Business Performance Software

9 Common Mistakes to Avoid When Measuring Business Performance

Investing in the right business performance software is a good start for preventing mistakes. Although it goes without saying that a business must measure its performance in order to optimise its usage of resources and ensure that business goals are reached, how to measure the performance effectively is where the confusion comes in.

So, which mistakes should be avoided? We take a look at some of the common mistakes made in business performance measurement, and how it is possible to eliminate such mistakes through following best practices in measurement, and of course, investing in relevant software to facilitate the performance measurement.

1. Using Performance Appraisals to Focus on the Negative

If the appraisal is used to highlight what the employee does wrong, rather than to measure the employee’s performance which is in line with the company or departmental objectives, then it becomes a negative tool. Employees will become dishonest in appraisals and dread the appraisals. The performance appraisal should be about feedback and incentives to improve performance, rather than a policing tool.

2. Pride

Measurement is only done on the objectives that employees are most likely to achieve. Everyone feels good when objectives are reached, and better yet when their bonuses are connected to the results of their measurements. If they are likely to score in the 90% range, they won’t mind measurement. However, the measurements should evaluate how the employee’s performance affects the reaching of a specific business goal. So, even if the employee performs perfectly in a specific measurement point, but it is not relevant to the business objectives, then it shouldn’t be the focus of measurement.

3. Focussing on Lagging KPIs

Although it is important to measure, for example, luggage lost in a particular period, it cannot on its own be used to predict loss of luggage two years later. Measurement should also be done regarding the workload that the personnel at the particular institution have, if the likelihood of lost luggage in the particular period is to be established with more accuracy.

4. Changing Strategies to Sidestep Performance Results

If the department or company’s budget, for instance, determines the metrics, it can have devastating effects. The restaurant owner, for instance, measures wastage per day, but the restaurant falls short, so the owner applies the strategy of closing earlier, in order to get a score of 100% non-wastage, instead of closing normal time. Although the restaurant scores perfectly following the new strategy, it loses valuable customers and thus income, because of a three-hour shorter service time. In this scenario, the problem of wastage has not been addressed, so the restaurant continues to lose money because of the high level of wastage.

5. Assumption rather than Fact

This is when the manager thinks he knows what should be measured, rather than having a proven metric in place. The manager simply assumes he knows what is an important KPI and measures that, instead of analysing what really should be measured. Here the right business performance software and training can help to overcome the problem with pre-selection of KPIs according to the company’s strategic goals, its industry and other important factors.

6. Only Using Annual Performance Measurements

A lot can change in one year, and waiting 12 months before doing another appraisal can be damaging. In addition, managers often only focus on the last few days or weeks, instead of the employee or department’s performance over the entire period. This gives an inaccurate picture of performance.

7. Focussing Only on a Single Aspect

Companies often just measure a single aspect, instead of taking a holistic view. A company can focus on the measurement of new first-time customers, but fail to measure their retention. As such, the company doesn’t have information on whether or not their customers are satisfied, or whether they are losing existing customers.

8. Only Measuring Financial Aspects

A company is not just about numbers. Various components make up the picture. Rather useful data is ignored, if only financial indicators are measured.

9. Relying Only on Customer Surveys

The company cannot only rely on customer surveys. Employees, suppliers and business partners should also provide feedback, and the data should be used in the business’s performance measurement.

What is the Solution?

Select KPI Management Solutions to help your company focus on the right KPIs, and make use of our business performance software to streamline the performance management function.