As with any business function, measurement in eSourcing is a fundamental key to success, but only if done right. That’s why the article on The 7 Deadly Sins of Performance Measurement and How to Avoid Them in a recent issue of the MIT Sloan Management Review is a must-read for e-Sourcing program managers. As the article points out, operational performance measurement remains an unsolved problem, as there are still a multitude of systems out there and generally no indication as to which one is the right one for your business. Nonetheless, even if the best way, and the best set of metrics to use, is unclear, there are definitely wrong ways to go about the problem.
Avoiding the wrong way starts with avoiding the seven common, but deadly, mistakes pointed out by Michael Hammer in his article. These are:
Don’t just use measures that will inevitably make the organization, its people, and especially its managers, look good. Every organization has weaknesses, and the key to becoming best in class is improving upon them. However, you cannot improve upon a weakness you cannot identify.
Organizational boundaries and concerns should not dictate performance metrics.
Organizations often measure from their point of view when they should be measuring from their customer’s point of view.
Many organizations assume they know what is important to measure without giving it adequate thought or effort.
Measuring only a small component of what is important.
Implementing metrics without giving any thought to the consequences of these metrics on human behavior and, ultimately, on enterprise performance. People in an organization will seek to improve a metric they are told is important, especially if they are compensated for it, even if doing so has counter-productive consequences.
Not being serious about measurement in the first place.
So what can an organization do to avoid the seven deadly sins? The author offers four key steps.
- Decide what to measure
Select the right things to measure, those aspects of organizational performance that are both controllable and important to achieving success.
- Measure the right way
Use metrics that capture the essence of what needs to be measured in a usable form.
- Use metrics systematically
Embed the metrics in a disciplined process for performance improvement.
- Create a measurement-friendly culture
The organization must encourage the disciplined use of metrics for ongoing performance improvement rather than regarding them as threats to be feared or opponents to be vanquished.