Overview of how to transform performance measurement, based on Dr. Dean Spitzer\'s book "Transforming Performance Measurement: Rethinking the Way We Measure and Drive Organizational Success"

1. Transforming Performance Measurement:
Rethinking How You and Your
Organization Use Measurement
Dr. Dean Spitzer
President
Dean R. Spitzer & Associates

2. Measurement is ubiquitous
We spend a lot of time every day measuring things. In fact, we are almost always
measuring things: dates, time, size, weight, speed, temperature…and the list goes on
and on. In our personal lives, we spend a lot of time every day measuring things. At
work, there is even more measurement.
Some form of measurement is involved in almost everything we do in life, even if
we aren't explicitly aware of it. Consider some common examples of measurement
tools and indicators:
Time and date measurement (e.g., calendars and clocks)
Weather measurement (e.g., forecasts, temperature, wind speed and direction, humidity, barometric pressure)
Geographical measurement (e.g., location, distance, and direction)
Medical vital signs (e.g., body temperature, pulse, blood pressure, etc.)
Financial measurement (e.g., currency, paychecks, checkbooks, budgets, investments)
Consumer measurement (e.g., prices, size and weight, quality measures)
Political measurement (e.g., election results, voter attitudes, campaign financing)
Sports measurement (e.g., scores and individual and team statistics)
Academic measurement (e.g., grades, competencies, credentials) Type
text
Transportation measurement (e.g., speedometer, odometer, altimeter, fuel gauge, warning lights)
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“We can and do all measure. Measurement is not first and foremost a sophisticated technical skill, it
is an intuitive ability.” [Taylor & Soal]
2 © 2009 Dean R. Spitzer & Associates, Inc.

3. Performance measurement is powerful!
§"Measurement always improves performance." [Buckingham & Coffman, First, Break All the Rules, p. 236]
§"...everything that is measured improves." [Scheuring, Handbook of Performance Measurement, p. 2-6.13]
§"Good data, properly distributed, transform organizations." [Whitely, The Customer-Driven Company, p. 175]
§"Measures have great power, almost like genetic code, to shape action and
performance...Change the measures, and you change the organism." [Epstein & Birchard, Counting
What Counts, p. 145]
§"Most often when we see illogical behavior, the fault is in the measurement system, not
in the employees." [Brian Joiner, Fourth Generation Management, p. 242]
§"Changing the way we measure changes everything." [Meador, The Dance of Change, p. 299]
§"An organization's measurement system strong affects the behavior of people both
inside and outside the organization." [Kaplan & Norton, The Balanced Scorecard, p. 21]
§"The essence of a corporate culture is the firm's measurement system." [Strassman, The Business
Value of Computers, p. 73]
§"The mere action of defining measures of success will change behavior positively or
otherwise." [Thorp, The Information Paradox, p. 164]
§"Metrics are to a business what the five senses are to humans - systems of feedback
that improve our capacity to adapt and excel over the long run." [Tachi Kiuchi, "What We Learned in the
Rainforest," Barrett-Koehler, 2002, pp. 152-153]
§"Count what is countable, measure what is measurable, and what is not measurable,
make measurable." [Galileo Galelei, 1564-1642]
3 © 2009 Dean R. Spitzer & Associates, Inc.

4. Management is based on measurement, and all
other organizational systems are dependent on the
measurement system
No organization can be any better than its measurement system
Human Resources
Marketing Quality
& Training
Research & Information Service Customer
Logistics
Development Technology Delivery Service
Compensation & Rewards Results
Management
Measurement
4 © 2009 Dean R. Spitzer & Associates, Inc.

5. Effective measurement serves many functions
important for performance management
§Clarifies performance expectations
§Increases the visibility of performance
§Enables goal-setting (goals are targets set on measurement
dimensions)
§Forges increased strategic agreement and alignment
§Increases the holistic perspective at all levels
§Focuses attention on what is most important
§Promotes accountability (without measurement there can be
no accountability)
§Provides timely early-warning signals and facilitates prompt
and appropriate corrective actions
§Increases the frequency and accuracy of feedback
§Motivates improvement
§Increases objectivity and the perception of fairness
5 © 2009 Dean R. Spitzer & Associates, Inc.

