Measures, Metrics and Indicators

Perhaps this is why the main concern in these projects is the correct implementation of BPMS, BRMS, SOA, and all the dictionary of technological acronyms involved, relegating the business-related aspects (and performance management, consequently) to a secondary plan.

An important point to achieve process performance management is the definition of good performance indicators. These indicators should allow managers to monitor the business and serve as triggers for action when the process performs differently than expected.

MEASUREMENTS x METRICS x INDICATORS

First of all, it is necessary to clear up a common confusion in the use of the terms “measure”, “metric” and “indicator”, which are often mistakenly taken as synonyms.

Measure

According to the BPM CBOK – version 3.0,

“Measurement is the quantification of data to an acceptable standard and quality (accuracy, completeness, consistency, timeliness).”

Measurement is the evaluation of a quantity by comparison with another quantity of the same kind taken as a unit. When measuring the length of a material or part, for example, the meter can be used as a unit, that is, the object measured is represented as a fraction (or multiple) of the meter.

Measurement represents a datum.

Metric

The BPM CBOK definition, states that:

“Metric is an extrapolation of measurements, that is, a conclusion based on finite data.”

According to this definition, a metric can be understood as the relationship between two measures of equal or different magnitudes. An example would be the number of defects identified in a batch of finished products (defects [number] / batch total [number]).

Another example could be the ratio between the total number of calls made by a Customer Service (CSR) and the number of hours worked by customer service representatives (calls [number]/hours worked [time]).

Indicator

According to the BPM CBOK,

“Indicator is a representation in a simple or intuitive way of a metric or measure to facilitate its interpretation when compared to a benchmark or target.”

Indicators represent information from which to evaluate a situation and its historical evolution. However, poorly defined indicators can lead to erroneous conclusions. For example, taking only the number of customer complaints, month by month, over the year, and finding that the absolute number of complaints increased over the period does not necessarily indicate a worsening business.

It is clear that if your company makes 1,000 sales in December and has 10 customer complaints, it is a better situation than if you made 100 sales in January and received 5 complaints. Proportionally, the number of complaints will have dropped from 5% (5/100) to 1% (10/1,000), although in absolute numbers they will have doubled.

Of course absolute numbers can be good indicators, depending on what you want to evaluate. But indicators that relate different metrics and measures allow you to put reality into perspective and make better comparisons, as in the example above, because although the number of complaints has grown in absolute terms, the situation has actually improved.

GUIDING INDICATORS x OUTCOME INDICATORS

When defining indicators for the purpose of monitoring process performance, many organizations define their monitoring dashboards based on metrics that focus only on the desired outcome and thus miss the valuable opportunity to monitor not only the outcome of the process, but its execution. Thus, the outcome is known only when there is nothing more to be done to bring the process to a favorable conclusion for the organization.

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