What is performance measurement?

Performance Measurement Overview

In its simplest terms, measuring performance means assessing business results to: (1) determine how effective a company's strategies and operations are and (2) make changes to address shortfalls and other problems.

Companies measure their performance using different methods and criteria. However, in many organizations, performance management entails examining the results generated by key business activities, using specific performance metrics (also known as measures). For each business activity, there are numerous possible metrics. The table below shows just a few examples.

Specific Performance Metrics
Business Activity	Possible Performance Metrics
Finance	Profit margin (percentage of every dollar of sales that contributes to the company's bottom line) Revenues
Marketing	Market share Customer profitability
Production	Number of units manufactured within a specific time period Number of items shipped on time Machine changeover time
Sales	Percentage of customer visits or phone calls that generate sales Percentage increase in sales over previous quarter or year Percentage of customers retained this period
Customer Service	Number of customer complaints Service-call response time
Purchasing	Vendors' ability to provide services or materials on time Defect rate of vendors' products
Quality	Product yield: ratio of good products produced to total products started into production Defect rates of a key process
Human Resources	Workforce turnover Absenteeism rates

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