Performance Measurement Defined for Small Businesses

Performance Measurement Defined for Small Businesses

Performance Measurement Defined for Small Businesses

Performance Measurement Defined for Small Businesses

Performance Measurement in Small Businesses

The role of performance measurement in small businesses is primarily one of learning; providing the small business owner with the required information to navigate towards desired end results, as reflected in a small business’s strategy. Similar to the principle used by ants, who leave pheromone trails to assist each other in navigating towards the food source. Performance measurement results should travel through the small business, facilitating communication, providing a base for analysis, synthesis, and ultimately decision making across all levels of the small business.

If you as a small business owner don’t measure …

  •  How do you know whether your performance is improving or declining?
  •  How do you know where to improve?
  • How do you know where to allocate or re-allocate scarce resources?
  • How do you know how you compare with others?
  • How do you know if your resources are productive or cost effective/ efficient?

Performance measurement in small businesses is critical for business success! Also read our blog post “10 Good Reasons for Small Business Performance Measurement”.


What is Performance Measurement?

Consider “performance” and “measurement”:

  • Definition of Performance: Performance is the action or process of carrying out or accomplishing an action, task, or function.
  • Definition of Measurement: Measurement is a result, usually expressed in numbers, that you obtain by ascertaining the size, amount, or degree of something.

Measurements quantify the input and output dimensions of processes, products, services, and the overall business (outcomes).

Performance measurement is connected to the goals/objectives/targets of your small business. Read the blog post “Where Performance Measurement Fits into Your Small Business”. A set of metrics are used to quantify or qualify the efficiency and effectiveness of actions taken to meet them. Performance measurement, therefore, make goals, objectives, and targets quantifiable, provide visibility into the performance of teams, employees, projects, or products within the Small business, and enable decision makers to take action.

Definition of Performance Measurement: Performance Measurement in small businesses is a structured process of:

  • Developing measurable indicators that can be systematically tracked to assess the meeting of predetermined goals, and
  • Collecting and reporting information on these measurable indicators to determine the progress made in achieving the goals.

Performance Measurement is one of the pillars of small business excellence and should start before you start your business. You will gain valuable insights into strategic planning and documenting your business venture by doing this on the frontend.


Key Components of Performance Measurement in Small Businesses

The key elements of effective performance measurements include:

The cascading performance measures should be:

  • Relevant and Aligned with business’ objectives
  • Result Driven to drive high-performance
  • Allow Innovation – encouraging improved/alternative methods
  • Clear and Easy to understand
  • Inclusive and Representative of performance
  • Attributable to (caused by) someone that influences it
  • Responsive to change (improvement)
  • Accessible and Timely based on readily available data
  • Consistent and Comparable represent the same thing over time
  • Verifiable – calculated from data that can be verified
  • Cost-effective – cost to collect data must balance its value (usefulness)

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