Performance Dashboards: Measuring, Monitoring, and Managing Your Business, 2nd Edition

CHAPTER 11

How to Create Effective Performance Metrics

One of the most common questions people ask about performance dashboards is “How do we create effective metrics?”

Change Agents. Metrics are important because they govern how employees do their jobs. The adage “What gets measured gets done” is true. Metrics focus employees’ attention on the tasks and processes that executives deem most critical to the success of the business. Metrics are like levers that executives can pull to move the organization in new and different directions. In fact, among all the tools available to executives to change the organization and move it in a new direction, performance measures are perhaps the most powerful.

For that reason, executives need to treat metrics with respect. As powerful agents of change, metrics can drive unparalleled improvements or plunge the organization into chaos and confusion. If the metrics do not accurately translate the company’s strategy and goals into concrete actions on a daily basis, the organization will flounder. Employees will work at cross-purposes, impeding each other’s progress and leaving everyone tired and frustrated with little to show for their efforts. In short, the company will be efficient but ineffective.

A trucking company, for example, that measures performance by the percentage of on-time shipments may drive hauling costs skyward because the metric does nothing to discourage dispatchers from sending out half-empty trucks to meet their schedules. To ...