For some it’s a source of motivation, for others it’s a thorn in their side. But one thing is certain: there’s no escaping it. To be sustainable, companies must regularly evaluate their performance. So it’s super important to establish a list of reliable indicators. Unsurprisingly, profitability is the most widely used analysis variable.
But what do we do when the expected results can’t be measured in numbers? This is the case, for example, with not-for-profit organizations and public services whose successes are more intangible. Does this mean they have to grope along, fingers crossed, hoping for the best?
Of course not! There are many ways to set up customized performance indicators for your business. Here’s how.
Step 1: know what you want – define your objectives
First of all, I’d advise you to leave SMART objectives behind. It’s a very interesting model, but it lost its relevance when the acronym was translated from English into French.
So I had some fun questioning it. And by playing with the letters… bingo! I discovered the acronym that perfectly defines what a good goal is for me: RAPPORT.
Realistic, Ambitious, Relevant, Precise, Observable, Linkedto vision, Temporallydefined
It’s a French word, easy to remember… and, as an added bonus, I find it rather amusing to hear myself tell a customer that their objectives don’t fit.
What exactly are RELEVANT objectives?
(For the sake of efficiency and clarity, I’ve played a little with the order of the letters in the acronym. I’ve also combined some of them to make them more compatible).
Realistic and Timely
To determine whether a goal is realistic, you need to assess your company’s current situation and determine what can be done to improve it and achieve the desired results.
But that’s not all! The timeframe within which you plan to achieve them must also be appropriate. This alone can make the difference between success and failure.
Ambitious
Don’t be afraid to aim high.
And if you find it too dizzying – or unrealistic – to think “big”, divide your ambitious goals into several sub-goals. Then, determine the time and resources you’ll need to achieve each sub-goal.
Relevant and linked to the vision
It’s easy to get lost along the way and forget the vision that gave rise to your goal. So when in doubt, stop and think of your vision as a compass. It will show you the direction you need to take.
Once you’ve completed this step, make sure you have the time and means to get where you’re going.
Will you go over the lake or the mountain? Will you be going in a straight line, or will you have to take a detour to get around an obstacle? Is this really the best time to start this journey?
Precise and observable
As you may have noticed, I prefer to use the term “observable” rather than “measurable”. Why? Because the word “measurable” implies a notion of quantity. Yet an intangible objective is also observable.
So, what’s important is that you can describe precisely the reality that will be observable when your goal is achieved.
It must be so clear that no doubt will remain: you’ll know immediately whether it’s completed or not.
And it doesn’t have to be complicated. It can be as much about getting a smile at the end of a meeting as a 132% ROI. Both are equally relevant and observable.
Step 2: know where you’re starting from
The current condition
Obviously, if you want to be able to see improvements or progress in your performance, it’s important to have a realistic picture of the situation as it exists today right from the start. And to get there, you need to look at the facts and data that describe it.
Above all, don’t panic! It’s not as complicated as it sounds: the information you have doesn’t always have to be absolutely accurate to be effective.
After all, the cup of flour you need to bake your favorite cake is an approximation. Think about it! You don’t count each individual grain.
Sounds a bit confusing?
Here are a few questions to help you take stock of your current situation without getting too bogged down:
- What made you realize you had to set a goal?
- What evidence have you gathered to show that you need to improve something?
- What data do you currently have?
- What do you need to know to assess customer satisfaction?
Relevant measures
Be careful! Some measures, especially if they have little or no impact on performance, can skew your decision-making.
It would also be totally counterproductive to include indicators, situations or phenomena over which you have no control.
This is what happens, for example, when an employee’s work is evaluated without due consideration being given to the constraints imposed by the organization.
It is therefore essential to find the obstacle that limits the system and improve it BEFORE analyzing its components. This means, among other things, finding out what blocks a person’s professional performance BEFORE judging it.
Measuring the intangible
BUT not everything is easy to measure. Such is the case with intangible data, which requires the use of qualitative rather than quantitative indicators.
Here are a few examples to get you started:
- Frequency (it happens more often, less often, regularly, cyclically, seasonally, randomly?)
- Statistical variation (is it always the same or does it change?)
- Time or duration (how long does it last? How long does it take?)
- Classification (in which category does it fall? Is it more or less frequent than another comparable phenomenon? What is the top 5?)
- Counting (how often does this happen?)
- The sample (by measuring one part, what can we deduce about the rest?)
- Probability (how certain are we that it will happen?)
Have you chosen your performance indicators? Congratulations! Now you need to make sure they’re relevant to your business.
To stimulate your thinking, ask yourself these questions:
- Is it related to what you want to achieve (your goals, your mission)?
- Is it understood by those doing the work, and does it give them feedback on their performance?
- Does it reflect the experience and reality of the people who work as closely as possible?
- Is the effort required to measure it (investment, time, system, etc.) proportional to the value of the information it yields?
- Extrapolation (if we know of a comparable or similar phenomenon, what can we associate with this new phenomenon?)
- Direct observation (what can we qualitatively know about the phenomenon?)
- Simulation (calculating our measurement from known parameters, testing a hypothesis, carrying out an experiment on a smaller scale)
Step 3: Measure progress
Success, Effectiveness, Efficiency
Success, effectiveness and efficiency are often confused when it comes to assessing a company’s performance. Yet these 3 words contain important nuances to be grasped.
Success: achieving a goal
Effectiveness: comparing results with objectives
Efficiency: comparing results with resources used
By the way, did you know that not all 3 of these variables need to be achieved to properly measure your progress?
Let me give you two examples:
Example 1
When an athlete prepares for the Olympic Games, his sole objective is to surpass himself. So they put their heart and soul into their training, without counting the hours.
Efficiency, in his case, doesn’t enter the equation. What he can measure, however, is :
- Training efficiency
- Its success depends on its ranking objective.
Example 2
You’re injecting a large amount of money into your business. Your objective is, of course, to reap a good return in return. The last thing you want is to have wasted your efforts or your capital. In this case, what you need to consider is :
- Efficiency. Because you want to get the best results for the time or money you’ve invested.
Results indicators, process indicators
Within your list of indicators, there are 2 main “sub-categories”: result indicators and process indicators.
Performance indicator
It’s the one that’s visible and obvious. Your customer’s “in your face”.
It’s a dependent variable (you can calculate or estimate it from your other indicators) that’s directly linked to your problem or main objective.
It lets you know quickly whether you’ve hit your target or not.
Process indicator
The process indicator lies behind the result. It is the intermediate indicator that supports it and contributes to its achievement.
It lets you know if the process is working as expected, and what you can do if it’s not.
Examples:
As you can see, while profitability is often at the top of the list, there are plenty of other ways to measure your company’s performance. Even when your results aren’t quantifiable.
So, rather than getting anxious or going in blind, think of it as an opportunity to reinvent the rules of the game. After all, you’re the one who decides whether your goals are RELEVANT or not…
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By Julie Savage-Fournier
Industrial engineer
Lean Six Sigma Master Black Belt
Catégorie Performance