6. One of the biggest problems in organizations is lack of
alignment among ‘measurement systems’
Organizations with poor performance measurement will be poorly aligned, with
functions pursuing their own self-interest and often working at cross-purposes
Finance
Operations
Marketing Human
Resources
Budgeting
Information
Technology
Delivery
Project Learning
Management Customer
Service
Not only don’t most organizations have a single integrated measurement system,
but the disparate measurement systems don’t even communicate!
6 © 2009 Dean R. Spitzer & Associates, Inc.

7. Organizations are drowning in data
7 © 2009 Dean R. Spitzer & Associates, Inc.

8. Measurement is a mess!
In The Agenda, Michael Hammer puts it this way:
“A company's measurement systems typically deliver
a blizzard of nearly meaningless data that quantifies
practically everything in sight, no matter how unimportant;
that is devoid of any particular rhyme or reason;
that is so voluminous as to be unusable;
that is delivered so late as to be virtually useless;
and that then languishes in printouts and briefing books,
without being put to any significant purpose....
In short, measurement is a mess."
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8 © 2009 Dean R. Spitzer & Associates, Inc.

9. Performance measurement must be transformed!
Outstanding Organizational Performance
Outstanding Management
Transformational Performance Measurement
Interactivity
Integration
Context
Focus
Basic Performance Measurement
9 © 2009 Dean R. Spitzer & Associates, Inc.

10. Context
Measurement is imperfect
"All social measurement systems are very fragile and open to manipulation
and there is very little we can do about it." [Karl-Erik Sveiby]
Opportunity
Motive
Flaws Flaws
Measurement
System
Flaws
Flaws
Flaws
Manipulation = f (Opportunity, Motive)
10 © 2009 Dean R. Spitzer & Associates, Inc.

11. Context
People's experiences and the context determine their
attitudes toward measurement
People's attitudes and feelings toward measurement are largely a reflection of the
perceived consequences and how much control they think they have over the results.
When they feel positive and empowered in what they are doing, people tend to
embrace measurement, and use it with great enthusiasm. In fact, when people feel
good about their performance potential, they want as much information as possible
about how they are performing. They realize that - win or lose - measurement is the
key to improvement.
Measurement at work is often
perceived negatively.
Both participants
and spectators love
measurement in
sports and games.
“Measurement is one of the most sensitive issues in any organization.” [Eliyahu Goldratt]
11 © 2009 Dean R. Spitzer & Associates, Inc.

12. Context
Measurement is not the same as evaluation
Action
Evaluation (Judgment)
e-value-ation
Measurement
Too often evaluation and its consequences prevent learning from measurement
12 © 2009 Dean R. Spitzer & Associates, Inc.

13. Context
Which type of measurement is more common in your
organization?
Traditional Measurement Positive Measurement
§ Monitoring § Visibility
§ Reporting § Communication
§ Control § Feedback
§ Justifying § Understanding
§ Judging § Prediction
§ Triggering rewards/punishment § Learning
§ Negative accountability § Improvement
§ Positive accountability
"Many measurement practices and systems signal distrust through their emphasis on
monitoring and control." [Jeffrey Pfeffer]
13 © 2009 Dean R. Spitzer & Associates, Inc.

14. Context
So much measurement is being used to report on past
successes and for self-serving purposes
•“See how much I’ve accomplished!”
•“Look how great our scores are!”
•“Now give me my bonus and stock options.”
•“Let me show you my business case!”
•“Let me show you how good we are!”
•“Let me show you our ROI!”
It is easy to manipulate measurement
(and too often the organization doesn’t
really want to know the truth).
“In complex human systems, there
are always many ways to make
things look better in the short-term.”
- Peter Senge
Measurement done to prove will rarely improve!
14 © 2009 Dean R. Spitzer & Associates, Inc.

