The Performance Measurement Index
Key Fact #1: If you can’t measure it, you can’t improve it.
Pursuing excellence is a noble undertaking, but it can be a wasted effort when there are no metrics to track its progress. To align an agency’s mission with its operations, an organization must ensure there is a scorecard system in place – and one that is respected and used by the teams. As Peter Drucker famously wrote, “If you can’t measure it, you can’t improve it.”
Such an undertaking is not just for individual companies. Countries and governments, too, can commit to sustained progress and improvement, as is the case with the Kingdom of Saudi Arabia’s Vision 2030 initiative. Overall, Saudi Vision 2030 strives to reduce Saudi Arabia’s dependence on oil by opening up its economy to other opportunities and expanding public service sectors such as health, education, infrastructure, recreation, and tourism.
To establish the required performance culture, a dedicated agency called Adaa — the National Center for Performance Measurement – will provide the tools, frameworks and educational support to enable measurement and development. A central pillar of this initiative is transparency of reporting and data.
As the director general of Adaa, Husameddin AlMadani states, this initiative uses “outcome-based key performance indicators: Measuring the progress toward Vision 2030’s approved targets and objectives; execution level data; collecting data on milestone achievements of Vision 2030 realization projects and initiatives; service-level data; and measuring and collecting data on beneficiaries’ satisfaction with government services.”
A Formalized Approach to Performance Measurement
Although the business community is routinely awash in management techniques and buzzwords, performance measurement has its roots firmly entrenched in the world of project management, which makes sense, given its need for effective measurement and quantification of tasks. It is beneficial not only in a proactive mode such as establishing standards, but also “reactively,” by helping organizations improve upon a traditional bad habit: failing to use existing performance information to manage their internal operations.
The concept of performance measurement was given a substantial boost during the Obama administration in the US, which placed a high priority on transparency and accountability in government. With ever-advancing improvements in the use of data to track every aspect of business activity, a formalized approach is becoming essential to every company or government seeking to do business in the global economy.
A performance measurement index works like a scorecard that helps management compare actual performance against predetermined targets. This helps identify areas where improvement is needed. Because it uses weighted values, it also encourages regular review to ensure each program continues to align with an agency’s priorities, funding levels, and mandates.
Performance Measurement Development and Implementation Process
The image below, retrieved from an article posted at the Project Management Institute (PMI.org), illustrates the sequence of steps required for each activity to ensure it aligns correctly with an agency mission. An agency calculates scores at each step.
As described on the PMI.org page, “each component of the index is weighted to reflect the impact of the underlying programs or project areas on the agency’s overall mission score. Performance targets are set at the performance measure level, based on budgeting and resource allocations. Index scores are generated by calculating achievements against targets and applying the component’s weight. Achieving a high overall index score requires strong performance in the measured program areas. As a result, agency leaders will likely work together more often as a group to support mission priorities and meet or exceed targets.”
To make this work, a company needs guidance on how to both frame the right questions and execute the right actions, all within the context of how they define and measure success.
Cassidy, J. & Kendis, S. (2011). Performance measurement: an index approach for federal agencies. Paper presented at PMI® Global Congress 2011—North America, Dallas, TX. Newtown Square, PA: Project Management Institute., retrieved from
Benefits of Using an Index to Measure Performance
Key Fact #3: A tiered approach keeps people talking.
In addition to encouraging discussion about, and measurement of activities and operations, a performance measurement index helps to do the following:
- Establish a common platform for communication and understanding. People who work in teams are often left in the dark when it comes to strategies, plans, or subjective definitions like excellence. This can lead to morale and quality issues. Having an index that is clearly visible and understandable helps people see beyond their immediate tasks and gives them part-ownership of an organization’s future success.
- Connect performance targets and resources: An agency can set performance targets within a budget, and the performance measurement index scores will reflect the impact that resource and funding have had on those targets.
- Improve project tracking:The multi-layered structure of the performance measurement index helps stakeholders to track progress according to their roles, needs, and priorities. This includes adding enough granularity for project managers and teams while giving clarity to higher-level strategic reporting, as well as any detail in between for other types of stakeholders.
- Eliminate subjectivity: Individualized interpretation of data or priorities can be dangerous to the successful deployment of any project, especially one focused on large-scale improvement. Data, placed within a matrix, gives people a clear, indisputable vision of itemized tasks and assessment of the success of its completion in line with its objective. Thresholds of performance success or failure can also be identified.
One example of successful performance measurement comes from a not-for-profit organization that had a problem with performance appraisals, in that no one was doing them. HR spent much of its time urging managers to complete forms, while the managers found the process frustrating and time-consuming. Employees observed that the appraisals were meaningless since everyone got the same raise regardless. The system was universally hated.
Their solution came from getting the process under control through automation. They deployed an affordable performance management solution, and managers immediately found the process less time-consuming. Automatic reminders paired with electronic records in place of paper shifted responses substantially towards a majority of on-time submissions, which resulted in the following benefits:
- With the administrative logjam cleared, the performance management system was better able to tie compensation to performance.
- Goal setting was taken seriously, and the fact that people could see one another’s goals led to better alignment.
- Managers were better able to make salary decisions based on improved access to data.
By pairing automation with a set of data goals, the organization was able to deploy the concepts behind performance measurement thoroughly. Automation led to participation and buy-in, which led to outcome-specific activity.
How Does a Company or Country Commit to Performance Measurement?
Performance measurement is a business process similar to that of Six Sigma or Total Quality Management, in that it is an institutionalized approach to excellence, based largely on data and communication. Managers who are interested in learning about the success criteria for performance measurement would be well advised to first talk with a consulting firm familiar with the process, but also to review some of the case study material available in Six Sigma and TQM and not just performance measurement. An organizational change of this magnitude has a significant number of hurdles to overcome, specifically around people and processes. Correct planning and deployment of the performance measurement initiative itself is as important as the day-to-day activities that it entails.