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Performance Measurement

By Ed Bones

Republish: EasyPublish™ Published: 27Oct2008 Word count: 670 Viewed: 289 time(s) Get Free Content For Your Site

The often repeated requirement to improve business performance and to achieve not simply an improvement but continual improvement, pre-supposes that some mechanism or method exists to actually measure performance, since measurement is a pre-requisite to control and improvement.

Auditors of management systems are tasked with reviewing the arrangements for managing the ISO Standard's requirement for improvement, and although a few organisations can be seen making the effort to improve performance, seldom is the process well thought through, and in the majority of situations can best be described as 'all show, no go'.

The need to identify processes and their inter-relationships, while well intended, has removed the focus from business objectives, and so distorted any improvement activity. It has become the accepted practice of ISO auditors to ask for evidence of Process Measurement and subsequent improvement activities, and while this is reasonable and necessary, it is also counterproductive in that, like compliance auditing, it ignores the overall needs of the business to meet its objectives as defined within its business plans.

Auditors of a business system will frequently expend significant efforts in explaining and examining the interrelated process concept (ISO9001 4.2), without ever attempting to assess the 'value added' aspect of a process, or sub-process. Until a process can be seen to contribute value to the total system there is little point in attempting measurement and improvement. It is not the lot of the external auditor to do this, and generally internal auditors are ill-equipped to do so, and so measurement and improvement efforts continue in support of activities and processes that may add little or no value to the overall objectives of the business.

To maximize the benefits of process measurement and improvement efforts it is clearly necessary to perform some measure of process analysis to remove the 'no value added' aspect of work activity. For most companies, this alone will bring a measure of improvement. After this is completed, the application of performance measurement and possible improvement can be considered. However, there remains the danger of measuring and possibly improving a process activity that contributes little or nothing to the overall objectives of the organisation.

Measurements and improvement efforts against the indices should not concentrate on the process, but instead focus on the top level business objectives. It is these performance measures that need to be supported, rather than local process performance. Too often we witness measurement of a process capability, and possible improvement in that capability that has no bearing on the overall needs of the business. There is, for example, no point in improving process cycle time when the real need is to reduce - say - costs, and there is already ample spare capacity available. Every business will benefit and claim to be striving to achieve reduced operational costs, and while this can be seen to be an objective in respect of scrap and rework (in manufacturing), seldom are the process measures concentrated on the cost of labour or their efficiency of work, yet these are amongst the largest costs of many operations, and will always be a consideration in corporate budgeting.

Until process measurement and improvement relates to the collective and corporate objectives of the business it will continue to be an activity put in place to satisfy the demands of ISO registrars, as opposed to the commercial interests of corporate stake-holders, and will consequently fail to interest local management or to produce any results worthy of recognition.

To conclude with a process common to all management systems, namely Internal Audit, I believe there is only one measure of this process that has significant value, "How well was an adverse audit finding received?" With a response that addresses only the symptoms, or is argumentative, the auditor has not done an effective job, and this approach is valid for both internal and external audits. An effective measure here would be the length of time a problem remains open. The number of adverse findings should never be a metric of an audit process.

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