value insights

Performance Metrics Categories- Valutrics

Performance measures quantitatively tell us something important about our products, services, and the processes that produce them. They are a tool to help us understand, manage, and improve what our organizations do.

Performance measures let us know:
• how well we are doing
• if we are meeting our goals
• if our customers are satisfied
• if our processes are in statistical control
• if and where improvements are necessary.
They provide us with the information necessary to make intelligent decisions about what we do.

A performance measure is composed of a number and a unit of measure. The number gives us a magnitude (how much) and the unit gives the number a meaning (what). Performance measures are always tied to a goal or an objective (the target). Performance measures can be represented by single dimensional units like hours, meters, nanoseconds, dollars, number of reports, number of errors, length of time to design hardware, etc. They can show the
variation in a process or deviation from design specifications. Single-dimensional units of measure usually represent very basic and fundamental measures of some process or product.

More often, multidimensional units of measure are used. These are performance measures expressed as ratios of two or more fundamental units. These may be units like miles per gallon (a performance measure of fuel economy), number of accidents per million hours worked (a performance measure of the companies safety program), or number of on-time vendor deliveries per total number of vendor deliveries. Performance measures expressed this way almost always convey more information than the single dimensional or single-unit performance measures. Ideally, performance measures should be expressed in units of measure that are the most meaningful to those who must use or make decisions based on those measures.

Most performance measures can be grouped into one of the following six general categories.
However, certain organizations may develop their own categories as appropriate depending on the organization’s mission:
1. Effectiveness: A process characteristic indicating the degree to which the process output (work product) conforms to requirements.(Are we doing the right things?)
2. Efficiency: A process characteristic indicating the degree to which the process produces the required output at minimum resource cost. (Are we doing things right?)
3. Quality: The degree to which a product or service meets customer requirements and expectations.
4. Timeliness: Measures whether a unit of work was done correctly and on time. Criteria must be established to define what constitutes timeliness for a given unit of work. The criterion is usually based on customer requirements.
5. Productivity: The value added by the process divided by the value of the labor and capital consumed.
6. Safety: Measures the overall health of the organization and the working environment of its employees.

The following reflect the attributes of an ideal unit of measure:
• Reflects the customer’s needs as well as our own
• Provides an agreed upon basis for decision making
• Is understandable
• Applies broadly
• May be interpreted uniformly
• Is compatible with existing sensors (a way to measure it exists)
• Is precise in interpreting the results
• Is economical to apply
Performance data must support the mission assignment(s) from the highest organizational level downward to the performance level. Therefore, the measurements that are used must reflect the assigned work at that level.


Within a system, units of measure should interconnect to form a pyramid. Technological units start at the base. These are measures of individual units of products and of individual elements of service.
The next level of units serve to summarize the basic data (e.g., percent defective for specific processes, documents, product components, service cycles, and persons.)
Next are units of measure that serve to express quality for entire departments, product lines, and classes of service. In large organizations, there may be multiple layers of this category.
At the top are the financial and upper management units (measures, indexes, ratios, etc.), which serve the needs of the highest levels in the organization: corporate, divisional, and functional.

Listed below are seven important benefits of measurements:
1. To identify whether we are meeting customer requirements. How do we know that we are providing the services/products that our customers require?
2.To help us understand our processes. To confirm what we know or reveal what we don’t know. Do we know where the problems are?
3.To ensure decisions are based on fact, not on emotion. Are our decisions based upon well-documented facts and figures or on intuition and gut feelings?
4.To show where improvements need to be made. Where can we do better? How can we improve?
5.To show if improvements actually happened. Do we have a clear picture?
6.To reveal problems that bias, emotion, and longevity cover up. If we have been doing our job for a long time without measurements, we might assume incorrectly that things are going well. (They may or may not be, but without measurements there is no way to tell.)
7.To identify whether suppliers are meeting our requirements. Do our suppliers know if our requirements are being met?

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