Article

Performance Measures? Who Needs Them?

I recently visited a plant where the owner proudly handed me his balanced scorecard. He didn’t know that I am a certified practitioner of scorecard and he began to brag about his 97 key performance measures.

So I asked, “What is the strategy?” He looked at me and swallowed. Then he said something about getting better every day.
That’s not a strategy, that’s a platitude. It can’t be measured and there is no finish line. Having 97 “key” measures is way too many.

So I explained that I believe that the term “balanced scorecard” is misnamed. It implies that the measures and dashboard are the most important when, in the judgment of the Balanced Scorecard Institute and myself, they are an outcome of a process. Instead, I’d call the process Strategic Management, where strategy is created, a map of objectives and tactics is drawn and then measures are determined as indicators of success in the tactics.

“Getting better every day” is fine, as long as we make it SMART:

• Specific
• Measurable
• Attainable
• Relevant
• Time-limited

So if a strategic theme is what I would call operational excellence (getting better every day) and we were looking at the plant, we could have a smart objective of improving efficiency by X percent per year for Y years. That is SMART.

Then we need to draw a map. As we go down the map, we ask “how,” and as we go up, we ask “why.” How will we increase productivity? By improving throughput. How will we do that? With training and downtime reduction. Why are we optimizing layout? To reduce waste. Why are we doing that? To increase productivity.

The map works because we create cause-and-effect relationships. This map says that we must start with the activities at the bottom in order to realize the objectives above. Only after we understand what we are trying to achieve can we begin to look at what is the best way to see whether we are making progress.

Note that part of the map should include continuous improvement objectives. We will never be “good enough” at any of them. If the “how” for reduce waste was “eliminate feeder trips,” that would not be an objective, because it is not continuous improvement. Because it is a gap closure issue, we call this an initiative in support of an objective.

In the next issue, after we understand the mapping, we’ll look at performance measures.