Metrics that matter: seven guidelines for better performance measurement

Abstract

Purpose

Most strategies stumble in the implementation phase. This article outlines a market‐validated process, and practical guidelines, for deploying well‐calibrated metrics to optimize implementation. The primary audience is mid‐level and senior executives charged with the responsibility for implementing strategy.

Design/methodology/approach

This approach focuses on how to design and deploy a balanced set of performance metrics to guide the implementation of strategy. It reviews conventional approaches and pitfalls, citing examples from a diverse array of businesses, then presents “best practices” for measuring what’s important. A key thesis is that good metrics reinforce implementation, while poor metrics actually interfere with implementation.

Findings

Misaligned metrics often impede implementation, eliciting counterproductive behavior from key managers. A better approach involves creating and deploying a smaller set of multidimensional metrics, closely aligned with the firm’s strategies. Successful firms move beyond simple budgetary indicators: they formulate a small set of metrics that directs management focus outside the firm (into the marketplace); translate qualitative aspirations into quantitative targets, using a common language; align the firm’s metrics with other managerial systems (like rewards) to motivate and galvanize the management team.

Research limitations/implications

The approach and logic described are universal, but the actual metrics may need to be adapted to fit the strategies, stakeholders, and competitive position of each firm, and refined over time to dovetail with the firm’s budgetary process.

Practical implications

Strategy programs need to be expanded to focus on the implementation process – where performance measurement is instrumental. More attention should be given to simplifying and distilling performance indicators, and broadening and its stakeholders will help facilitate implementation, and ultimately, enhance stakeholder value. managerial perspective so that implementation challenges can be flushed out and resolved.

Originality/value

The rational, practical approach described offers managers specific guidelines for bringing strategies to life – for bridging the gap between aspirations and real performance. It illustrates common pitfalls, and outlines how to measure and optimize performance, improve implementation, and galvanize the management team.

Citation

Allio, M. (2006), "Metrics that matter: seven guidelines for better performance measurement", Handbook of Business Strategy, Vol. 7 No. 1, pp. 255-263. https://doi.org/10.1108/10775730610618918