15. Context
The biggest problem with the context of measurement is
the lack of Measurement Leadership
§ While most managers publicly extol the value of measurement, few
actually use it systematically and well.
§ Measurement is everybody’s job and therefore nobody’s job!
§ Organizational leaders are more than happy to delegate
measurement to "measurement specialists." They don't realize how
strategic measurement is, and how much management attention it
requires to do it right. Measurement is one of the most under-
appreciated organizational activities, and measurement leadership is
one of the least appreciated leadership roles.
Who is leading
measurement in your
organization?
15 © 2009 Dean R. Spitzer & Associates, Inc.

16. Context
Measurement Measurement
Expectations Leadership
Organizational History of
Climate Measurement
Measurement System
• Measures
CONTEXT OF • Measurement process
Measurement
• Technical infrastructure
MEASUREMENT Resources
People
Measurement • Attitudes Measurement
Communications • Motivation Constraints
• Capabilities
16 © 2009 Dean R. Spitzer & Associates, Inc.

17. Focus
Measures are a lens through which people “see” the world
Reality Data
Measures
17 © 2009 Dean R. Spitzer & Associates, Inc.

18. Focus
Most organizations are full of “routine measures” that
have been accepted as “standard operating metrics” and
rarely, if ever, change
Routine Measures
18 © 2009 Dean R. Spitzer & Associates, Inc.

19. Focus
Sustainable organizational change is impossible without
changing measurement system
Leadership vision
Pressure
Pilot project
“Quick win”
Temporary enthusiasm
Change
Change
Project
Transformational Routine
Vision More of the Same
Measures
Time
19 © 2009 Dean R. Spitzer & Associates, Inc.

20. Focus
“Transformational measures” can help organizations
focus on what is most important today and for the future,
rather than in the past
Transformational
Measure
Transformational
Measure
Routine Measures
Transformational
Measure Transformational
Measure
“When we change our ways of measurement, the fundamental ‘lens’ used to view things
changes. Organizational transformation is what happens when people begin to see their
20 organization through the new lens.” [Dean Spitzer, Transforming PerformanceDean R. Spitzer & Associates, Inc.
© 2009 Measurement]

21. Focus
Transformational measurement requires looking beyond
what we are currently measuring, making new
connections, and crossing functional silos
21 © 2009 Dean R. Spitzer & Associates, Inc.

22. Focus
Emergent and Transformational Measures
§ Customer Delight § Employee Engagement
§ Customer Loyalty § Learning Effectiveness
§ Customer Experience § Information Orientation
§ Customer Engagement § Information Proficiency
§ Voice of the Customer § Innovation Climate
§ Customer Profitability § Partner Relationships
§ Customer Lifetime Value § Organizational Trust
§ Knowledge Stock and Flow § Social Performance
§ Learning § Corporate Social Responsibility
§ Organizational Agility § Sustainability
§ Strategic Readiness of § Organizational Health
Intangibles § Employee vitality
§ Project Scheduling § Executive Intelligence
§ Collaboration § People Equity
§ Reputation § Service Quality
See “Transformational Measurement Action Plans,” Chapter 14,
Dean R. Spitzer, Transforming Performance Measurement (2007)
22 © 2009 Dean R. Spitzer & Associates, Inc.

23. Focus
Strategic Readiness of Intangibles is a promising
emergent measure
It is not enough just to have intangible assets. The competitive advantage of
organizations in the new economy is increasingly dependent on how “ready”
their intangible assets are for deployment in supporting strategy. Intangibles
assets that are not ready are like unused inventory.
1. How well aligned are the
assets with strategy?
(0% - 100%)
2. How ready are they for
deployment?
(0% - 100%)
Context of Measurement question: How can you have confidence in people’s ratings?
23 © 2009 Dean R. Spitzer & Associates, Inc.

24. Focus
Time is becoming a crucial factor in today’s fast-paced
world that demands agility
“Cycle time to threshold proficiency”
§ Define “threshold proficiency”
§ Determine start and end times
§ Might have nothing to do with training
§ “Accumulation of experience”
§ Faster forces the streamlining of processes
and the reduction of waste
Charles L. Fred, Breakaway, Jossey-Bass, 2002]
“It is our experience that TIME is the strategic weapon of
choice for business leaders. When leadership treats time as the
independent variable in its business equation, optimum quality
and costs are the predictable results.” [Thomas Group]
24 © 2009 Dean R. Spitzer & Associates, Inc.

