Metrics

Background

Performance metrics is a concept for measuring a company's activities in terms of its vision and strategies, to give managers a comprehensive view of the performance of its business. Measuring business performance has been around for quite some time but the concept, also referred to as the balanced scorecard, was refined in the early 1990's by Robert Kaplan and David Norton (Balanced Scorecard, n.d.). The key element of the balanced scorecard was to not only focus on the financial outcomes but also on the human issues that drive those outcomes, so that organizations focus on the future and act in their long-term best interest.

Analysis

Performance metrics management has evolved to a point now where many companies utilize the methodology in managing their business. Successful companies like; Toyota, General Electric, Microsoft and The Vanguard Group have implemented performance metrics into their business model, to name just a few. There are two main types of marketing performance metrics: process and end-result. Process market metrics are the leading indicators of financial performance while end-result metrics occur simultaneously with a company's financial performance (Best, 2005). At The Vanguard Group, process metrics are referred to as drivers, while end-result metrics are called outcomes. Examples of driver metrics are: investment management process effectiveness, product service and market development, employee satisfaction and effectiveness, and service excellence. The driver measures are designed to represent activities that influence process performance. Outcomes on the other hand represent the results of how well the company has performed as viewed by its clients and the industry (Best, 2005). Examples of outcome metrics at Vanguard include; net cash flows, client loyalty and operation profitability.

Keeping track of all this data can be a difficult task to say the least, but one preferred method used to monitor performance metrics is through the use of dashboards. Every department at The Vanguard Group uses dashboards to keep track of their key performance indicators. The department level dashboard information is then rolled up to the dashboard at the corporate level so that senior management can track business performance across the company and take note of positive or negative trends and determine what action steps, if any, are necessary. For Vanguard, dashboards enable the company to identify and resolve problems much more quickly and efficiently than might otherwise be possible. Benefits of using dashboards are as follows (Vanguard Corporate Dashboard, n.d.):

* Facilitates trending and other analysis. Dashboard data is typically displayed in charts designed to make comparisons and trend analyses easier.

* Creates discussion. A dashboard provides objective data and a common reference point. In addition, as members of the department meet to discuss and analyze data, decide on action items for improvement, and launch projects, they naturally build consensus on business priorities and performance.

* Speeds improvement. Departments can quickly identify performance gaps and launch improvement initiatives.

* Provides consistency. Data is collected and measures are displayed using consistent methods. These methods produce a growing body of data to form the basis for valid comparisons and other analysis.

As I mentioned earlier, companies use key performance indicators (KPIs) as a way to quantify