companies to develop a successful metrics driven performance measurement

Companies to develop a successful metrics driven

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companies to develop a successful metrics-driven performance measurement program for their operations. We’ve found three critical questions that together foster a successful performance measurement program: 1) What to measure? In principle, the answer to this question is simple. Choose metrics that provide an understanding of performance vis-à-vis strategic objectives and outcomes. For instance, we developed the operations performance metrics for a global investment bank by first identifying six relevant performance categories. The strategic objectives were then mapped to each performance category. The principles guiding the development of these performance metrics were that they should be based on key themes worthy of senior management attention; they should be based on facts, rather than conjecture; they should be practical and actionable; they should provide insight into how well the operations function is performing, not just what it is doing; and they should initially be simple to allow room for evolution over time ( see Exhibit 4, next page ). We’ve identified several best practices that can set the foundation for determining what to measure within operations: Develop the performance metrics iteratively, gaining buy-in along the way from stakeholders in operations and the business units. Ensure that the metrics strike a good balance between breadth and depth of visibility into current and future performance. They should have leading indicators, such as outstanding trade confirmations, from both a numerical and cost perspective, and lagging indicators, such as the number of open and satisfactory audit assessments. Develop measures that allow performance targets to be benchmarked across products, divisions, and companies — for instance, against information in Z/Yen and Moody’s Risk Management reports.
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12 Strategy& Source: Strategy& Exhibit 4 Performance measurement development approach 1–2 objectives for each category Guiding principles Efficiency Innovation Regulatory/ compliance Control/ risk Client service People development Performance categories Process efficiency and cost drivers Ability to innovate and support innovation External oversight and regulations Internal controls and operating risk Ability to meet client needs Ability to develop staff professionally Strategic objectives 1–2 outcomes for each objective Desired outcomes 1–2 key metrics to measure each outcome Metrics 1. Key themes worthy of senior management attention 2. Fact-based, not conjecture 3. Premium on practicality — measures that we can collect, report, and act on 4. Focus on metrics providing insight into “how well” as opposed to just describing “what” an area does 5. Room for evolution — start simple and build over time
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13 Strategy& Target a limited number of strategic metrics as opposed to a laundry list of operational metrics. For instance, in its first year of implementing a performance measurement program, Bank of America 2 began with 20 to 30 metrics. This number was
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