Companies that work to define and implement performance measurements have an all-important tool in their efforts to drive excellence. By measuring progress toward defined goals, they can quickly grasp what’s working and what isn’t, and adjust accordingly.

Through a performance measurement system, organizations identify the critical factors that matter most to their success. These vary by company and can include a range of key elements, including customer service, internal processes, employee productivity, and the all-important financial performance.

Correlated performance measurements are subsequently established that quantify the levels of success in the critical areas that have been identified. Organization and employee behavior is driven by what is measured, and companies can actively manage their businesses using achieved results compared to desired results.

For many organizations, deciding what to measure can be challenging. Here are some essential insights into selecting good performance measurements.

• Start with what you know and have. Avoid creating an entirely new process to measure something new. There’s no reason to add another step to a process for the sake of capturing a measurement.  Instead, measure factors that are already within existing processes. For example, most companies already track numerous targets and outcomes in day-to-day operations. Take an inventory of current reports and determine whether any items hold value as good overall performance measurements.
  
  
• Make sure they’re meaningful. So many things can be measured, and often too many things are. Don’t measure what’s easy; measure what matters. Only those few strategic items that are critical to a company’s success should be considered. Measurements must reflect an organization’s goals and be aligned with its strategic objectives.
  
  
• Maintain simplicity. Avoid overcomplicated measurements. Too much data or too many measurements are cumbersome and hard to embrace. Clear, simple measurements will keep the workforce focused on achieving results. At the same time, companies must receive enough details to reveal the causes behind performance deviations. Just keeping score isn’t enough. For instance, turnaround targets may fall short one month, but it’s important to know why. Additional information is needed so that improvements and solutions can be targeted.
  
  
• Strive for a quantitative/qualitative balance. The value of hard numbers is obvious, but organizations can also benefit from monitoring and improving non-financial performance measurements. Factors linked to long-term objectives like customer loyalty and new product development may play a significant strategic role for some organizations, and therefore, deserve to be measured.