What is performance measurement
Performance measurement is the process of collecting, analyzing and/or reporting information regarding the performance of an individual, group, organization, system or component. It can involve studying processes/strategies within organizations, or studying engineering processes/parameters/phenomena, to see whether output are in line with what was intended or should have been achieved.
Performance measures quantitatively tell us something important about our products, services, and the processes that produce them. They are a tool to help us understand, manage, and improve what our organizations do. Performance measures let us know:
- How well we are doing
- If our processes are in statistical control
- If we are meeting our goals
- If and where improvements are necessary
- If our customers are satisfied
They provide us with the information necessary to make intelligent decisions about what we do.
A performance measure is composed of a number and a unit of measure. The number gives us a magnitude (how much) and the unit gives the number a meaning (what). Performance measures are always tied to a goal or an objective (the target). Performance measures can be represented by single dimensional units like hours, meters, nanoseconds, dollars, number of reports. number of errors, number of CPR-certified employees, length of time to design hardware, etc. They can show the variation in a process or deviation from design specifications. Single-dimensional units of measure usually represent very basic and fundamental measures of some process or product.
More often, multidimensional units of measure are used. These are performance measures expressed as ratios or two or more fundamental units. These may be units like miles per gallon (a performance measure of fuel economy), number of accidents per million hours worked (a performance measure or the companies safety program), or number of on-time vendor deliveries per total number of vendor deliveries. Performance measures expressed this way almost always convey more information than the single-dimensional or single-unit performance measures. Ideally, performance measures should be expressed in units of measure that are the most meaningful to those who must use or make decisions based on those measures.
Most performance measures can be grouped into one of the following six general categories. However, certain organizations may develop their own categories as appropriate depending on the organization’s mission:
- Effectiveness: A process characteristic indicating the degree to which the process output (work product) conforms to requirements. (Are we doing the right things?)
- Efficiency: A process characteristic indicating the degree to which the process produces the required output at minimum resource cost. (Are we doing things right?)
- Quality: The degree to which a product or service meets customer requirements and expectations.
- Timeliness: Measures whether a unit of work was done correctly and on time. Criteria must be established to define what constitutes timeliness for a given unit of work. The criterion is usually based on customer requirements.
- Productivity: The value added by the process divided by the value of the labor and capital consumed.
- Safety: Measures the overall health of the organization and the working environment of its employees.