Strategic Performance Measurement

Can the small or medium sized business use management techniques more typically used by larger companies? In the opinion of this writer, the answer is a resounding YES! This paper will introduce to the small to medium sized business (SMB) a " big company " management method known as strategic performance measurement (SPM). It is also sometimes referred to as the " balanced scorecard " approach to strategic planning. A quick way to introduce the concept of SPM is to compare it to the more familiar tool for managing a business, the company budget process. Most SMBs use a budget to plan and control their business. This very familiar tool is used to communicate to various constituencies, e.g., employees, functional managers, bankers, or board of directors, what's expected of the business and what activities the company will undertake in the upcoming 12 month period. It is usually broken down in excruciating line item detail of revenue and expenses for each department in the company. This gives everyone a good idea of what the company is expecting of them whether as revenue producers (e.g., the sales department) or as a cost center (e.g., the production department). It also provides a basis for managers to monitor whether the company's activities are performing at the level necessary to produce the profitability expected for the year. It also can alert everyone to where some problems may lie so action can be taken to address these shortfalls to the plan. What is Strategic Performance Measurement? Now we can move to describing what strategic planning and SPM is all about and why it is just as important (if not more important) to making a business successful as the budget process. Just as with setting near-term direction for the company with a budget, management has the responsibility for setting longer term strategic direction and goals for the company. Examples of strategic management activities are deciding what markets the company will target and determining what is required of the company to compete in these markets. What specific products or services will be offered customers and why? How will a competitive advantage be achieved and sustained with these products and services? How are employees best trained to be most effective in handling the needs of customers? What internal processes are most critical to improve in order to reduce cost or increase level of service? Simply put, SPM focuses the …