagging indicators (input, process and output measures);
• trade-offs between measures.

The most popular performance measurement framework is Kaplan and Norton’s "Balance Scorecard". A well balanced performance measurement system will help to:

• develop, discuss and formulate the company’s strategy;
• communicate the strategy throughout the organisation;
• define objectives and specify targets for business units, project teams and employees;
• motivate and monitor employees and managers and guide their actions;
• inform employees, managers and shareholders on the efficiency and effectiveness of past actions and strategies and the likelihood of success for future actions.

Links:

• http://www.som.cranfield.ac.uk/som/cbp
  Centre for Business Performance at Cranfield University School of Management
• http://www.performanceportal.org
  The Performance Measurement Association (PMA) is a global network for those interested in the theory and practice of performance measurement and management. It was launched at the 2nd international PM Conference, PM 2000, Cambridge, UK

Papers/Books:

• Neely, A, Mills, J., Gregory, M., Richards, H., Platts, K., Bourne, M. (1996) "Getting the Measure of Your Business" Workbook, Manufacturing Engineering Group, Cambridge.
• Neely, A. (ed.) (2002) "Business Performance Measurement – Theory and Practice", Cambridge University Press, Cambridge.
• Simons, R. (1999) "Performance Measurement and Control Systems for Implementing Strategy", Prentice Hall, Upper Saddle River, NJ.

 by Johannes Schmitz, <js340eng.cam.ac.uk>