What do Indicators Achieve?

An organization’s vision, mission, policies, and critical success factors are the starting points for developing a performance measurement system. Think of an indicator as a light, sign, or pointer that gives information as to the direction that an organization is taking in accomplishing its vision and mission in terms of its economic, environmental, and social objectives. In broad terms, indicators represent progress or lack of progress in terms of efficiency and effectiveness. Organizations would like to accomplish their objectives as efficiently and as effectively as possible.

Efficiency metrics are indicators of the quantity of resources (input) to produce some product or service (output) such as emissions per barrel of oil produced.

Effectiveness metrics determine if an objective is met, regardless of cost, such as achieving an absolute level of employee satisfaction.

% of Employees Very Satisfied

However, most organizations would like to achieve objectives with the least cost, thus combining effectiveness and efficiency, sometimes referred to as cost effectiveness.