Part 1
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Allen leads a product development group in the electronics unit of Hainsworth & Smith, a large consumer goods company. At Hainsworth & Smith, unit managers have traditionally used financial metrics to assess their units' performance. But in the face of heightened global competition, the company has decided to revise its performance measurement system. A more comprehensive system, management believes, will help Hainsworth & Smith fortify its market position.
Top management has asked leaders in each business unit to form a special task force charged with defining new metrics for their unit—metrics that focus on both financial and nonfinancial measures. Allen's boss has asked him to participate in the electronics unit's task force. This task force also includes representatives from other functions within his unit—such as manufacturing, operations, finance, and IT. All task forces will share their ideas with an executive steering committee, which will then combine the ideas to build the most appropriate companywide performance measurement system.
At the task force's first meeting, the project leader invites everyone to offer ideas for how to begin the revision process.
view textWhat's the best suggestion for how the task force might begin its work?
Explore all the choices.
Immediately benchmark against the performance metrics of similar companies to take advantage of best practices
Not the best choice. Benchmarking against other companies' performance metrics is a positive way to generate some interesting ideas for the task force—but it shouldn't be the first step Allen takes. Each company has different goals and challenges, so one company's metrics may not be appropriate for her organization. The metrics he ultimately chooses need to reflect her unit's unique set of circumstances, aims, and challenges.
Identify the three or four most crucial processes performed in the unit that will eventually be assigned metrics—such as visiting potential new customers, training employees, and so forth
Not the best choice. Though metrics related to processes are very useful, the purpose of measuring is to help improve results. The task force eventually needs metrics related to outcomes—such as the number of customer visits that generate sales, and the number of trainees who demonstrate that they acquired the right skills during training. But Allen won't engage in this process until he has talked with managers in other units to clarify the company's strategic goals.
Talk with high-level unit managers to clarify the company's strategic goals
Correct choice. A unit's performance metrics should be linked to the company's strategy. That is, they should indicate how well the unit is supporting execution of the strategy. For example, if Hainsworth & Smith's strategy hinges on being a provider of cutting-edge products, the electronics unit might ultimately define metrics related to product innovation.
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