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Choosing performance measures

Issues covered during this stage

Types of performance measure
Choosing measures

This section deals with selecting the right measures with which to assess the organisation’s performance.

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People involved
Types of performance measure

There are three main types of measure:

  • economy measures express the relationship between resources and inputs (the costs of inputs)

  • efficiency measures express the relationship between inputs and outputs (how well the process performs with the given inputs)

  • effectiveness measures express the relationship between outputs and outcomes (how the process contributes to business, strategic, organisational or policy goals).

  • A balanced performance framework may have to include measures of all three types.

  • Focusing on one type of measure may lead to bias or gaps in coverage, for example focusing purely on economy neglects the wider concept of value for money.

  • Effectiveness measures are often necessarily subjective. This is not a reason to exclude them; avoid a focus on outputs simply because they are easier to quantify.

Choosing measures

The performance measures you choose, at whatever level, should be:

  • focused

  • reliable

  • worthwhile

  • balanced

  • avoiding perverse incentives

  • ready for change.

  • Focused: exclude measures that are interesting but not directly relevant. Make sure everyone involved agrees that the measurements are going to be useful

  • Reliable: the information you gather must be accurate, as you will base your management decisions upon it.

  • Worthwhile: remember that measurements and analysis have resource implications - the benefit of each measure must be in proportion to the effort required to take it. Existing information sources should be considered before new ones are created.

  • Balanced: choose measures for all important areas, and at all levels - costs, output volumes, efficiency, quality, progress towards strategic aims - even if the measures have to be subjective.

  • Avoiding perverse incentives: that is, those that encourage behaviour that exists to meet a target rather than to improve. For example, measuring the quantity of letters answered but not the usefulness of the responses may not produce a better service.

  • ready for change: measures that are relevant both before and after a radical change are useful in judging its success; those that focus on temporary aspects, or those that may change, are less useful.

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