Organization Performance Measurement System
Organization performance measurement systems allow a company to judge how well they are doing, and is far superior to any single performance metric. It can help management to balance the short- and long-term creation of value and the board and leadership to determine whether management's policies and strategies are on target. The purpose of the organization performance measurement system is to establish measurement indicators and metrics for analyzing the conditions within the organization to assess how the company is performing with respect key target measures and progress towards long term goals and objectives. 

Measuring Organizational Performance 
​Strategic Performance Management is an approach that makes an organization's strategic goals more transparent to line managers and executives and provides an ongoing mechanism to monitor progress toward these goals through simple and intuitive performance measures. The purpose of setting objectives is to convert managerial statements of business mission and company direction (strategic vision) into specific performance targets, something by which the organization's progress can be measured. 

The organization performance measurement system provides the basis for analysis, evaluation and control of the behavior and performance of the organization as a whole, and its employees. ​Performance measures are defined along financial and non-financial perspectives/dimensions.

1. Financial Measures - Financial category is comprised of objectives  that typically relate to such financial measures as earnings growth, return on investment, borrowing power, cash flow, and shareholder returns. ​Financial performance is important because without adequate financial performance an organization risks being denied the resources it needs to grow and prosper. Since only a company's historical performance - financial and returns on capital - not its future performance - can be measured directly, the potential for future growth and returns must be inferred. 
2. Non-Financial - Non-financial measures may be strategic or operational. Strategic measures indicate whether an organization is fundamentally healthy, in the sense of being able to sustain its current performance and to build profitable businesses in the future, can provide the basis for making these inferences. Strategic measures - which indicate whether an organization is fundamentally healthy, in the sense of being able to sustain its current performance and to build profitable businesses in the future, can provide the basis for making these inferences. Strategic performance measures are needed to prompt managerial efforts to strengthen a company's overall business and competitive position. This category is comprised of objective measures concerned with a company's competitiveness and long-term business position in its markets: growing faster than the industry average, overtaking key competitors on product quality or customer service or market share, achieving lower overall costs than rivals, boosting the company's reputation with customers, gaining a sustainable competitive advantage, and capturing attractive growth opportunities. ​

​Measurement is critical to today's organizations, and is a fundamental requirement and an integral part of the management function of leading and controlling. Performance measurement is the process by which an organization monitors important aspects of its programs, systems, and processes. ​

System of Measures
Organization performance can be defined in terms of a system of measures along financial and non-financial perspectives/dimensions. An example of a system of measures that integrates financial and non-financial measures, such as the Balance Scorecard includes the following perspectives:
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• ​ Financial Perspective - This dimension focuses on measures and metrics that define how the organization relates to shareholders in terms of financial performance, revenue, cost and efficiency. Financial objectives typically relate to such measures as earnings growth, return on investment, borrowing power, cash flow, and shareholder returns. The measures are expressed in terms of market share, revenue growth - cash flow, sales growth, operating income (Gross Margin, Profit Margin, etc.), return on assets, return on investment, increase in $ spent, etc.
• Customer Perspective - This dimension focuses on measures and metrics that define customers' value perception of our value proposition (products/services). Example measures  in key results areas may include: percent of sales from new products, on time delivery, ranking by important customers, market share, etc. These measures are expressed in terms of the outcomes that an organization expects from its strategy. These measures are relevant to understanding how customers see the company.
• Internal Processes Perspective - This dimension focuses on measures and metrics that define the state of output from internal organizational systems such as processes, organization units, individuals, etc., in key results areas such as defined by functional areas in an organization e.g., Credit, Sales, Regulatory & Operational Risk, Marketing, Production/Operations, etc. Examples include cycle time, unit cost, yield, etc. These measures are expressed in terms of quantitative/qualitative measures of performance efficiency, and effectiveness.
• Organization Capacity (Learning & Growth) Perspective - This dimension focuses on measures and metrics that define relevant factors that are indicators of health/strength of intangible assets such as human capital - people development (e.g., competencies, skills, etc.); information capital, and organization capital (e.g., leadership, corporate culture) that are required contributors to successful and effective planning, implementation and execution of a strategy. Examples may include measures of increase in competency / capability that provides competitive advantage in time to develop new generation of products, life cycle to product maturity, time to market versus competition. This dimension also allows organizations to construct measures that supplement performance measures and provide a basis for estimating the organization's ability to sustain creating and delivering value to customers in the future.

