Performance management is the focus of tremendous attention today. Whether it's called business, corporate, or enterprise performance management, metrics and their use in dashboards and other reporting formats form a key part of how organizations are to convey concise and timely information. Unfortunately, amid the buzz, very few words have been written focused on what metrics are, how they should be defined, and how you can determine their relevance and validity. You might find such discussions in academic writing, but not in the trade press.

In this article and the next installments, my goal is to focus on metrics themselves, beginning with a basic discussion of what they are. With accepted definitions, organizations can make true progress with performance management.

Metrics Defined

Metrics are measurements. For this discussion, they are measurements of process elements (inputs, activities, and outputs) in relation to an explicit benchmark — a specified level of performance. Therefore, metrics are process-based. These processes can be in research, manufacturing, finance, operations, marketing, services, or any other process-based activity. No doubt, the more discretely you've defined a process, the more accurate your results will be. Generally, however, you can define metrics for all but the most amorphous of processes.

Metrics by themselves merely state process parameters. In other words, when used to measure performance, users view them relative to a stated policy or benchmark — something I will discuss in more detail in the second part of this article. Ideally, organizations establish benchmarks using statistical methods. In a few cases (for example, the introduction of a totally new process) the management team, perhaps in concert with consultants and subject-matter experts, will arbitrarily establish the initial benchmark. Once established in this manner, however, actual measurements and statistics will refine the benchmark over time.

Metrics must be selected to give the greatest amount of information while using the least amount of resources required to report them in the most effective manner.

Processes Defined

What is a process, exactly? Merriam-Webster defines a process as: "a series of actions or operations conducing to an end." (See Merriam-Webster Dictionary Online at www.m-w.com.) For our purposes, we will also include defined input and output attributes for the process in the definition.

Processes have interface points and workflow. Where processes exchange inputs/outputs — that is, where touchpoints exist — there will be an interface. Some methodologies refer to this interface as material flow, though the connotation that the interface involves something concrete does not always apply. In relationships from customer to company, regulatory agency to company, company to markets, and company to vendors you will see examples of external process interfaces. Other examples of relationships involving internal process interfaces include accounting to finance, operations to accounting, shop floor control to master production scheduling, and manufacturing to distribution. With a little thought, it becomes obvious that myriad processes and interfaces are relevant to any enterprise.

Within and between processes, there is workflow. Workflow is a series of discrete tasks connected by dependencies; workflow consumes resources. Each task consists of operations performed by resources upon components to create a discrete product.

It is possible to measure each operation, task input, task output, dependency chain, interface point, and resource. These measures are the base components for metrics that will provide business intelligence regarding enterprise performance. However, this is not to say that every identifiable operation, task input, task output, dependency chain, interface point, or resource should be measured and monitored. The effort required to collect, compile, and report on metrics must be cost effective. Realistically, you can't report on every measure.