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Performance Measurement

Frequent performance measurement is essential for effective management control.  It provides the feedback needed to evaluate performance and take prompt corrective action when necessary.  A management information system that delivers timely, accurate operating and financial results is a requirement for meaningful performance measurement.  

Organizational planning should produce a time phased comparative standard or baseline for variance analysis and frequent performance evaluation.  Performance measurement must integrate operating, financial, and investment outcomes to provide a complete picture of current performance and a basis for estimating future results.  

Performance measurement validates the estimating relationships used in the planning and budgeting process and indicates how the organization's functions (subsystems) are relating to each other.  It is the difference between managing for results and supervising a level of effort.

Symptoms of of inadequate performance measurement

  • Uncertainty about the current status of the enterprise and what actions to take.

  • No clear correlation among operating, financial, and investment reports and results.

  • Ineffective communication among departments creating a silo or bunker mentality.

  • Reactive responses to events generating a continual firefighting atmosphere.

  • Unfocused, inconsistent, and hectic management activity.

  • Performance degradation due to a lack of timely or appropriate corrective action.

  • A general feeling of powerlessness and inability to control events.

Three Sigma's services

We assist executives establish a formal performance measurement and evaluation process and build a management information system to provide timely feedback of the required data.

We coach executives how to regularly measure performance, analyze variances and determine their root causes, and identify needed corrective action.  

We conduct management control and information system audits to help executives examine their current management control process, identify the information needed for effective performance measurement, and develop and prioritize corrective action plans as needed.

  • Our audit instruments are constructed from the Cost and Schedule Control Systems Criteria developed by the Department of Defense to evaluate the management control systems of their prime contractors.  

  • Each criteria area is judged using a series of questions posed to management and examining objective evidence that substantiates the responses to these questions.

  • Prior to implementing a management control and information system audit, we conduct an interview with the organization's management to determine whether an audit is appropriate and if so, to determine the scope of the audit, the time required and fees.  This pre-audit interview is complimentary except for any out-of-pocket expenses incurred.  This interview can be conducted by phone and e-mail if desired.

  • The audit consists of a series of questions posed to management and then examining objective evidence that substantiates the responses to these questions.  These answers and objective evidence are evaluated against the criteria in our audit instruments and any deficiencies are documented and prioritized. 

  • We assist in the development and implementation of action plans to address any deficiencies identified in this audit.

We provide follow-up audits to evaluate the effectiveness of corrective actions taken and the current status of planning, budgeting, and management control system improvement efforts.

For executives who choose to improve their performance measurement systems using their own resources, the following models are available on this website and can be copied or downloaded free of charge.

We provide coaching on-site, by phone or e-mail to help or facilitate using these models.

Expected results

A performance baseline integrating all organizational activity communicates the organization's game plan and clearly establishes accountability for results.

Ongoing variance analysis and evaluation enables timely, more effective corrective action and strong management control.

Effective performance measurement shows executives where they should focus their efforts and set priorities.  This enables proactive management and more time for strategic thinking. 

Copyright 2002 Three Sigma, Inc.