If you don’t know it, I’m a diehard Kansas City Chiefs fan. Third generation season ticket holder (yes, while living 400 miles away in Minneapolis). I was in Arrowhead last week when the Chiefs lost to the Pittsburgh Steelers in the AFC Divisional Playoffs – a devastating way to end the season (especially on a controversial holding call). But it should have never come down to officiating – their offense just didn’t play well enough throughout the game. As a good friend put it: “We could have beaten this team…we were in the game the whole way. But in the end, they scored more points than we did, so I guess that means their team moves on and our team doesn’t.”
Not exactly Leo Tolstoy, but insightful nonetheless. The Chiefs were in the game until the last three minutes. In fact, statistically KC outperformed the Steelers in many ways (they were, somewhat incredibly, the first NFL playoff team to outscore their opponent by two touchdowns and LOSE – the first out of 246 games!). But in the end, Pittsburgh led in the final score, so won the game 18-16. I know fans of the Vikings, Packers and many other teams can relate. Which brings me to the power of measurement…
Measures are critical for keeping score – in sports as well as in organizations. They are critical for decision making. They help translate strategy into action, and then help leaders monitor progress toward that strategy. And they are critical for understanding current – and improving future – performance (of processes, products, services, people, and overall enterprises). But for many organizations, they are something of a mystery. It doesn’t have to be that hard.
Using the Baldrige Excellence Framework as a guide (and pulling in insights from a few other published articles), here are 10 tips that I think generally represent consensus best practice in organizational measurement:
- Measures should be both strategic and operational. Organizations should have two sets of measures: one for tracking progress of strategy, and one for managing daily operations. Ideally, those measurement sets should be linked and aligned, where strategic measures inform the operational measures. Generally, strategic measures are “owned” by senior leaders, while operational measures are “owned” by process owners.
- Measures should be balanced. Organizations should have a balanced, comprehensive set of metrics that reflect holistic performance. Far too many organizations just track financial performance (and maybe some operational performance, such as productivity, cycle time, error rates). But as first championed in the “Balanced Scorecard” philosophy (and as captured in the Baldrige Framework), measures should address performance in at least the following areas: financial, marketplace, leadership/governance, customer-related, workforce-related, and operations/products/services/process. Tracking a balanced set of measures gives a more complete picture of overall organizational performance, helping to eliminate blind spots and helping leaders understand the trade-offs and correlations between different types of organizational outcomes.
- Track both leading and lagging performance. Organizations should track both leading (predictive) and lagging (outcome, output) measures. Ideally, those measures should be connected, so that leading indicators help predict – or at least are correlated with – lagging outcomes. In this way, measures can be a powerful decision making tool. For example, if your objective is growth in revenue (a lagging measure), some of the leading indicators might be number of cold calls, number of sales visits, number of qualified leads, and so forth. Better understanding – and managing – performance in leading indicators will eventually translate into better performance in outcomes.
- Don’t get lazy in identifying measures. Many organizations fall into the trap of measuring only what is easy to measure – those areas where it conveniently has data to capture. Resist that temptation and spend time thinking about what measures are truly meaningful to the success of the organization, and then proceed to try to capture that data. It may take more time, resources, and hard work to get to the measures that actually move your organization forward, but collecting and monitoring – or worse yet, making decisions with – measures that really don’t reflect what’s important is not only wasteful, but can actually lead to poor decisions and unanticipated poor outcomes.
- Be clear on what you’re trying to measure. Spend time defining each key measure: how will it be calculated; what are the data source(s); what is the reporting frequency; who owns the collection of the data; who is accountable for the actual performance itself; and so forth. Being clear on these measurement parameters up front will produce more useful information downstream.
- Get your people involved. Employees – not just senior leadership – should be involved in determining what measures to track (because they’re actually closer to the process!), in collecting and tracking that performance, and in analyzing and using the information. Getting employees involved improves buy-in, facilitates better decision making, and inspires quicker action.
- Collect comparative data. Identify relevant comparisons (benchmarks) for key measures. They could be within or outside your industry; they could represent average, top quartile, top decile, or best-in-class (depending on your organization’s desired level of performance and the current distance in getting there). Comparative data will help leaders gauge relative performance, identify performance gaps, set targets and goals, and see what performance is possible. You don’t need comparative data on all of your measures, but you should have it on your key measures. It gives you a reference point – some context in setting goals and in closing performance gaps.
- Set SMART Goals. Every measure should have a goal – a desired level of future performance, which helps leaders allocate resources and monitor progress. Goals should follow the S.M.A.R.T. philosophy: Specific, Measureable, Achievable (and Agreed upon), Realistic (and Relevant), and Time-Bound. Ideally, goals should relate to external benchmarks as a way to gauge best practice or to determine what’s possible for a given measure.
- Use the measures! Once you start collecting data, be transparent and report results to those who can benefit from knowing it (certainly to employees in the process, but potentially also to partners, suppliers, customers and other stakeholders). Analyze your performance and use the data to make decisions! Just collecting, but not actually using, the data is really a waste of time. It’s helpful to consider performance trends (are you getting better or worse on a given measure over time?) as well as performance against goals and comparative data. To facilitate analysis, sometimes data need to be aggregated from various sources. Data may also need to be segmented (by product/service, by location, by customer segment, by workforce demographic, for example) to gain deeper understanding. Analyzing performance helps leaders determine if they need to course-correct, change allocation of resources, or consider a different set of action plans.
- Focus and go! Pick just a few measures (or even just one) of high value, begin tracking the data, and then learn and adjust along the way. Far too many organizations spend far too much time trying to create the “perfect” set of measures. Do spend some time being clear on what you’re trying to measure (see the fifth bullet above), but don’t waste time trying to get it perfect: just implement the measure(s) and then begin using them to learn and improve. You can always revise and adjust over time.
One of the 11 Baldrige core values is “management by fact,” because higher performing organizations generally use data to make decisions rather than relying on management and employee intuition. I think this commentary from Baldrige captures the importance of management by fact:
“Measurements should derive from business needs and strategy, and they should provide critical data and information about key processes, outputs, results, outcomes, and competitor and industry performance. Organizations need many types of data and information to effectively manage their performance. The measures or indicators you select should represent the factors that lead to improved customer, operational, financial, and societal performance. A comprehensive, yet carefully culled set of measures or indicators tied to customer and organizational performance requirements provides a clear basis for aligning all processes with your organization’s goals.”
And, really, that’s what it comes down to. Measures help leaders and employees “keep score” – they help align action with strategy; monitor progress and facilitate improvement; enhance better decision making; and provide a basis for accountability, recognition, and celebration. They also enable us sports fans to look up at the scoreboard and see which team is winning. Same in business.
If you want to learn more about how to create a measurement system that facilitates better decision making and organizational performance, consider attending PEN’s workshop March 14: “The Metric of Urgency: Using Key Metrics to Link Strategic Needs to Operational Execution.”
And for more information on some of the best practices captured in this article, check out the Baldrige Excellence Framework, APQC, the Balanced Scorecard Institute, and some of the quality resources from ASQ.
What other insights/tips do you have on measurement? Participate in a discussion on this topic: visit our LinkedIn group to post a comment.
Never stop improving!
Brian S. Lassiter
President, Performance Excellence Network
Catalyst for Success Since 1987!
Photo credit imaworldwide.com