Andy Row asked who determines metrics, and what happens in the case of
This is my "philosophical" contribution:
An organisation is an artifical construct which can only maintain its
equilibrium when it satisfies the parties who support it. Without going
too deeply into Stakeholder Theory (capitals), it is simplest to call
these supporting parties stakeholders (small letter). The goal of a
company is therefore to create value for its stakeholders. No value, no
support. No support, no company.
Since the principle nothing-for-nothing also holds for companies, the
creation of value involves a form of trading, an exchange process. Ergo: a
company creates value for stakeholders by performing exchange processes
with them. Goldratt's Theory of Constraints offers a valuable next step:
whatever contributes to this goal is "productive".
If a company is to maintain its equilibrium, it must assure that it is
productive for all its stakeholders (which I am inclined to limit to only
3: customers, employees and shareholders -which is another discussion and
irrelevant here ). Any set of metrics -or Performance Indicators- should:
* measure productivity
* ultimately implode into 3 CPI's (corporate performance indicators)
expressing the value created for stakeholders.
Who determines CPI's? They are the subject of negociation and
agreement/acceptance (on a literal "take it or leave it" basis) with every
individual stakeholder, who will consider all relevant environmental
Since: a) there is nothing outside a company except stakeholders, and b)
it is impossible for all stakeholders to negociate with one another, this
task is performed by one or more managers.
Management represents all the other stakeholders in the negociations with
each individual stakeholder, and, as a consequence, becomes responsible
for the creation of the agreed value, as measured by the agreed CPI's.
The production of value entails a vast number of processes, which should
all be monitored and adapted to be optimally productive (i.e. contribute
to the creation of stakeholder value). This results in an equally vast
number of PPI's (process performance indicators), each measuring the
productivity of a specific process. They are determined by the process
owners, but they are the ultimate responsibility of management since they
implode into 3 the CPI's.
Affiliated Lecturer, University of Groningen, The Netherlands
Senior Consultant, MSP Associates, Amsterdam, The Netherlands
Guido Thys <email@example.com>
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