Organizational Performance Measurement and Management

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(gentle music) Welcome to Organizational Performance Measurement and Management. Here, you'll learn the importance of evaluating organizational performance. How to choose performance metrics and implement organizational performance measurement systems. You'll also learn about the link between organizational performance and management and how management can benefit from the performance results. Evaluating organizational performance involves checking where the business is going against its strategic direction and understanding the businesses needs and employees needs. Let's say that you're part of the management team that evaluates organizational performance. The first step is to identify the organization's key stakeholders because they impact the organization in one way or another. Some businesses identify customers, employees, suppliers, communities, and shareholders as their stakeholders. After that, you can use these five questions devised by Dr. Graham Kenny, author and expert in business strategy and performance measurement to narrow down the list. Does the stakeholder have a fundamental impact on your organization's performance? Can you clearly identify what you want from the stakeholder? Is the relationship dynamic- that is do you want it to grow? Can you exist without or easily replace the stakeholder? And has the stakeholder already been identified through another relationship? Create a table and for each question, write your answer and check whether it's the same as the criteria. Once you've identified the relevant stakeholders, the evaluation process can focus on what's important for the organization and won't waste time and effort on measuring irrelevant performance metrics. This approach also compels managers to look at the big picture, incorporating all parties involved. Next, managers can evaluate the organizational performance by looking at the performance metrics for each stakeholder. When you set the performance metrics, think of what you give and what you expect to gain from them in return. For example, for customers as stakeholders, you can measure metrics related to the level of customer service and customer loyalty. For employees as stakeholders, you can measure metrics related to salary, benefits, and aspects of the desired company culture. Many organizations also use Kaplan and Norton's 'Balanced Scorecard Framework' to evaluate the performance. This framework helps managers look at their organization's performance from four different perspectives, financial, customers, internal business processes, and innovation and learning. It provides answers to four questions. How do customers see us? What must we Excel at? Can we continue to improve and create value? And are we achieving our financial goals? For each perspective, you can set goals and performance measures. The balanced scorecard approach is balanced because it helps managers measure financial results as well as monitor the non-financial results in areas such as building customer relationships, innovating products to retain the competitive advantage, employees' knowledge, skills, and abilities, and the internal business processes' efficiency and effectiveness.