The Importance of Balanced Metrics
Good metrics foster the behaviors necessary for successful execution. A set of well-chosen and maintained metrics provides clarity for the entire organization. This allows employees to understand how their activities are tracked and how that output will be aggregated into the company’s execution.
Depending on your Strategic Intent, these behaviors can lead your organization to foster collaboration leading to innovation, reduce costs by systematically rooting out inefficient processes, or deliver outstanding service based upon measuring client satisfaction. Regardless of your strategy, you control what you measure, and if employees know what you control, they will adapt their behavior accordingly.
However, the reality is many organizations aren’t maintaining well-balanced metrics. In our work helping clients to improve their execution capabilities, we often see inefficient metrics, such as:
An out-of-date dashboard, containing metrics that are no longer relevant.
“Vanity Metrics”, measurements designed to always deliver positive values that cast their owners in a positive light.
The dashboard is only shared with executives and managers.
Budgets that have progressively drifted out of alignment with the strategy. This may be especially true if Zero-Based-Budgeting is not used, allowing budgets to be continuously carried over without substantial critical review.
Reflect on the following questions:
Do you systematically consider and act on every metric you track?
Do your employees have full access to the metrics that track their activities?
Are your metrics out of date when it comes to guiding today’s work?
Is your budget fully aligned with your strategic priorities?
If you answered “No” at least once, you may need to review your current metrics to make sure they support your strategy execution.
To achieve excellent execution, there must be a focus placed on metrics as soon as the Strategic Intent has been clarified. To successfully promote metric management a few simple guidelines can be implemented.
First, an organization’s metrics must track all of its key drivers for execution. Our company has studied a massive body of research on balanced scorecards. When coaching our clients, we encourage them to consider each element of their strategy while focusing on their key drivers for execution. This process also includes an intervention to assess current standing metrics, removing what is irrelevant or outdated.
Second, it’s the leadership’s responsibility to clearly communicate Strategic Intent, ensuring that the underlying metrics are equally visible and accessible to all. Imagine a bowling alley: what if the pins were hidden behind a curtain? How would you adjust your aim and technique? Allow employees to increase their score by removing the curtain enabling them to adjust their aim accordingly. We recommend reporting company-wide metrics at least once a month.
Third, employees must be empowered to act upon the metrics that track their activity. People fundamentally want to perform well. This requires that each individual has the ability to assess their own impact, along with the opportunity to improve and develop.
Finally, as suggested with operational metrics, budgets should be reviewed to maintain their consistency with the Strategic Intent. Like all metrics, if not frequently re-assessed against the strategy, budgets can inflate over time becoming disconnected from the business’s goals. No manager wants to take a budget cut, however, this discipline may be required to maintain focus on the essentials of the Strategic Intent.
In our next blog, we will consider the impact of a well-designed organizational structure and focused activities on your ability to execute
How well is your business executing? To find out, contact us and we will initiate an assessment of your execution capabilities.