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Overview of Different Performance Measurement System Models

written by: Suba Lakshminarasimhan•edited by: Jean Scheid•updated: 5/25/2011

After a careful thought process on analysis and research on organizational development, experts concluded the unmeasured performances go uncontrolled and in turn become unmanageable. Learn about different performance measurement system models here.

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    1. HPMS Model

    The hierarchical performance measurement system model or HPMS, links various analytical model levels into a blended one. Through the HPMS model, organizations can measure the performance of each function and its sub functions aligning with the overall company objectives. When the HPMS model is implemented to measure each function in a project level, this process automatically allows the system to measure program level activities. When the organization has a system implemented to monitor and measure the performance of all key functions and sub functions, as a reflux action, attaining organization goal becomes feasible.

    Apart from the individual performance measurement, the generic set categories given below are used as key logistics in the HPMS model.

    • Asset Management
    • Finance
    • Customer Satisfaction through Service
    • Overall and Sub-Functional Productivity
    • Quality Control and Assurance
    The hierarchical performance management system model is highly used in measuring supply chain performance.
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    2. Balanced Scorecard Model

    According to balanced scorecard performance measurement system model, all levels of activities are performed toward achieving organizational objectives; these activities are measured based on one or four strong perspectives.

    Balanced Scorecard Performance Measurement System Model, darktaco, sxc.hu Customer Perspective: Organizations should have goals from the perspective of the customers like customer satisfaction levels, timely delivery of a quality product or service. In order to achieve these customer perspective goals, companies need a system to measure the performance of activities like order fill rate, delivery date and order status. Measurement tools like customer surveys and analysis help a great deal to keep up with attaining the organization’s goals. For example, companies like Starbucks or McDonald's use social media (Facebook, Twitter) to continuously measure their goals on customer perspective.

    Internal Project Perspective: Measuring the performance of internal projects that boost overall excellence is critical for any organization to grow. Internal projects are the pillars that hold the organization together. Develop a model that measures the internal project and functions like HR, finance, operations and administration. For example, circulate a questionnaire to find out what motivates your employees. This process helps to measure a company’s performance affecting employee’s growth, and in turn, decreases employee attrition rate.

    Finance Perspective: Revenue building is the key reason we have companies and various businesses in this world. Measuring various finance related activities is compulsive for companies to be sustainable in the market. The balanced scorecard performance measurement system allows companies to install a system to monitor and measure the key finance activities such as cash flow, return on investment, market share, sales and revenue growth and other income.

    Innovation and Learning Perspective: Organization’s objectives should aim at achieving a competitive advantage by measuring their performance on development of the product to market time, revenue from new product introduction and manufacturing functional excellence. The performance measurement model needs to be designed to measure the tasks related to innovative achievements through continuous learning.

    These are considered the four key components of a balanced scorecard performance measurement system model.

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    3. Frustum or Low Level System Model

    The Frustum is known to point to the lower part of the pyramid by cutting off the top. What does it mean from the organizational point of view? Performance measurement focus is now on the low level operations, not on the top level. The frustum performance measurement system model works on measuring the performance of the functions, activities and people at the lower levels.

    This model helps to:

    • Define the lower level activities at the vertical project architectures
    • Develop lower level activities into key performance indicators
    • Measure economic financial performances
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    4. Integrated Performance Model

    The integrated performance measurement model is designed to measure the integration between the internal and external performances. We all know that it is impossible to make an organization to be productive by eliminating either an internal or external performance. Hence, it is critical to have an integrated measurement model that measures both internal and external activities.

    Integrated Measurement Model, capgros, sxc.hu 

    Be it cost involved or no cost performance, both the internal and external activities are measured with the help of this integrated performance measurement model. For example, measuring the internal performances such as project life cycle time, delivery time and new product introduction leads to measuring the external performances such as the increasing number of new and repeated customers, customer attrition rate and market value of the organization.

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    5. Value Chain Model

    The value chain model is one of the key performance measurement systems used in measuring the overall performance of an organization. The value chain analysis is a key models used in project management.

    This model comprises of measuring the value systems based on the steps given below:

    Step 1: Impact on internal organizational occurrences due to issues such as global calamities, recession, increasing unemployment rates or increased workload.

    Step 2: Impact on functional inputs due to internal organizational changes (as in step one) such as funding problems, employee attrition and lack of technological support.

    Step 3: Action items driven by functional inputs from step two is where the measuring process starts. During this step, the various parameters like money spent per product or overall productivity are measured.

    Step 4: Now, organizations start measuring the outcomes from inputs (as in step three). Data is captured and analyzed; the activities such as quality audit, end products and deliverables, client satisfaction and post sales service are measured.

    Step 5: There are three levels of project outcomes measured in this step.

    • Immediate Results
    • Intermediate Results
    • Ultimate Results
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    Doing It Right the First Time

    Even though we discuss different performance measurement system models, choosing the right one for your organization is essential. Analyze the situation well, gain insights on these various models and then select the best one to measure the key metrics in your organization.

    Resources:

    The Integrated Performance Measurement System Model retrieved from Business, Blind Men, and Elephants, The Need for an Integrated Performance Measurement System by William B.Abernathy, Ph.D at http://www.pmezine.com/Business-Blind-Men-and-Elephants

    The Value Chain Model from The Value Chain Model of Performance Measures at http://reneewing.com/pdf/Appx_A.pdf

    Image Credits:

    Scale/capgros, sxc.hu

    Measure/darktaco, sxc.hu