Get your measures right

“What’s the value of measuring speed if you are driving in the wrong direction?”

“If you have too many rear view mirrors , it will be very difficult to see the road ahead”

I see too many managers getting carried away with measuring strategy. When that happens, it does the organisation more harm than good.

But how do you measure correctly. And what do you measure?

Here are 6 important measurement tips to focus on. You can use them to challenge existing measures of check the quality for new ones.

1. Measures: aim for relevance

Performance indicators should be deduced from strategic objectives and measure the degree of achievement. Focus your measurement on the outcomes, not the means. Here’s an example from Balanced Scorecard expert Carlos Guevara: “Once, in a BSC workshop, a Supply Chain Manager told me that one of her key objectives for the next year was to implement a new procurement system. She had even set out the measures and targets – in 15 months the system should ‘go live’. I asked, “Why do you need a new procurement system?”. After a few seconds pause, she replied: “You are right, that’s not my objective, that’s my initiative. My objective would be to improve the efficiency of procurement”. In this example, the real benefit, the outcome, is a more efficient procurement. And that outcome deserves a measure and one or more targets.

2. Measures: aim for simplicity

Using ratios – correlating two variables such as cost per unit or CAPEX per employee – may seem like a good idea at the start, but when your ratios are so complex that you can’t explain if it is going wrong because of your numerator or denominator, using ratios become useless. Measures should be simple to understand and easy to act upon.

3. Measures: aim for recurrent ones

Always spend enough time defining your measures. Stay away from those that can only be measured once a year. Great measures are backed up by reliable data, can be reported frequently and are easy for target setting. First of all, this means no ‘yes/no’ indicators. Indicators should be constantly measurable and suitable to show development over time (e.g. the improvement or deterioration of the indicator over several periods). This means that an indicator that is measuring the achievement of a certain condition, such as a quotation of the division at the stock exchange, is not a good indicator, even though the objective might show strategic relevance.

4. Measures: aim for consistency

Performance indicators have to be consistent over time and across several operating units. It starts with a clear indicator so that measuring the same value by two different people gives the same result and a stable measurement process. How? Make a definition card that clarifies the purpose of the measure, the source of its data elements, the calculation method, frequency of update, data owner or owners and evaluation limits. If management asks “Where did this number come from?”, you probably missed a few steps.

5. Measures: aim for a good mix between leading and lagging indicators

A lagging indicator is an indicator that looks at the past. It trails behind reality and offers an accurate, but historical view of the facts, such as turnover. A leading indicator tries to predict the future. It shows trends before lagging indicators show the actual result, for example, customer satisfaction before customer loyalty. Your dashboard should have enough leading indicators so you can predict where you are going and take corrective action if needed. Having only lagging indicators limits your corrective ability. Also, having a dashboard full of lagging indicators gives you a false sense of control.

6. Aim for efficiency

If it takes you a week to collect the data or you need to reconfigure your complete ERP system to get it automated, you are probably better off selecting another measure.

22 interesting behaviours of a strategy tourist

Many strategy execution efforts are slowed down or even killed by strategy tourists. They ruin performance.

But there is also an upside. I believe their behaviour offers a very useful career guide for the strategy execution hero. Tourist show how execution heroes should not behave. So take advantage of all the strategy tourists in your company and develop opposite behaviour.

THE STRATEGY TOURIST: 22 BEHAVIOURS 

1. In all things, focus on yourself first. You are more important than the organisation you work for.

2. Create diversions when things get difficult. How? Get a consultant on board, preferable a firm with a good reputation, and launch a new strategy.

3. If things still don’t improve , blame it on the consultant.

4. Develop your power play skills and use them as often as you can.

5. Surround yourself with people less smart than yourself.

6. Don’t support hero promotions. High-quality people can make your life misserable when they get into key jobs.

7. Change jobs regularly to outrun major execution challenges.

8. Once you arrive in your new job, tell everyone how bad you predecessor did and start from zero (preferably with a consultant). This buys you at least a year.

9. Focus obsessively on the short run. Go for quick wins that put you in the spotlight. Define long term “something we can focus on once the basics are in place”. This buys you another year.

10. Create walls between departments. Promote ‘Us against Them’. It creates a great diversion from the real issues.

11. Keep crucial knowledge close to you. Avoid sharing or, if you have no other option, do share and tell everyone how important knowledge diffusion is. At least you get some benefit.

12. Compromise over the important company issues, but dig in and fight forever over smaller topics that are important for you and your career.

13. Learn to identify other tourists and bond as hard as you can. Long lunches are ideal: they are effective and enjoyable.

14. Inflate budgets. This gives you enough money to fund you pet projects or cut costs without any effort when you are forced to do so.

15. Fervishly promote work-life balance. It’s a popular topic and it gives you a ligitimate reason to go to the golf course when the sun is shining or quit at 5 PM.

16. Take lot’s of time to promote yourself and actively campaign for a better job.

17. Blame the market, other departments or poor IT-systems for the fact that you are not taking brave, independent action.

18. Always take credit for the work your team did. Never take the blame.

19. Try to join as many steering committees as possible, but avoid taking on responsability as a sponsor or project manager.

20. When a difficult problem shows up, turn it into a project and delegate this to an eager hero in another department. Call it a learning experience or talent exchange. When the project is finished, make sure the person gets a promotion to a job far away from your territory. They might know to much.

21. Learn to outlast passionate resistance from heroes by quietly ignoring it and waiting for it to go away.

22. Develop a good headhunter network and take advantage of your contacts when you feel that you cannot outrun the heroes anymore. Start again, but much wiser, in another company.

 

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