Commitment and alignment are critical success factors for any strategic initiative. Metrics are by far, the best tool for alignment because they create a singular focus on strategic performance outcomes and their enablers.
Leaders of strategic initiatives should regard good metrics as a priority. Metrics will help foster learning, support the strategic initiative story, integrate the many components, and encourage good decision making.
What Makes a Good Metric?
A good metric – or set of metrics – does these six things:
- It measures something important. If the word strategic means important, then metrics reflect the imperatives of the individual or the organization.
- It has relevance to the audience. Since strategic initiatives have difference stakeholders, one of the biggest challenges is to prioritize the audience and tailor messages to them.
- It measures something that is directly controllable by individuals or small groups. This suggests that metrics are local, and connected to action.
- It is resistant to gaming. This is the counterbalance to localization; that is, the metric is difficult for self-centered actors to manipulate.
- It is a member of a very small, lean set of measurements. Since people have a limited span of attention, we want to keep the metrics to a handful: five to seven metrics is advisable.
- The set of metrics includes both leading and lagging indicators. No one drives their car by focusing on the rear view mirror, they look down the road to see the turns and respond to the threats. This analogy holds well for the set of metrics.
Metrics versus Measures
The concept of metrics is distinct from the term measures. An organization’s accounting system can measure thousands of performance indicators, frequently yielding “measurement clutter.” Thus, the term “measure” is a generic term referring to anything that be captured as a measurement, regardless of usefulness.
A metric is a subset of all measures. It is a measure that is relevant to someone: it has meaning (tells a story) and causes action. A metric is to a measure as information is to data. They are limited in number and effective because they stimulate action.
People have a limited ability to process information, so they employ filtering. A metric is a signal that cuts through all of the noise in the organization. Metrics reflect and reveals people’s values and reward systems; they are part of the organizational culture.
Metrics both reflect and shape the organization’s culture. People can only pay attention to a handful of things, so the question for any change agent is what metrics are preserved and what new metrics are needed to encourage people to move in new directions. The metrics that matter are those that are valued by the culture, or believed to be new signals of something important.
Example: What Earns You Your Bonus?
IBM is a company staffed by thousands of accountants and reporting systems many of them involved in measuring individual performance for the purpose of promotions and bonuses.
Several years ago, I was there supporting a strategic initiative that involved improving the new product development process. One day’s task involved helping a group of senior managers understand how project management enabled its product development process to be faster and more productive. The managers listened dutifully and asked many questions. As the day wrapped up, I noticed they were scheduling a follow up meeting to discuss their “game plan.” Was this game plan good or bad?
They explained that every year a new strategy and set of objectives came out of corporate headquarters, and that individual bonus and promotions were tied to the objectives. This group of managers made it a practice to schedule an offsite where they would develop a spreadsheet model. Through their analysis, they figured out how to create the right enablers for that model, so that they could maximize their share of the bonus pool.
These were smart people who cared about their careers. They needed to know what was considered important and how it would be measured, so they could align their actions accordingly. The commonsense principle,
Tell me what is being measured and I’ll tell
you want people are paying attention to.
Lesson: Never Overlook the Importance of the Individual
When I introduce the principles and practices of metrics to audiences, I ask them to take a moment to think about their performance objectives for the year. I then ask them to answer this question:
What are the five to seven things that you
must accomplish in order to earn your bonus? How will you measure and report your success with them?
The same principle applies to strategic initiative performance. What are the five to seven things (including leading indicators) that you – as the strategic initiative leader – need to focus on?
So, What are the Metrics that Matter?
The metrics that matter are those that are relevant to you and your audience. You develop metrics by asking and answering questions such as these:
- What is our performance gap and how do we define success?
- What leading indicators are most useful?
- Who will see the metrics, when, and in what reporting format?
- Are the chosen metrics effective and impactful?
As an example of a strategic, I’ll return the Domino’s pizza turnaround. One performance gap was to improve sales revenues, and the vision for success was to make a claim that “our pizza tastes best.” The metric for performance was consumer preferences in a blind taste test, and Domino’s continually tested different formulations to improve its score on that metric. It made its “Oh Yes We Did!” product launch announcement when its metrics supported its advertising claims.
What metrics have you used for strategic initiatives?
- That’s the Fact, Jack: Data Drive Strategic Initiatives (leadingstrategicinitiatives.wordpress.com)