Introduction A performance metric is a measure of an organization’s activities and performance. Performance metrics should support a range of stakeholder needs from customers,shareholders to employees. While traditionally many metrics are financed based, inwardly focusing on the performance of the organization, metrics may also focus on the performance against customer requirements and value. In project management, performance metrics are used to assess the health of the project and consist of the measuring of six criteria: time, cost, resources, scope, quality, and actions.
Total Quality Management guidelines that indicate that performance metrics should lead to a quantitative assessment of gains in: Customer SatisfactionOrganizational PerformanceWorkforce Excellence The key elements of the performance metrics to these guidelines should address: Alignment with Organizational MissionCost Reduction and/or AvoidanceMeeting DOE Requirements Quality of ProductCycle Time ReductionMeeting Commitments Timely DeliveryCustomer Satisfaction The Process
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The first step in developing performance metrics is to involve the people who are responsible for the work to be measured because they are the most knowledgeable about the work. Once these people are identified and involved, it is necessary to: Identify critical work processes and customer requirements. Identify critical results desired and align them to customer requirements. Develop measurements for the critical work processes or critical results. Establish performance goals, standards, or benchmarks.
The establishment of performance goals can best be specified when they are defined within three primary levels: Objectives: Broad, general areas of review. These generally reflect the end goals based on the mission of a function. Criteria: Specific areas of accomplishment that satisfy major divisions of responsibility within a function. Measures: Metrics designed to drive improvement and characterize progress made under each criteria. These are specific quantifiable goals based on individual expected work outputs.
The SMART test is frequently used to provide a quick reference to determine the quality of a particular performance metric: S = Specific: clear and focused to avoid misinterpretation. Should include measure assumptions and definitions and be easily interpreted. M = Measurable: can be quantified and compared to other data. It should allow for meaningful statistical analysis. Avoid “yes/no” measures except in limited cases, such as start-up or systems-in-place situations. A = Attainable: achievable, reasonable, and credible under conditions expected.
R = Realistic: fits into the organization’s constraints and is cost-effective. T = Timely: doable within the time frame given. Types of Metrics Quality performance metrics allow for the collection of meaningful data for trending and analysis of rate-of-change over time. Examples are: •Trending against known standards: the standards may come from either internal or external sources and may include benchmarks. •Trending with standards to be established: usually this type of metric is used in conjunction with establishing a baseline. •Milestones achieved.
Determining the Quality of Metrics The following questions serve as a checklist to determine the quality of the performance metrics that have been defined. Is the metric objectively measurable? Does the metric include a clear statement of the end results expected? Does the metric support customer requirements, including compliance issues where appropriate? Does the metric focus on effectiveness and/or efficiency of the system being measured? Does the metric allow for meaningful trend or statistical analysis? Have appropriate industry or other external stands been applied?
Does the metric include milestones and/or indicators to express qualitative criteria? Are the metrics challenging but at the same time attainable? Are assumptions and definitions specified for what constitutes satisfactory performance? Have those who are responsible for the performance being measured been fully involved in the development of this metric? Has the metric been mutually agreed upon by you and your customers? A criticism of performance metrics is that when the value of information is computed using mathematical methods, it shows that even performance metrics professionals choose measures that have little value.
This is referred to as the “measurement inversion”. For example, metrics seem to emphasize what organizations find immediately measurable — even if those are low value — and tend to ignore high value measurements simply because they seem harder to measure (whether they are or not). Every small business owner needs to look at the business reports daily, weekly and monthly on a regular basis to stay up-to-date with how their business is performing. You need to understand what key performance metrics to look at in those reports.
You don’t have to start from zero when looking for key performance metrics for your business. Many types of small businesses have “standard” set of metrics. As a small business and franchise owner you should be aware of these metrics. The key metrics for services business are as follows: Customer Satisfaction – As we mentioned above customer satisfaction is more important for services business than for other types of businesses. You should rely on surveys and other techniques to find out how satisfied your customers are.
Weekly sales – As with every other small business types you should track weekly sales and compare to previous reporting periods to uncover any sign of trouble before they become serious. Repeat Customers – High repeat customer count shows that your customers like your services. You can show this metric either as % of total sales from repeat customers or % of total customers that are repeat. Employee Turnover – The employee turnover has big impact on the customer satisfaction for service business. It is not unusual to find customers who go to a particular business only because of certain employees.
You should ensure that your employees are motivated andemployee turnover is managed properly. INFORMATION TECHONOLOGY INDUSTRY IT Key Metrics Data provides a macro level look at. IT Key Metrics Data provides you with immediate access to authoritative data on IT staffing levels, IT investment levels & key technology cost & performance metrics and trends for all areas of IT to support your business and IT clients’ changing environments. The IT Key Metrics Data reports are based on the industry’s most comprehensive IT performance measurement database.