25. Focus
Learning has become a social phenomenon: “Social
Network Analysis,” a measure of how people really
collaborate and learn at work
Andy Frank Indojit
Carl
Karen
Darren
Sam Ming
Neo Leo
Earl
Gerry Harry Jeff
"The illiterate of the future will not be the person who cannot read. It will be the person
who does not know how to learn." - Alvin Toffler
25 © 2009 Dean R. Spitzer & Associates, Inc.

26. Focus
People Equity is a potentially transformational measure
Alignment
People Equity
Capability Engagement
PEOPLE EQUITY = ALIGNMENT + CAPABILITIES + ENGAGEMENT
Source: Metrus Group
26 © 2009 Dean R. Spitzer & Associates, Inc.

27. Focus
Qualitative Measurement, Estimating, and Subjectivity
“Measurement is assessing the degree to which a variable is
present….Notice there is no reference to numbers in that definition.”
[D. Lynn Kelley]
"A high barrier stands between us and the habit of
making rough estimates -- the fear of getting the
'wrong' answer. There is nothing wrong with educated
guesses as long as the uncertainty is acknowledged
and managed. Contrary to what most of us have
learned in school…an inexact answer is almost always
good enough.“ [Arno Penzias]
1 2 3 4 5 6 7 8 9
Extremely Honest
Not Honest At All
27 © 2009 Dean R. Spitzer & Associates, Inc.

28. Focus
Developing emergent measures is an iterative process
Construct
(e.g., innovation, agility,
leadership, climate,
engagement)
Potential
Indicators Measures “Metrics”
(characteristics)
One of the keys to emergent measurement is the “socialization process” that occurs as
the construct and its measurement are discussed.
28 © 2009 Dean R. Spitzer & Associates, Inc.

29. Focus
Organizations must not be afraid to experiment with
measurement
Performance Area
Performance View
Conventional
Measures
Performance View
Emergent test Transformational
Measure Measure
not working
discard as desired revise
One of the keys to emergent measurement is the “socialization” that occurs as the
construct and its measurement are discussed.
29 © 2009 Dean R. Spitzer & Associates, Inc.

30. Focus
What makes a measure ‘good’?
1. Validity: Are we measuring the right thing?
2. Reliability: Are we measuring it consistently?
3. Relevance: How useful is it? Does anyone really care?
4. Actionability: Do they know what to do about it?
30 © 2009 Dean R. Spitzer & Associates, Inc.

31. Focus
Don’t be intimidated by the “measurement police”
Is it valid enough?
Is it accurate enough?
Is it reliable enough?
Is it precise enough?
…and, whatever you do,
don’t dare to be creative!”
31 © 2009 Dean R. Spitzer & Associates, Inc.

32. Integration
Performance measurement is not about numbers and
calculations; it is about understanding outcomes, drivers,
trade-offs, etc. and how to use this understanding for
continuous improvement of the organization and its
component processes
Financial
Measures
Customer
Measures
Marketing
Sales Measures
Measures
Product/Service Quality
Measures
Manufacturing Measures Supply Chain Measures
Innovation Other Support Process
IT Measures
Measures Measures
“There is a strong tendency to state numerically as many as possible of the variables with which
management must deal.” [V.F. Ridgway, Dysfunctional Consequences of Performance Measurements]
32 © 2009 Dean R. Spitzer & Associates, Inc.

33. Integration
What are your most crucial measures and their
interrelationships?
Understanding business drivers
and leading indicators is
difficult because organizations
still don’t have a clear concept
of what drives value.”
33 © 2009 Dean R. Spitzer & Associates, Inc.