These measures make it explicit that management not only must deliver good financial performance, but also must deliver on strengthening the organization's long-term business and competitive positions. The challenge of balancing the need to improving an organization's financial performance and strategic performance leads to closing the gap between actual and desired performance. ​

For example, financial results, impact on customers, how an executive leads and develops his/her people, risk, regulatory and compliance requirements. The measure of intangible asset development and/or increase in strength is modeled in the Learning and Growth perspective, output and input measures in the internal processes perspective, and the impact on vision and mission as outcomes in the customer value outcomes measures and  the financial outcomes measures.

Types of Performance Measures
​Each perspective of the system of measures defines the scope of a domain populated with information from some key results area. The indicators and measures defined for key results areas (KRAs) are agreed upon between the executive management and middle and line managers and is informed by operations strategy. Measures are the actual metrics used to gauge performance on objectives. There are numerous types of measures, including:
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•  Output-Oriented Measures - Output measures/indicators tell the story of what you produced. They are the indicators of products, services, or facilities that result from an organization's projects or activities. Output indicators measure the success or failure of a process or business activity. Output measures do not address the value or impact of your services for your clients.​ Examples of output KPIs include revenues, profits, or new customers acquired. These measures indicate the amount of work performed, or number of services received. This indicator measures what was done, but not how well it was done. Some examples include:number of potholes repaired; number of invoices processed.
• Input-Oriented Measures - Input indicators are used to measure resources needed for a business process or project. They are leading indicators - drivers - that measure the activities that are taking place, and they influence the outcome measures.They are necessary for tracking resource efficiency in large projects with a lot of moving parts, but are also useful in projects of all sizes. Some examples of input indicators include staff time, cash on hand, or equipment required. 
• Efficiency Measures - These are productivity or cost-effectiveness measures, defined as a ratio of outputs per inputs. These measures indicate the relationship between the work performed and the resources required to perform the work. Efficiency measures are often expressed as unit costs. Examples are: Cost per pothole repaired. 
• Outcome Measures -  Outcome/effectiveness measures are results-oriented measures; it is difficult to have an impact on these measures, directly. These measures add efficiency and effectiveness. Productivity ties together work, cost, resources and results. Examples may include: Unit cost per effective meter repair (effective meter repair means that the meter was not returned for further repair within 6 months).These measures add efficiency and effectiveness. Productivity ties together work, cost, resources and results. Examples may include: Unit cost per effective meter repair (effective meter repair means that the meter was not returned for further repair within 6 months). An outcome measure is the level of performance or achievement that occurred because of the activity or services your organization provided. Outcomes - are specific, measurable statements that let you know when you have reached your goals. Outcome statements describe specific changes in your knowledge, attitudes, skills, and behaviors you expect to occur as a result of your actions. Outcome measures measures reflect the quality of work performed. They tie together, work (output measures), resources and results. An outcome measure is the level of performance or achievement that occurred because of the activity or services your organization provided. Examples may include: water meters read per day with less than 1% error.
• Productivity Measures - These measures add efficiency and effectiveness. Productivity ties together work, cost, resources and results. Examples may include: Unit cost per effective meter repair (effective meter repair means that the meter was not returned for further repair within 6 months).
• Quality Measures - These are measures that gauge effectiveness of expectations and generally show improvement in accuracy, reliability, courtesy, competence, responsiveness, and compliance. Examples of quality measures include number of audits with no findings or within a range of accuracy.
• Impact Measures - Impact is the broader or longer-term effects of a project's or organization's outputs, and outcomes.

Measures are the best indicators of performance; they help you track your progress. ​Strategic measures are based on Key Performance Indicators (KPIs) that define how well an organization is progressing toward its strategic goals. Establishing strategic measures involve setting long-term strategic direction and goals for the company. ​

