The extended entry includes the first page of an article I’m writing on performance measures for business, and how existing indicators of profit margins, improvement and technology penetration (a horrible concept to begin with) are really not providing outcomes which can adequately assist in strategic planning. All comments, suggestions and input greatly appreciated as usual.
PERFORMANCE INDICATORS AND STRATEGY DEVELOPMENT FOR YOUR INDUSTRY SECTOR.
By now, all organisations are clear about the need to deliver to shareholders and stakeholders a clear communication of performance achievements over any period of time, and this forms the basis of reporting to governing authorities as part of corporate compliance activities. But understanding the criteria for performance both within an organisation and between an organisation and its peers is not widely understood. Indeed, for most enterprises, profit margins and market penetration are still the key performance indicators, partly because these are the highest priority for organisations generally, but also because they are the only aspects of organisational performance that are published and easy to calculate industry-wide. The Australian Banking and Financial services industry, for instance, only regards economic performance measures in terms of actual profits, share price, market share and improvement of these measures over time as indicators of quality and it is these aspects that contribute to rankings systems.
The trouble is that these end-products of performance management are significantly affected by organisational performance across a range of other indicators, including management of information systems, supply chain management, change management, innovation, differentiation in focus areas and education within the employee and customer markets. This is the so-called information society, and it is information and negotiation that actually provide the source materials upon which an organisation can grow. This in turn may or may not provide operational benefits and economic improvement, depending on how well the aspects of organisational performance are implemented, reviewed and adaptive to change. But it is these particular measures that can give a clearer, ‘macro’ sense of the performance of an organisation over time.
While some organisations may regard themselves as measuring these phenomena, it is often the case that organisations will measure their performance according to internal expectations and will not consider their position against their competitors, or the industry at large. Or, organisations will (for instance) compare penetration of technology hardware use across an industry sector rather than in terms of how efficiently that technology is being used.
In my consultancy work I’m often faced with organisations that have evolved to include technology considerations in the future development of the organisation, but due to concerns about the standard operating environment within a firm, or due to concerns about shirking in the workplace, or perhaps due to privacy concerns, they will be reticent to adopt measurement of technology efficiency. Partly because intranets and information management systems have evolved on an ad hoc basis, and partly due to misunderstanding the nature and structure of the electronic sphere, organisations feel their investment in information management solutions has far exceeded the promise of its supposed benefits.
But the problem has really been about poor consideration of performance management for these technology solutions, poor education about the information services to be derived from technology solutions, and poor comparisons of business improvement performance as a result of technology implementations.