KPI BASICS #10: What Are Baselines, Benchmarks, Targets and Standards?

Summary

In this video, the speaker clarifies the distinctions between four key performance terms: Baseline, Benchmark, Target, and Standard. They explain how each term applies to performance measurement and improvement: Baseline represents current performance, Benchmark serves as an external reference, Target defines a future goal to strive for, and Standard sets the expected minimum level of performance. By understanding these concepts, organizations can avoid confusion and set clear, actionable goals to improve performance effectively, ensuring everyone is aligned and focused on the right objectives.

Takeaways

• 😀 A baseline represents the starting point for performance measurement and comparison, often defined as the average current performance level.
• 😀 The baseline helps distinguish routine variations in performance from actual changes or improvements.
• 😀 A benchmark is an external reference point or standard that is used to compare and assess performance against industry or global best practices.
• 😀 Benchmarks can be used as targets when they represent the highest standards achieved by others in the same field or industry.
• 😀 A performance target is the desired future level of performance, set with a focus on long-term improvement and efforts to redesign processes and capabilities.
• 😀 Simply asking employees to work harder to meet a target without addressing underlying process capabilities can lead to burnout and inefficiency.
• 😀 A performance standard is a defined level of quality or attainment, such as a customer promise that needs to be met consistently (e.g., fixing problems within two days 95% of the time).
• 😀 Standards are often about meeting current commitments and ensuring that business processes are capable of maintaining consistent performance.
• 😀 Targets are future-oriented goals, while standards apply to the present state and measure performance against current promises or commitments.
• 😀 Clearly defining and discerning these terms in an organization helps prevent confusion and inefficiencies in performance measurement and improvement efforts.

Q & A

What is the definition of a performance baseline?

A performance baseline is the minimum or starting point used for comparisons. It represents the average level of performance that you are currently at, and it is used to compare future performance levels to test if performance is changing.

How is a performance baseline different from routine variation in performance?

A performance baseline is the central reference point for your performance measure. It is not just a single value but an average. Routine variations in performance should not be mistaken for a change in performance, as they are expected fluctuations, not indicative of improvement or decline.

What is the purpose of a performance benchmark?

A performance benchmark is used to compare your performance to external standards. It typically comes from outside your organization, often representing best practices or the performance levels achieved by other organizations in the same industry.

How does benchmarking contribute to performance improvement?

Benchmarking provides a reference point against which you can measure your own performance. By comparing your results to best practices or industry leaders, you can set more realistic and achievable targets for performance improvement.

What is a performance target, and how is it defined?

A performance target is the level of performance an organization aims to reach in the future. Unlike a baseline, which is the current level, a target represents a goal that requires time and effort to achieve, often through process redesign and skill development.

Why is the word 'attack' not ideal in the definition of a performance target?

The word 'attack' in the definition of a performance target is not ideal because it carries negative connotations. Instead, it is more fitting to describe a performance target as a level of performance the organization is aiming to reach in the future, focusing on growth and improvement.

How can performance targets be achieved without burning out employees?

To achieve performance targets without burning out employees, it is crucial to redesign underlying business processes and ensure that systems are capable of supporting the desired level of performance. Simply telling employees to work harder without improving the system will lead to burnout.

What is the difference between a performance target and a performance standard?

A performance target is a future-oriented goal, while a performance standard is a present-oriented benchmark that represents a level of quality or attainment that should be maintained consistently. For example, a standard might be fixing customer problems within two days, 95% of the time.

How do standards play a role in performance measurement?

Standards represent the level of performance an organization is striving to maintain, such as a specific time frame or success rate. They are crucial in monitoring how well an organization is meeting its promises, but it is important to note that having a standard does not guarantee business processes are capable of meeting it.

How can an organization improve its processes to meet performance standards?

An organization can improve its processes by redesigning workflows, enhancing skills, and refining capabilities so that business operations are capable of consistently meeting performance standards. Performance improvement efforts should focus on process design and capability building to ensure the standards are achievable.