34. Integration
Measurement must reflect the organization’s business
model and the strategy
Strategy is about Business Strategic
making choices Model
Measures
Strategy Critical
Success
Factors
Execution
Operational
(Operations) Measures
“Measurement lies at the heart of both vision and strategy. It's hard to overestimate its importance in
determining the future course of the business....It is measurement that allows managers to harness
vision to the earthly realities of daily business practice. Measurement turns vision into strategy and
strategy into fact.“ [Frederick Reichheld]
34 © 2009 Dean R. Spitzer & Associates, Inc.

35. Integration
Measurement must reflect how value is created and
destroyed in the organization
Value drivers
Revenue
Value Creation Profit
Cash flow
Mission accomplished
value evaporation/loss
(value destruction)
Strategy should be focused on making best use of the value drivers to create optimal value
from resources for stakeholders.
But we can’t just talk about value, we have to understand its drivers and do something about them.
35 © 2009 Dean R. Spitzer & Associates, Inc.

36. Integration
Measurement frameworks help clarify the relationship
among measures
Leading Lagging
Inputs Process Outputs Outcomes
• Funds • Activities • Products • Internal
• Skills • Behaviors • Services • External
• Attitudes • Process performance • Inventions
• Climate (quantity, quality, • Patents [see below]
timeliness, cost)
Outcome Outcome Outcome Outcome
• Revenue • Profit • Timely delivery • Customer
• Quality • Competitive • Customer loyalty
• Cost reduction advantage perceived quality • Customer
• Employee • Employee • Customer success
satisfaction retention experience
• Learning • Innovation
Internal Outcomes External Outcomes (Customer Value)
36 © 2009 Dean R. Spitzer & Associates, Inc.

37. Integration
Example: Measurement framework for innovation
Outcomes
Inputs Process Outputs (internal, external)
Innovation Ideation IP Asset External
Leadership Measures Management Relationship
Measures Measures Measures
Innovation
Innovation Pipeline Internal Innovation
Strategy Measures Relationship Benefit
Measures Measures Measures
Project
Innovation
Management Innovation
Climate
Measures Value
Measures
Measures
Human Social
Capital Measures
Measures
Innovation Efficiency
Innovation Capability Innovation Capacity Innovation Effectiveness
37 © 2009 Dean R. Spitzer & Associates, Inc.

38. Interactivity
The purpose of measurement is not to collect data!
Wisdom
Knowledge
Information
Data
38 © 2009 Dean R. Spitzer & Associates, Inc.

39. Interactivity
But creating knowledge and wisdom from data
requires more than technical measurement skills
Wisdom
Effort Required
Knowledge
Information
Data
Depth of Understanding
39 © 2009 Dean R. Spitzer & Associates, Inc.

40. Interactivity
How intelligent is your organization?
Data Information knowledge Wisdom
Intelligence
The most important part of measurement is to ‘learn’ from it!
40 © 2009 Dean R. Spitzer & Associates, Inc.

41. Interactivity
Performance Measurement Cycle
Plan Review
Select
Take Action
Collect
Commit
Analyze
Decide
Interpret
41 © 2009 Dean R. Spitzer & Associates, Inc.

42. Interactivity
Most performance measurement is broken
Plan 30%
60% Review
30%
Select
Take Action
20%
Collect 60%
80% Commit
Analyze 50%
Decide
70%
Interpret 20%
42 © 2009 Dean R. Spitzer & Associates, Inc.

43. Interactivity
Technology is an enabler, but not a panacea
Plan
Review
Select
Take Action
Collect
Commit
Store
Analyze
Technology
Decide
Interpret
43 © 2009 Dean R. Spitzer & Associates, Inc.

44. Interactivity
44 © 2009 Dean R. Spitzer & Associates, Inc.

45. Interactivity
Dialogue: The missing link
Plan Review
Select
Take Action
Collect Dialogue
Commit
Analyze
Decide
Interpret
45 © 2009 Dean R. Spitzer & Associates, Inc.

46. Performance measurement must be transformed!
Outstanding Organizational Performance
Outstanding Management
Transformational Performance Measurement
Interactivity
Integration
Context
Focus
Basic Performance Measurement
46 © 2009 Dean R. Spitzer & Associates, Inc.

