Tuesday, February 14, 2006

Measuring Performance In Services by McKinsey

McKinsey Quarterly has an interesting article ,Measuring Performance In Services.

Here is a small part of the text. To do so, it is necessary to bear in mind a few essential principles of service measurement.

First, service companies need to compare themselves against their own performance rather than against poorly defined external measures. Using external benchmarks only compounds the difficulties that service companies face in getting comparable measurements from different parts of the organization.

Service companies must look deeper than their financial costs in order to discover and monitor the root causes of those expenses. This point may seem self-evident, yet many companies fail to understand these causes fully.

Finally, service companies must set up broad cost-measurement systems to report and compare all expenses across the functional silos common to service delivery organizations. The goal is to improve the service companies' grasp of the cross-functional trade-offs that must be made to rein in total costs.

None of these principles is easy to implement.

... by developing internal trees for each service line can a company begin to understand its true cost drivers. A tree allows a manager to compare the performance of different accounts against similar metrics and also to calculate which improvements will have the most impact on the top-level figure.

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