Where Performance Measurement Fits into a Small Business
Integrated Performance Measurement?
Performance measurement starts before your small business is in business. As indicated in the diagram below, it’s an integral part of the strategic, tactical, and operational planning processes. Goals, objectives, and operational targets are all measures of performance within small businesses. Measuring business performance to evaluate and control the achievement of these goals, objectives, and targets are critical for small business success.
The challenge facing small businesses is how to match and align performance measurement with business strategy and culture. Furthermore, the type and number of measures to use and the balance between the merits and costs of introducing these measures. Thereafter, how to deploy the measures so that the results are visible, used and acted upon.
To find out more about performance measurement read our blog post “Performance Measurement Defined for Small Businesses”.
How Performance Measurement Fits In
Business strategy is the working plans that connects your performance measurement goals, objectives, and targets. Strategic, tactical and operational planning looks ahead toward desired goals, objectives, and targets; performance measurement looks back at achievements. Combined, planning and performance measurement form a circle, the continuous process of managing your small business to get results. Plans define the performance to be measured, while performance measurement provides the feedback to evaluate the plans. These plans must regularly be revisited, and goals, objectives, and targets need to be adjusted for circumstances that changed.
Referring to the diagram above.
Mission Statement: A brief description of your business’ fundamental purpose and the reason for its existence.
Vision Statement: Describes what your business wishes to achieve in the long run, generally in a time frame of three to five years. It is an inspirational picture of your business’ future framework for all strategic planning.
Values Statement: Fundamental beliefs (core values) upon which your business and its behavior are based. They are the guiding principles in managing internal affairs, as well as its relationship with stakeholders (customers, government, shareholders, suppliers, general public, etc.).
Strategic Goals: A longer-term (three to five-year planning horizon), “big picture” outcomes that a business attempts to reach to fulfill their vision. Keep your strategic goals at a high level and stay outcome focused. Your visionary goals typically fall within some of the following strategic areas:
• Portfolio: Product/service offerings, expansion, innovation, etc.
• Financial: Growth, revenue, profitability, shareholder return, etc.
• Customer: Customer satisfaction, returning customers, service quality, delivery times, etc.)
• Network of partners: Building the network, partner loyalty, etc.
• Employees: Happiness, workplace safety, development, etc.
• Technology & Business Processes: Production costs, build capacity, decrease defects, resource allocation, etc.
• Community: Community involvement, philanthropy etc.
Business Objective: A measurable result that a business aims to achieve to accomplish its strategy by working towards a broader goal. Objectives are detailed and measurable steps that you aim to achieve within a time frame and with available resources. The difference between goals and objectives is that a goal is a description of a destination, and an objective is a measure of the progress that is needed to get to the destination.
Action Plans: A sequence of steps that must be taken, or activities that must be performed, for a strategy to succeed. An action plan has three major elements:
• Specific tasks: What will be done.
• Resource Allocation: What specific resources including funds are available for specific activities.
• Time horizon: When will it be done.
Action plans can be created on a daily, weekly, monthly, quarterly, or yearly basis depending on the result that needs to be accomplished.
Operational Targets: Quantifiable values expressing the business performance in a shorter time-frame level. Operational performance covers all business operations/functions and performance standards are normally set to evaluate performance.
Also read our blog posts: 5 Easy Steps in Developing Key Performance Indicators for Small Businesses and 10 Good Reasons for Small Business Performance Measurement