By Lycette, Bill; Herniman, John
Industrial Management , Vol. 50, No. 5
Selection of the right set of performance metrics plays a vital role in ensuring organizational focus for driving superior business results. However, metrics alone offer minimal value without the inclusion of associated goals. Goals should consider both business and human psychological aspects. Business-vital metrics and associated goals are selected based on strategic intent, organizational alignment, customer and business requirements and return on investment. Improved business results can be attained by also considering psychological factors embodied in goal-setting theory.
Metrics must be in alignment with high-level business objectives. Operational performance metrics must lend themselves to clear linkages to highlevel business objectives. Selection of a few business-vital metrics can be the difference between a dust-gathering dashboard and business execution. Metrics at all levels must have clear ownership and accountabilities, and they must provide lines of sight to the overarching metrics provided in the business's balanced scorecards and performance dashboards.
Setting effective goals can be a tricky and contentious affair, and it usually requires the combined energies of art, science, diplomacy and political savvy. But focusing alone on the pure business side of goal setting can lead to disappointing behaviors and results. Improved results can be achieved by giving consideration to the psychological aspeas of how an organization sets its goals. It is instructive to develop an understanding of the psychological aspects that are documented in literature, including goalsetting theory. These theories describe what drives human motivation to achieve performance goals, enabling astute management to tailor goal-setting strategies on a situation-by-situation basis to drive operational results.
Human psychological aspects are one factor when establishing effective goals. A second consideration comprises strategic intent, customer requirements and historical performance of the business. Past performance should be considered as an initial reference point. Current and future needs of your customers must be understood. Decisions need to be made to determine if the goal reflects strategic intent to maintain current levels of performance or if larger investments should be made to improve business results either incrementally or disconti nuously. As with any measure, business performance metrics contain an element of measurement uncertainty and normal random variation. This margin of error can be calculated using statistical methods and included in the goal to assure that costly responses to false alarms are avoided and that credible expectations are set.
Agilent Technologies provides high- quality performance products that serve the electronics and life sciences test and measurement markets. Many of the concepts and methods described in this article are employed by Agilent to select meaningful performance metrics and goals for driving superior customer experiences and business results. Examples are given where these concepts have been applied.
Aspirational and inspirational metrics
There are very few organizations in business today where metrics are not present in great numbers. There are different levels of contribution that metrics can provide to an enterprise.
When organizations set aspirational metrics such as "zero defects," these are often mislabeled as stretch metrics. In most business environments, zero-defect goals are not achievable but do provide for very visible quality goals. However, the low probability of ever reaching this goal makes it difficult to generate ownership and commitment around such metrics. Aspirational metrics do play a strong role in helping to create an end vision, but there is the key follow-up step that is critical to creating superior business results: turning aspirational goals into tangible and owned next steps namely business vital metrics. …