Thu, Jan 12, 2023

In today’s modern digital age, competition in business and industry is relentless. High-level organizational performance and consistent improvement are critical to any meaningful success. This is why adherence to performance measurement best practices is so vitally important right now.

Setting performance standards and reinforcing them with sound performance measurement procedures are key to reaching organizational goals, enhancing success and limiting failures.

What Is Performance Measurement?

Performance measurement” is defined as the process of determining where an organization is in relation to its corporate goals and objectives. The process involves the collection and subsequent analysis of proprietary information and relevant data and the generation of a report that communicates findings.

Performance management procedures can (and should) be used on organizations of any size and on smaller groups within an organization, like divisions, departments and even teams of individuals.

The goal of all performance measurements is, of course, to provide data that will help people reach their goals.

Why Is Performance Measurement Important?

Performance measurement is crucial in all competitive endeavors. Imagine an athlete trying to win a race if they didn’t know how long the course was or where they were on the track. It would be impossible to compete, especially if the other runners could see where they were and where they were going.

The same principles hold true in business. If businesses want to improve their standing and beat the competition, they must first use all available performance measurement tools to figure out exactly where they are.

Performance measurement demonstrates strengths to be exploited and weaknesses that need to be improved upon. It helps managers set goals and lets them know when benchmarks have been met.

For all of these reasons, KnowledgeLeader highly recommends that performance management integration be implemented at all important levels of an organization. It’s why we strive to provide our clients with all the performance measurement tools and performance management templates they need to succeed.

Strategic Clarity

There was a time when financial results were the only thing a company needed to measure. Those days are gone. Modern business demands agility, cost containment and high-level customer service. An incredible spectrum of business attributes needs to be monitored today. In other words, what is needed today is the kind of strategic clarity that performance measurement best practices can provide. Now more than ever, organizations need to know where they are and where they’re going.

The best companies create specific, targeted performance goals and apply them all the way down to the individual employee level. Each goal and every process along the way necessitates measurement and management.

Effective communication of goals and the expected performance measures will increase teamwork and knowledge sharing. When managers and employees can visualize the relationship between future plans and current performance, they will know exactly what needs to be done. Achieving the necessary “buy-in” will be that much easier.

Harness the Power of People

Performance measurement and management can sometimes be complex and may be difficult during these challenging times. Regardless of what may be achievable, success depends on personnel-based support systems. The energy for success comes from the people within the organization. All this is to say that people are the foundation of all measurement systems and should be the focus of all performance measurement templates.

Too often, performance reviews and assessments are adversarial. Proper performance management should be geared toward developing a sympathetic and supportive company culture. This attitude should start at the top with officers and C-level executives and should be designed to improve teamwork and build critical human (and other) infrastructure.

Obviously, as in most things, leadership is extremely important to the ultimate success of performance measurement management or to its failure. Leaders establish the organizational tone and determine the overall business environment.

The employees and managers who are doing the hard work of an organization cannot be expected to be more committed to performance than their leaders and officers. It follows that the best leaders are performance orientated and value organizational achievement over personal gain. Managers should give their people what they want and what they need: clear and honest communication and an adaptive management style.

This approach will sometimes lead to uncomfortable or difficult interactions, but the results will be worth the effort.


We agree with Robert Kaplan of Harvard Business School and his frequent collaborator, David Norton: Performance measurement is often a quantitative tool that requires a balanced approach.

To achieve balance in performance measurement integration, it is necessary to enumerate and communicate precisely where and why various measurements are needed most. To be most effective, performance measures must be targeted to optimize and enhance value creation inside and outside (client-facing) an organization.

In the development of performance measurement and management procedures, company goals should be periodically reviewed to be sure they remain relevant. Pertinent internal databases should also be reviewed, and the input of department heads should be sought out. The wider the range of information sources, the easier it will be to achieve a balanced performance measurement “scorecard.” Senior management and members of the board of directors should be included as well as employees who interact with customers.

For best results, performance metrics should be limited to between four and six per process. If managers need more metrics, they should consider narrowing the areas being examined. It’s better (easier to have a balanced scorecard) to use a smaller number of performance metrics on a larger number of functions than the other way around.

Customize Communications

According to Kaplan and Norton, when it comes to performance management, communication should be ongoing and enthusiastic.

Communication is more than just a method for passing along information—it’s a social tool that keeps people working together for the good of the organization. All performance management procedures should, therefore, include a sophisticated communication plan that explains exactly what the company is trying to achieve by measuring performance.

The communication plan should utilize the internal email system, word-of-mouth, bulletin boards, newsletters, scheduled and impromptu meetings, and an “open door policy” at most levels of management.

No performance measurement initiative can succeed unless it’s known and understood by all involved.

Rewards and Recognition

It’s a well-known business axiom that it is easier to keep a happy employee happy than it is to make a miserable employee happy. Well-run companies will use the results of performance reviews to establish formal and informal rewards programs. Rewards and recognition never fail to inspire employees and improve overall morale.

One of the best reasons to implement a system of rewards is the tremendous return on investment such programs yield. Compared to what organizations get back in productivity, rewards programs are a very low-cost way to enhance productivity.

Benchmarking Tools

KnowledgeLeader exists to make the job of risk, accounting and audit professionals easier, and this includes the areas of performance management and measurement.

One of our most effective benchmarking tools for this business segment is our Organizational Performance Key Performance Indicators (KPIs) template. This tool, which is available for unlimited download to our subscribers, is in the form of a questionnaire that uses dozens of pertinent questions and many potential answers for each to keep an organization's performance management on track.