47. How ‘mature’ is performance measurement in your
organization?
300 Transformational Performance Measurement
TPMM Score Positive
Transforming Collaborative
Context
Level 3
Basic Performance Measurement
Systematic Negative/
Programmatic
Level 2
Neutral Specialized
Level 1 Ad hoc Context
See Spitzer, D.R., Transforming Performance Measurement
47 © 2009 Dean R. Spitzer & Associates, Inc.

48. Transformational Measurement Maturity (context)
§ Performance measurement is widely used by all levels of employees throughout
the organization.
§ The importance and value of performance measurement are widely appreciated.
§ Employees perceive performance measurement as relevant, timely, and
actionable in their jobs.
§ Employees actively use performance measurement in their jobs.
§ Understanding and acting upon performance measurement data are viewed as
key responsibilities of all employees.
§ Performance measurement is generally viewed as a positive force in the
organization.
§ Performance measurement is used to empower and enable self-management.
§ Performance measurement is rarely used to blame or punish.
§ Fear of measurement is low.
§ Performance measurement is trusted.
§ Manipulation of measurement for self-serving purposes is very low or nonexistent.
§ Performance measurement data is discussed openly and honestly.
§ Employees are educated about measurement.
§ Employees are given the time and other resources they need to use performance
measurement well.
48 © 2009 Dean R. Spitzer & Associates, Inc.

49. Transformational Measurement Maturity (focus)
§ This organization measures the things that matter most and not those that
don't matter.
§ Performance measures accurately reflect the most critical aspects of the
organization's business model and strategy.
§ Performance measures are regularly reviewed and revised or eliminated
(as appropriate).
§ This organization has the right number of measures (not too many nor too
few).
§ Routine measures are reduced when new high-leverage measures are
added.
§ Routine measurement is being increasingly automated.
§ Progress is being made in measuring intangible assets and other difficult-
to-measure aspects of performance.
§ Experimentation with emergent measures is encouraged.
§ Transformational measures are being widely adopted and used.
49 © 2009 Dean R. Spitzer & Associates, Inc.

50. Transformational Measurement Maturity (integration)
§ There is a holistic approach to performance measurement across the
organization.
§ Measurement data is becoming more integrated.
§ Employees understand the cross-functional implications of their
measures.
§ Cross-functional measures are developed and used.
§ There is increasing understanding of the relationships and trade-offs
between performance measures.
§ There is widespread commitment to understanding the causal
relationships among performance measures.
§ Integrative measurement frameworks are developed and used.
§ Ongoing effort is being made to align measurement frameworks with
strategy, and keep them aligned.
§ Progress is being made toward creating one integrated organization-wide
measurement system.
50 © 2009 Dean R. Spitzer & Associates, Inc.

51. Transformational Measurement Maturity (interactivity)
§ There is widespread and frequent interaction throughout the organization about
measurement.
§ Frequent interactivity occurs regarding the selection of performance measures.
§ Developing and revising measurement frameworks are highly interactive.
§ Insights from performance measurement information are discussed in many forums.
§ The organization places a high priority on learning from measurement.
§ Time is made available to learn from measurement.
§ There are frequent and high-quality dialogues about performance measurement.
§ Executives are deeply engaged in measurement-related dialogues.
§ Measurement frameworks are continually and interactively reviewed and revised (as
appropriate).
§ Interpretation of data is as highly valued in this organization as data collection and
analysis.
§ Collaborative cross-functional learning from measurement occurs throughout the
organization.
§ Revealing questions are constantly being asked about measurement.
§ Measured experiments and pilot projects are occurring throughout the organization.
§ This organization has effective social mechanisms for translating performance
measurement data into appropriate action.
§ The capability of this organization for converting data into actionable insight is high.
§ This organization is effective at sharing insights from performance measurement.
51 © 2009 Dean R. Spitzer & Associates, Inc.

52. A journey of a thousand miles begins with a
single step
52 © 2009 Dean R. Spitzer & Associates, Inc.