emphasis should be on why we do a job"
You can't understand human performance unless you
can measure it directly and precisely.
- One cannot adequately engage in
evaluation at the end of a project unless a thorough analysis has been completed
at the beginning.
- It is impossible to evaluate training
impact unless one first determines what behaviors should be added, changed, or deleted.
- Likewise, one cannot
evaluate return-on-investment unless one has identified during analysis in what
the organization is investing.
How to measure the worth
of performance is the area in need of great attention. It is
important to incorporate planning,
evaluation of results and return-on-investment (ROI) in the beginning of
every performance improvement project so you can influence the business
old adage says, "what gets measured get managed". What gets
measured stands a better chance of becoming successful within the context of an
applied strategic business plan.
If we are not capable of measuring the true
value of a performance improvement project, then we cannot appreciate
its true potential.
The evaluation process must accommodate our ever-changing world. It
is important to become familiar with the most significant impacts on long-term
business growth and development. These aspects include organizational
development and organizational effectiveness. The metrics must measure the ROI in human
capital to the organization.
and design in a way that you can measure
results and ensure measurement is done well. A
key feature of sustained performance improvement is that it provides the
means for self correction. This can only be accomplished through continuing feedback and evaluation.
Develop a solid case that can show why decision makers should choose
a given solution to improve utilization
of financial resources. Connect measuring success with planning for success. Part of this involves evaluating both short-term and long-term outcomes:
- Can your employees perform tasks correctly at the end of
- Are they performing those tasks three months later on the job?
Keep in mind that "Worth = Value - Cost" and how
to determine value and costs. Learn about the Potential for
Improving Performance (PIP), the ratio of exemplary performance to
- Do you have potential for improved performance in your
- How much do you have and what is it worth?
- Would improved
performance help you better accomplish your business goals?
To create profits, organizations make strategic
investments that generate positive cash flows over the life of the investments.
The best figure of merit to use in calculating ROI is Net Present Value (NPV) because
it uses all cash flows for the project discounted to the present time.
present value of net cash flows.
NVP measures the excess or shortfall
of cash flows, in present value (PV) terms, once financing charges are met. NVP
is the most comprehensive and accurate decision making-tool available for business
Because most Chief Financial Officers (CFOs) have a strong finance
background, using NVP means you are speaking their language. Investments need to
be evaluated in today's dollars. Cash flow analysis determines the flows and the
NVP technique values them in today's dollars. In that way different projects can
be compared regardless of timing. The basic idea it remember is: a dollar
today is worth more than a dollar received in the future.
The further into the
future a dollar is received, the greater the uncertainty that it will be
received (risk) and the greater the loss of opportunity to use those funds
(opportunity costs). Accordingly, cash flows received in the future will be
discounted more steeply depending on the riskiness of the project. The
evaluation of any project depends on the magnitude of the cash flows, the
timing, and the discount rate.
Tip: Always work with the client's budget
specialist to calculate NVP when calculating potential ROI of a project.
Want help in acquiring these skills? See the workshops section.