Most companies today may claim

that they are using a:

Performance
Measurement
System

Management
-It is encompassed by a Performance
System which is a mechanism for tracking the
performance of employees consistently and
measurably.


BALANCED SCORECARDS
-
most widely used performance
Probably the best-known and
management system is the balanced scorecard (BSC).

- The balanced scorecard suggests that we view the organization from

four perspectives: customer, financial, internal business processes, learning
and growth.

THE CUSTOMER PERSPECTIVE. Recent management

philosophies have shown an increasing realization of the
importance of customer focus and customer satisfaction in any
business.

THE FINANCIAL PERSPECTIVE. Kaplan and Norton do not

disregard the traditional need for financial data. Timely and
accurate funding data will always be a priority, and managers
will do whatever is necessary to provide it.
THE LEARNING AND GROWTH PERSPECTIVE. This
perspective aims to answer the question, "To achieve our vision,
how will we sustain our ability to change and improve?" It includes
employee training, knowledge management, and corporate cultural
characteristics related to both individual and corporate-level
improvement.

THE INTERNAL BUSINESS PROCESS PERSPECTIVE. Metrics

based on this perspective allow the managers to know how well
their internal business processes and functions are running, and
whether the outcomes of these processes (i.e., products and
services) meet and exceed the customer requirements (the
mission).
 It is designed to overcome the limitations of systems that are
financially focused.
It does this by translating an organization's vision and strategy
into a set of interrelated financial and nonfinancial objectives,
measures, targets, and initiatives. The nonfinancial objectives
fall into one of three perspective
Customer. This objective defines how the organization
should appear to its customers if it is to accomplish its
vision. Learning and growth. This objective indicates
Internal business process. This how an organization can improve its ability to
objective specifies the processes the change and improve in order to achieve its
organization must excel in order to vision.
satisfy its shareholders and
customers.
In BSC, the term balance arises because the
combined set of measures is supposed
to encompass indicators that are:
• Financial and nonfinancial
• Leading and lagging
• Internal and external
• Quantitative and qualitative
• Short term and long term
 Dashboards Versus Scorecards

On the one hand, executives, managers, and staff use scorecards to

monitor strategic alignment and success with strategic objectives and
targets. As noted, the best known example is the BSC. On the other
hand, dashboards are used at the operational and tactical levels.
SIX SIGMA AS A PERFORMANCE MEASUREMENT SYSTEM

Six Sigma is a performance management methodology aimed at reducing

the number of defects in a business process to as close to zero
DPMO as possible.

Six Sigma rests on a simple performance improvement model known as

DMAIC. Like BPM, DMAIC is a closed-loop business improvement
model, and it encompasses the steps of defining, measuring, analyzing,
improving, and controlling a process. The steps can be described as
follows:
1. Define. Define the goals, objectives, and boundaries of the improvement
activity. At the top level, the goals are the strategic objectives of the
company. At lower levels- department or project levels- the goals are
focused on specific operational processes.

2 . Measure. Measure the existing system. Establish quantitative measures

that will yield statistically valid data. The data can be used to monitor
progress toward the goals defined in the previous step.

3. Analyze. Analyze the system to identify ways to eliminate the gap

between the current performance of the system or process and the desired
goal.
4. Improve. Initiate actions to eliminate the gap by finding ways to do
things better, cheaper, or faster. Use project management and other
planning tools to implement the new approach.
5. Control. Institutionalize the improved system by modifying
compensation and incentive systems, policies, procedures,
manufacturing resource planning, budgets, operation instructions, or
other management systems.
Balanced Scorecard Versus Six Sigma
The main difference is that BSC is focused
on improving overall strategy, whereas Six
Sigma is focused on improving processes.
Effective Performance Measurement
A number of books provide recipes for determining whether a
collection of performance measures are good or bad. Among the
basic ingredients of a good collection are the following:
• Measures should focus on key factors.
• Measures should be a mix of past, present, and future.
• Measures should balance the needs of shareholders, employees,
partners, suppliers, and other stakeholders.
• Measures should start at the top and flow down to the
bottom.
• Measures need to have targets that are based on research
and reality rather than arbitrary.