It is often said that it is impossible to manage what cannot be measured.  And organisations often have very poor performance measurement systems.

A Performance Management Framework (PMF) is a mechanism for managing an organisation through the identification of a number of critical measures and monitoring the current and planned performance.

Based on a balanced scorecard approach, the measure are developed from the organisation's Mission and Critical Success Factors.  The approach is of benefit to all organisations and has been used successfully in both private and public organisations of varying sizes.

The main benefits are:

• The approach links strategy with action and gives a simple view of performance status.  The management summary may be understood at a glance.
• All stakeholder interests are represented and minimal effort is needed to collect performance data.
• The design of the PMF allows easy access to detail as needed as the performance is reviewed.
• Management decisions are made with more confidence and debates are fact-based as opposed to being fact-free.

Principles

Traditionally performance measures and indicators have been derived from financial information, which measures how successful or not the organisation has been in the past, but says nothing about current or future performance.

Kaplan and Norton first introduced the balanced scorecard concept in 1992.  It views an organisation from four vital perspectives:

• financial (past);
• process (current);
• customer (current);
• learning and growth (future)

There are also two fundamental performance measurement types:

• Outcome measures (sometimes known as 'lag indicators') which show the performance of an organisation against what it must achieve to meet its mission, where the organisation wants to be in the future.
• Driver measures (sometimes known as 'lead indicators') which show the performance of the organisation's processes, how the outcomes will be achieved, how the organisation is performing now.

Poor performance of the drivers will lead to the outcomes not being achieved, so the business will fail to meet its objectives or mission.

Approach

The approach follows a five-stage 'DRIVE' sequence:

Define the scope
As with any major project, the starting point is the project definition and the mobilisation of the project team.  This is also the time to engage stakeholders by getting the scope of the work defined and authorised by the senior management team.

Review the current situation
Identify the current Critical Success Factors (CSFs), Key Performance Indicators (KPIs) and other available measures.  Ownership of the measures must be considered at this stage to prevent issues later on in the work.

Identify the PMF structure
Identify potential measures.  These will be at both the strategic (CSF) and operational (KPI) levels.  Targets, the potential data collection system, measurement medium, measurement structure and responsibilities all have to be agreed.

Verify the measures
Check that the measures are balanced before they are verified with the key stakeholders and the organisation.  Part of this stage includes performing 'dry runs' to ensure that the resulting system will meet the organisation's needs.

Execute deployment
Develop an implementation plan, with targets for putting each measure in place to establish regular data collection and usage.  It is normal to produce a review schedule against which implementation is monitored.  This schedule evolved into an ongoing systematic review of the PMF - are the measures beneficial, relevant and being used to manage the business?

Other Considerations
The PMF approach is most effective once an organisation has come to terms with its direction and critical success factors.  For organisations that have not reached this point, it might be appropriate to start with Direction Setting and Visioning activity.  Alternatively a Performance Management System may already be in place.