Key Performance Indicators
Key Performance Indicator (KPI) is a quantifiable measure of performance over time for specific objective.  KPIs provide targets for teams to shoot at, milestones to gauge progress, and insights that help people in the organization make better decisions. From finance to HR to marketing and sales. Key performance indicators help every area of the organization move forward at thee strategic level. Indicators can be classified into categories, such as, for example:
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• Leading Indicators - These are  measures - drivers - that measure the activities that are taking place, and they influence the outcome measures. Leading indicators are used to predict the outcome of a change in a process and confirm long-term trends in data. Leading indicators look at what might happen, such as when you introduce a new product or service. Forecasting these indicators can enable predictive decision making in relation to potential industry trends or customer demands.
• Lagging Indicators - Lagging indicators are used to measure results after an action has taken place in order to reflect upon the success or failure of that initiative. Often, they are used to gauge historical performance or to analyze the impact of a business decision. Lagging indicators enable businesses to determine whether their business decisions facilitated the desired outcome.
• Financial Indicators - Financial indicators are the measurement of economic stability, growth, and business viability. Some of the most common financial KPIs include gross profit margin, net profit, aging accounts receivable, and asset ratios.
• Process Indicators - Process indicators are used specifically to gauge the performance of a process and, hopefully, facilitate any needed changes.
• Actionable Indicators - Actionable indicators measure and reflect a company’s commitment and effectiveness in implementing business changes. Those changes could be within business processes, company culture, or political action. These metrics are used to determine how well a company is able to enact their desired changes within specified time-frames.

Financial indicators provide straightforward insight into the financial health of a company but must be paired with the other KPI types, as described above, to provide a complete picture. In general, KPIs should be paired with other KPIs to provide a full picture of the process, service, or outcome you’re attempting to measure.

• Strategic Measures
• Tactical Measures
• Operational Measures
• Capacity Development Measures

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Strategic Measures
Strategic measures are the class of results-oriented performance measures that focus the organization/company on those goals and activities that will make a difference 2, 3, or even 5 years down the road in the survival and success of the organization. Strategic measures are based on KPIs that define how well an organization is progressing toward its strategic goals. Establishing strategic measures involve setting long-term strategic direction and goals for the company. ​The objectives set must ideally embrace a time horizon that is both short-term and long-term. Short-term objectives spell out the immediate improvements and outcomes desired by management. ​​The objectives define common areas of focus for an organization that guide management decisions and actions in order for the organization to achieve its goals. These common areas of focus includes market share, financial resources, physical resources/assets, productivity, innovation, and action planning. Objectives defined for these areas of focus must be prioritized; each business organization having a prioritization unique to it.
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When choosing measures, make sure:

1. To have each strategic objective in the "Customer" and "Financial" perspectives has at least one outcome measure.
2. ​​Assign input-oriented (driver) measures primarily to objectives in the "Internal Processes" and "Learning & Growth" perspectives.
3. Use the measure that best communicates the meaning of an objective if more than one measure is applicable.
4. Do not create more than about 25 measures; this is about 1-2 measures per objective. Any more than that makes it difficult for you to figure out how you are doing.

Strategic objectives serve as yardsticks for tracking an organization's performance and progress. 

Strategic Measures are used to track your progress in achieving your objectives and goals. For example, if your objective is to retain current customers, you'll ask yourself, “How are we doing toward meeting this particular goal?” The answer to that question is the measure. In this example, it may be your customer renewal percentage going up or down. Measures are the best indicator of your performance with respect to the objectives defined in your (strategic) plan. Measures are the best indicators of performance; they help you tack your progress. ​The lead-lag relationship between strategic activities undertaken in the present and the results in the future is enormous, so monitoring the effects of the decisions made and direction set is critical to the long-term success of the organization.

Tactical Performance and Measures 
Tactical performance is how effectively your organization sticks to its strategy. It is the driver of focus and consistency. It allows organizations to increase strength by directing limited resources to the fewest targets. These tactical activities must be used in conjunction with long-term, strategic activities that take a holistic view of the myriad of limitations or failures that directly or indirectly result in less than optimum plant performance. Key among these strategic activities is promulgating standard procedures and processes for each and every plant or company function.

With your tactics, it’s more about your planning and the components therein. Tactics typically have a start and end date, certain allocated resources, and a number of milestones and action items to help achieve the tactic. You want to be sure that you hold each member of your organization accountable for the tactics they’re in charge of, so you should always assign ownership when a tactic is assigned. Viewed together, your tactics will give you the concrete steps you need to track anything relating or tied to your strategy, included related OKRs or KPIs. If you’ve allocated resources to a tactic, remember to track how they’re being used and how much budget you have remaining.

