Pioneers of Performance Measurement
Measurement is in the realm of mathematics. It is about keeping track, about establishing dimensions. Some of the earliest measurement activities in human history track back to 35,000 B.C. and 9,000-6,500 B.C. . Researchers consider them the first measurement tools in human history used for measuring intervals of time
In a business, measuring is linked to the use of money and can be traced back to Mesopotamia, where writing was first invented (3100 BC), banking was first developed (3000-2000 BC), and laws were first used to regulate banking operations (1792 – 1750 BC, The Code of Hammurabi).
Standards around measurement in a business environment are owed to the Venetians, who evaluated the performance of their sailing expeditions by calculating the difference between the investment made by the ship owner and the money obtained by selling the goods brought back by the journey. Venice merchant’s need for a more elaborate approach to evaluating outcomes lead to double-entry bookkeeping system, described by Luca Pacioli’s .While Pacioli is considered today the “father of accounting”, the emergence of the discipline represents one of the earliest illustrations of learning from practice.
One of the earliest books on performance measurement that used used the term “measure” in the context of evaluating performance is: Efficient Democracy, by William Harvey Allen. It was written in 1907, not before the age of management consultants, business schools and strategy gurus. Allen was a practitioner, secretary of the Committee on Physical Welfare of School Children and General Agent of the New York Association for Improving the Condition of the Poor. He wrote on education, healthcare and philanthropy.
In 1920-1925 DuPont started using Return on Investment as a performance measure, one in a long series of business and technology innovations that emerged from the company.
In 1951, General Electric introduced the use of key corporate performance measure, through an initiative commissioned by the then CEO, Ralph Cordiner. The selected measures were grouped in categories such as market share, productivity, employee attitudes and public responsibility.
In the 1970s, General Motors used a system of performance measures that included non-financial indicators, considered a precursor of the Balanced Scorecard as measurement tool as introduced in 1992.
In the 1990s, performance measures use gained in popularity across a variety of sectors, most importantly in government. Not all implementations of performance management systems were smooth sailing and sometimes they generated more harm than good. However, both good and bad experiences contributed to making more informed decisions about the use of measures by learning from practice.
Practice has lead the emergence of management concepts and not the other way around. The use of performance measures has evolved organically over time, consultants being facilitators and enabler of better results, but not drivers.