I have been teaching a course for the National Graduate School called Performance Based Management. Management courses are often based on theory. In this course we emphasize that theory must be tested with the actual performance of a process in practice. So in this course we talk about how to evaluate a process and develop measures for the process. Developing measures in theory is easy. Most process measures relate to the time it takes to finish the process, how much it costs, or to the quality of the product or service. If your goal is to decrease cost, then the measure is how much something costs. When time is critical, a measure related to the calendar time or processing time may be the most important. If not cost or time, the important measure is often related to quality. Cost, time, and quality are often interrelated, and more than one measure is important.
One of the reasons this graduate program is so beneficial is that the students are required to apply what they learn to an improvement process in their organization. So not only do we discuss the theory of developing measures of a process, students have to develop measures for a process they want to improve and then show improvement using those measures. Applying what you learn is hard, but the experience of developing some measures of your process and applying them provides great insight and understanding of the implications of the theory of measuring process.
For example, several of the teams in this class hypothesized that mistakes were happening because employees are not familiar with parts of a process. How do you measure knowledge of the process? You can:
- Develop a test about the knowledge employees need to have:
- Multiple choice
- Performance test, or
- You can develop rating scale to evaluate employee knowledge in different areas (perhaps on a scale of no knowledge to competent):
- Self rating or
- Supervisor rating
Students quickly learn that in either case you need to understand the important content dimensions surrounding the job. You have to evaluate the type of “knowledge” that is to be assessed – is it something that you can write a multiple-choice knowledge question about? Is it a performance? Do employees know enough about the dimensions to tell you their level of knowledge? Or would a supervisor know enough to rate the employee?
Certification programs can benefit from performance based management just as much as any other kind of organization. The critical question is what are the important processes to measure in your organization and how should you measure them? If you are interested in learning more about the importance of performance based management, you might be interested in observing a video about Dr. W. Edward Deming’s “Red Bead Experiment” that is available from http://managementwisdom.stores.yahoo.net/redbeexlivo7.html . This video vividly demonstrates how the system of management influences individual performance. Remember this is an example of how NOT using performance based measures can cause failure (please don’t emulate this).
You might also be interested in reading Harley-Davidson: Preparing for the Next Century by R. L. Nolan and S. Kotha (2006), available from Harvard Business School Press (Product #9-906-410) to see a case study of an organization that does use performance based measures.