Tactical Measures

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​Obviously, the best practices approach must include a tactical component, but it can’t be the only one. Tactical activities, such as root cause analysis, 5S, Kaizen and the like provide only short-term improvements for obvious problems. The benefits are hard, if not impossible, to sustain.
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These processes define how work is identified, planned, managed and executed. These standards must include a clear, concise methodology for measuring performance as well as means of enforcement. In addition, the strategic activities must include proven change management processes that, over time, will engender a work environment, work ethic and coordination that are essential to sustainable world-class performance. These strategic activities too often are invisible to in-house management and, as a result, are rarely addressed. Instead, management teams continue to concentrate on tactical, quick fixes. Experience shows that few of these “we can do it ourselves” attempts are successful. There’s absolutely nothing wrong with seeking help when you need it. Why are we so reluctant to ask?


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Operational Performance and Measures
Operational performance has become widely accepted as a critical success factor for companies across many industries. It is best described as the level at which all business units in an organization work together to achieve core business goals.  An Operations Key Performance Indicator (KPI) or metric is a discrete measurement that a company uses to monitor and evaluate the efficiency of its day-to-day operations. These operations KPIs help management identify which operational strategies are effective, and those that inhibit the company.

The Operations Performance Measures Model is based on three key performance measurements including: throughput, inventory and operating expense (cost) measures. The Theory of Constraints (TOC) emphasizes the use of these three global operational measures rather than local measures (e.g., efficiency and utilization).
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• Throughput  - This is defined as the rate at which the system generates money through sales, not through production. Goods are not considered an asset until sold.
• Inventory  - This is defined as the money invested in goods that the firm intends to sell or material that the firm intends to convert into salable items.
• Operating expense  - This includes all the money the firm spends converting inventory into throughput.

The objective of the firm, therefore, is to increase throughput and/or decrease inventory and operating expense in such a way as to increase profit, return on investment, and cash flow (more global measures). Increasing throughput and/or decreasing inventory or operating expense should lead to the accomplishment of the firm's goal: to make money now as well as in the future.

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Capacity Development Measures
Capacity development is both the product (change in capacity) and the change process through which individuals, organizations and societies obtain, strengthen and maintain the capabilities to set and achieve their own development objectives over time. Capacity development as a product is defined as changes in capacity over time that facilitates growth of:

• the individual in knowledge, skills and experience;
• the organization and institutions;
• societies 

​Capacity development as a change process involves the establishment and implementation of strategic assets that strengthen the organization's foundation resources enabling the successful achievement of the organization's mandate goals and long-term goals.

Organizational change, and development processes are too uncertain, ambiguous, and contradictory for a standard intervention or initiative - sequence of actions - to produce a 'guaranteed' result. Typically, the outcomes or value delivered by enhanced and/or strengthened asset are causally and temporally separated from the successful development of those assets through cause-effect relations that may involve two or more stages, making it difficult for managers to fully comprehend the contribution of these assets to the strategy execution success/failure. Managers usually know how much they have invested in strategic initiatives to enhance and/or strengthen aspects of the organization and its institutions, but have little idea in the short-term how much value they have created. The lead-lag relationship between strategic activities undertaken in the present and the results in the future is enormous, so monitoring the effects of the decisions made and direction set is critical to the long-term success of the organization. 

Capacity Development Measurement Factors
Most organizations continuously strive to strengthen their capacities to fulfill their mandates. A systemic approach to view the capture of results of these efforts through institutional capacity measures: 

1. Performance - Does the Institution perform more effectively and efficiently in delivering its mandate? Measures of the efficiency and effectiveness of converting inputs to outputs,
2. Stability - Does it do so consistently over time? Measures of the resolution of problems and removal of barriers.
3. Adaptability  - Does it make the needed adjustments to change or shocks to the system? Measures the adaptation to changing realities and demands in meeting its goals and objectives.

Capacity development response must embrace the inherent openness towards the environment as well as working with the complexity of human change. The uncertain, 'emergent' nature of capacity also implies that capacity development is unlikely to be linear, well planned, and predictable.

Capacity Development Growth Measures
Organization system performance system measures allow a company to judge how well they are doing, and is far superior to any single performance metric.

• ​Performance - Measures the efficiency and effectiveness of converting inputs to outputs:

1. Effectiveness - The degree to which the Institution's objectives are achieved
2. Efficiency - A comparison for what is produced/what has been achieved, and resources used -e.g., money, time, labor, etc.

• Stability - Measures the resolution of problems and removal of barriers:

1. Institutionalization
2. Risk Mitigation

• ​​Adaptability - Measures the adaptation to changing realities and demands in meeting its goals and objectives:

1. Investment of Innovation
2. Continuous Improvement

​ These measures can help management to balance the short- and long-term creation of value and the board and leadership to determine whether management's policies and strategies are on target.