“What’s measured, improves” — Peter Drucker
The difficulty with most strategies is not the content of the plan or the accuracy of the data, but the execution. Most strategies fail due to poor execution. As I have mentioned in previous posts, there are a number of reasons for poor strategy execution. (see 2011 Posts: Best of Strategy Execution )
Our philosophy of metrics can be summed up in the following statements:
- “If you don’t keep score, you are only practicing”
- “A strategy without metrics is just a wish. And metrics that are not aligned with strategic objectives are a waste of time.”
- “Be careful what you measure—you might just get it.” That is, by measuring something, you are declaring to your managers and employees that an activity is important.
One of the hidden barriers to effective strategy execution is the lack of metrics that are specifically related to the strategy and the strategic objectives of the company. Most organisations have dozens and dozens of metrics which are reviewed frequently by the senior team as well as other metrics at the functional, departmental and project level. The interesting part about a number of these metrics is that they were developed under earlier strategies and have been kept, and then added to, even though they may or may not reflect the current goals and objectives of the organisation. Sometimes having poor metrics is as bad as no metrics at all, since metrics tend to drive what executives focus on.
Rely does an organisation take out a blank sheet of paper and come up with a current list of metrics, ones that actually are derived from the strategy they are supposed to measure.
Clear, concise and relevant metrics serve multiple purposes within the strategy implementation process:
- Governance: Metrics allow us to manage and govern the overall focus, attention and resources we give to certain business activities.
- Reporting: This is the most commonly identified function of metrics. We use the Line-of-Sight Execution Roadmap™ metrics to report performance to ourselves, our employees and other stakeholders.
- Communication: This is a critical but overlooked function of a metric. We use metrics to tell people both internally and externally what constitutes value and what the key success factors are. People don’t easily understand value, but they readily understand metrics.
- Opportunities for Improvement: Metrics identify gaps (between performance and the expectation). Intervention takes place when we have to close undesired gaps. The size of the gap, the nature of the gap (whether it is positive or negative) and the importance of the activity determine the need for management to resolve these gaps.
- Expectations: Metrics frame expectations both internally (with our personnel) and externally (with our customers). Metrics help set customer expectations. For example, if we say that we deliver by 9:30 a.m. next day, we have formed both a metric (i.e., did we meet the 9:30 deadline) and an expectation. We will satisfy our customer if the order arrives by 9:30. We will disappoint otherwise.
A CEO… should be tracking and managing by the numbers; the nonfinancial numbers. By the time financial results turn downward, it is far too late to act. Financial numbers measure the past and lead to “rearview mirror management.” -James Heskett
Tight Lines . . .
John R Childress