What are performance metrics?
Discussions about Aligning Strategy, Metrics, and Rewards
A business has a purpose to market and sell a viable solution. And sales do not exist in a vacuum, they result from marketing and sales expenditures, R&D expenditures, and money committed to assets. Therefore, sales should be studied and analyzed in conjunction with other statistics that relate to their creation and impact on the bottom line.
Jack Stack says that, “Numbers tell you where the problems are, and how worried you should be.” Bill Hewlett, co-founder of Hewlett-Packard, once stated, “You cannot manage what you cannot measure. And what gets measured gets done.”
– Do you know what “critical numbers” really drive your business?
– Do you know what metrics are used in your industry?
– Do you know how you compare right now?
– How will you compare in the future?
You need to know what critical numbers, or value metrics, are driving value for your venture. Value metrics help you monitor growth, costs, profitability, and return on investments; they help you define business plans and compare plans to actions.
As the value manager, you need to create an “executive dashboard” to your business that monitors all value metrics. These metrics are used to shape stakeholders’ behavior in a way that ultimately allows the venture to achieve its goals.
Expected performance criteria and performance measures of stakeholders must be aligned with the strategy and clearly defined because “people just don’t get interested in a game if there’s no scoreboard.”