They allow you to rapidly identify trends in IT spending, staffing across over 20 different industries; unit cost and performance measures and trends across critical IT domains; as well as Information Security investment levels & Outsource market price benchmarks for the technology domains. IT Key Metrics Data publications are broadly defined by 5 key areas of the IT portfolio: Key Industry Measures Enterprise-level total IT spending and staffing measures by industry current-year results and multi year trends Key Infrastructure Measures
Unit cost, productivity and performance measures for the Infrastructure environments (current year and multi year), including the Mainframe, Wintel server, Unix server, Help Desk, Client and Peripherals, Data and Voice network environments. Key Applications Measures Cost, staffing, project measures, life cycle phase, productivity and quality measures (current year and multi year) as well as ERP/SAP measures. Key Information Security Measures Enterprise-level total spending and staffing measures by industry and region. Key Outsourcing Measures
Enterprise-level total spending and staffing measures by industry and region. The IT Key Metrics Data for Applications contains a comprehensive set of IT Spend & Support measures for the enterprise by industry in addition to Application Development & Support investment and productivity ratios. These key metrics provide a high level view of total applications as well as ERP/SAP spending, staffing and productivity metrics and distributions. This report also contains year-over-year analyses of key spending and staffing ratios by industry.
HOSPITALITY INDUSTRY Hotel and motel businesses are different from many other small businesses in that they are highly leveraged. They usually carry high debt and rely on cash flow to pay the interest and debt on a monthly basis. Because of that it is in their best interest to focus on cash flow and ensure that it is sufficient to cover the debt payment. The key metrics for hotels / motels are as follows: Occupancy Rate – Calculates how many rooms are filled with customers on a daily, weekly and monthly basis.
It doesn’t cost too much for hotel to service the room when it is filled; while a vacant room is not generating any money for the business that can be used to pay down the debt. Average Daily Rate – Calculates how much each room is being rented out for on an average. This metric shows if you are relying on discounting to fill the rooms. It is better to fill the rooms at regular rates without any discounts. Weekly Sales – This metric is tied to the previous two metrics. Higher occupancy and average daily rate lead to higher weekly sales.
It is good to monitor this metric on a regular basis and compare to previous reporting periods to detect any sign of potential trouble. Mortgage Coverage – Calculated as monthly cash flow divided by mortgage payment. The higher number is considered good for the business. As we mentioned earlier, the hotel / motel business carry higher debt compared to other businesses because of which they need to ensure that they have sufficient cash flow to cover the debt payment. Services Business Service businesses cover wide spectrum including automotive repair shop, hair salon, beauty parlors and so on.
In general, the services businesses are characterized by the fact that they are not selling products as is the case for retail business. Rather they are dependent people providing services such as auto repair, haircut and so on to their customers. In addition, their business is highly susceptible to customer satisfaction. AVIATION INDUSTRY The APM(Aviation performance metrices) interface consists of the following modules: ? Airport Analysis: Provides information on aircraft departure and arrival times and flight delays at selected airports compared to the schedule and flight plan times. City Pair Analysis: Provides information on aircraft departure and arrival times and flight delays between city pairs compared to the schedule and flight plan times. ?Taxi Times: Contains data on actual and unimpeded taxi times by airport. ?Individual Flights: Provides information on aircraft departure and arrival times and flight delays for individual flights compared to the schedule and flight plan times. ?Airport Efficiency: Contains data on Terminal and System airport efficiency rates. Arrival and departure counts include certain GA, military, and other flights not included in ASPM Analysis. Throughput Analysis: Contains data on actual airport throughput (number of arrivals and departures) in a defined period of time. ?Weather Factors: Categorizes and reports on the severity of individual weather factors in terms of their impact on flight delays at selected airports. Similar weather can have different delay impacts across airports. ?Actual Weather: Categorizes and reports on individual weather factors based on the severity of the weather phenomenon, and reports actual observed values for each weather factor at selected airports by hour. Data Download: Provides detailed APM data for Airport (by hour and by quarter), Individual Flights, and Cancellations. Data is provided via e-mail in Excel format. RESTAURANT INDUSTRY •Food Safety •Menu labeling of nutrition information •Employee turnover costs •Labor and commodity costs, basically Prime cost •Customer satisfaction AIRPORT PERFORMANCE METRICES Revenue & Passenger Shares By Region. These maps show at a glance where an airport’s O as well as revenue is being generated. Why It’s Better: This section gives a fast review of the geographic mix of the current air service at an airport.
It also can give indications regarding the mix of leakage that might be taking place to other airports with more extensive service to a given region of the nation. That data can identify additional market opportunities for both incumbent and potential new entrants Seats Offered v Seats Filled. There is a lot of information in this section of the Report. It does take an understanding of the airline industry, however. These are data representing the seats filled on flights arriving and departing the airport, and can immediately isolate service routings that may be weak, or may be candidates for service or capacity upgrades.
How’s Your Airport Doing v Others In The Region? The client airport and three others in the region (the selection can be made on our recommendation or at the client’s request) are ranked by the top 25 regional O&D destinations. This gives an immediate review of fares and traffic capture at each airport. Why It’s Better: You have immediate knowledge of actual average fares paid to key destinations from not only your airport, but others, too.
This gives invaluable insight and information in understanding leakage and identifying areas where fare discussions may be in order with a target airline. Market Share By Airline System. Each carrier system’s full data is given on one easy report. The Full List – The airport’s top 100 O markets for the full year, listed in alphabetic order, is provided. Markets beyond this ranking come from sample data so small that the data is not meaningful. Why It’s Better: The O&D data is fully reconciled against other sources to filter out the natural errors that result from the sampling process.