Useful Metrics that have nothing to do with measurement.

There are many ways that metrics tie organizational strategy to execution including organizational alignment, clear outcomes, refined action plans, employee motivation, compensation benefits and more, but one of the most powerful applications of metrics has nothing to do with measurement at all.

One of the top ten reasons for failure in a strategic planning process is that the plan is written, then it gets placed on a shelf where it collects dust. Certainly communicating the plan immediately after its preparation is important, but without constant reinforcement, the strategic plan's message grows stale and its message becomes forgotten.

The powerful thing about metrics is that measurement must be continuous. Just as an organization needs to turn out monthly financials (financial metrics), a well-executing organization will track key metrics on a monthly basis as well. Ideally these metrics will be on a dashboard and shared across the organization.

One of the greatest strengths of metrics, then, is that they serve to continuously reinforce the strategic plan to all team members on an ongoing basis. They keep the organization focused on the few Most Important things that need to be done and help to maintain organizational focus against the threat of day to day entropy that takes over daily activities.

So, by all means measure for measurement's sake, but also remember to measure for communications' sake.

Metrics: Right or Left Brain Activity?

I was reviewing one of my favorite books, Daniel Pink's A Whole New Mind: Why Right-Brainers Will Rule the Future and thinking about metrics and whether they are a right brain or left brain activity.

The initial response, of course, is that metrics are a numbers-based, quanitification-oriented activity that must be a left brain function. These are logical, step-by-step activities if they are taken at face value. Who are the primary metricians in a corporation? The accountants - who, by definition are left-brainers.

The reason Daniel Pink got me thinking about this is that when properly deployed, metrics are not about measuring routine activities, but rather they are about conceptualization, systems-level thinking and big-picture approaches to problem solving in business.

Metrics are borne of big ideas. Sam Walton is well known for saying "you get what you measure." The question about "what do you want to get" in a company is typically a board level/executive level function that includes setting the company's vision and mission, clarifying its values and setting its goals.

Metrics are how you go about achieving the vision, mission, values and goals. There is a lot of creativity involved in translating those high level objectives into specific, measurable actions that are carried out by each and every member of the organization. When you have a goal such as "Provide world class customer service." there is not much for your staff to dig their teeth into in how they carry out their day-to-day activities.

Hermes is the greek figure who served as the messenger of the gods. His job was to translate the deities' messages into a form that was understood by the mortals. The job of creating organizational metrics is no less challenging than this. Abstract concepts such as "world class customer service" consist of many critical tasks and projects that must be carried out, each of which has measurable outcomes. By focusing on these measurable outcomes we empower teams to use their creativity and to gain ownership in how the outcomes are achieved, while creating a crystal-clear description of what specifically needs to happen.

After all this has happened, it falls to someone to collect, organize and present the metrics data. And "yes", I suppose this is a left-brain activity, but this collection and presentation of data is not what metrics is about any more than cleaning paint brushes is what an artist does when he is creating a painting. Cleaning the brushes is an integral part of the process, but comes well after the creativity has occurred.

Metrics: Focus on the Future or the Past?

Are Metrics Based in the Future or the Past?

When you hear the word “metrics” what do you think of? Measurement of results and outcomes of a process? Or do you think of metrics tied to strategic initiatives with future outcomes?

Your perception of metrics as future or past based will have a lot to do with how you use metrics and what you can get out of them.

A good example of this distinction is the way that W. Edwards Deming approached quality management. One of Deming’s “Fourteen Points for Management” as described in his book Out of the Crisis (p. 23-24), was that companies need to “cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.” Thus, Deming’s approach was not to use metrics in the past (dependence on inspection), but rather in the future (building quality into the product in the first place.)

Metrics is at its most powerful when it is coupled with the strategic planning process. Ultimately it becomes cyclical so that it drives process in the beginning of a change and then measures results as they become available. Organizations then practice continuous process improvement by taking the resulting metrics into account when fine tuning their strategic plans, until ultimately the desired results are achieved.

Six Dilemmas Challenging Organizational Execution

Strategic planning commonly involves establishing a vision and mission for an organization. From there, objectives are determined and sometimes an action plan is created to help achieve the objectives. Unfortunately, many organizations stop there and the plan goes on the shelf with little more than lip service when it comes to execution.

Why do organizations so often drop the ball when it comes to carrying out their most important goals? There are many reasons and, to be sure, achieving change is difficult. The strategic use of metrics can help with this challenge. Some of the ways that metrics can be applied to organizational change include:

1) Dilemma: Everyone is on board with the action plan, but the goals appear to be intangible and it is not clearly understood how they will be achieved.

Metrics force an organization to define what it is that they REALLY want in terms of outcomes and behaviors. There is nothing so difficult that it cannot be measured, although finding the right measures requires special skills.

2) Dilemma: There is organizational resistance to change.

Metrics help an organization to clearly understand "who is on board" and who is not. Reward systems built around clear metrics provide inducement to team members to get on board and disincentives to those who passively or actively resist the change.

3) Dilemma: Everyone is excited about achieving the new goals, but different groups within the organization have different ideas about how to achieve those goals.

Use clear metrics to align your teams together with an agreed upon action plan that focuses everyone's actions on the same goals. Metrics alone will not ensure alignment because there may be many ways to achieve agreed upon measures. In this case, the important thing is to understand that metrics can be deployed at many levels of specificity. You may measure a very low level of specificity by setting a goal of increasing organizational profits, for example. There are virtually infinite ways that teams may work to achieve this goal. If your metrics have very high levels of specificity, however, then tasks are more easily aligned. So, instead of saying that your goal is to increase organizational profits, an organization may say that it will increase sales by 5% by engaging in a Search Engine Marketing campaign with a budget of $50,000. Within this specific goal, there should be a host of metrics such as cost per click, click through ratios, conversion rates, cost per sale, etc. There may be many such specific goals that all support the more general goal.

4) Dilemma: The problem with metrics is that "you might just get what you asked for."

Someone actually told me this at a conference earlier this year. Of course, the powerful thing about metrics is that you might just get what you asked for. Anything that is powerful requires special handling and forethought. If you choose the wrong metrics, you may get the wrong outcomes. For this reason, a rigorous process, complete with risk analysis and feedback from key stakeholders is critical. Also, organizations need to be flexible. If you don't get your metrics right the first time, by all means, come back and adjust them until they are right.

5) Dilemma: Our organization can't get perfect measurement data, so there is no point in measuring anything.

It is true that perfect measurement data is rarely, if ever, available. The goal of using metrics is not to achieve perfect measurement, it is to drive organizational behaviors aligned towards agreed upon outcomes that help to achieve the organization's mission and vision. Your metrics must be chosen carefully so that they not only support the desired outcomes, but so that when compensation is tied to metrics, the system is perceived as being fair and just by those who are participating.

6) Dilemma: Sometimes the cost to collecting the data can exceed the benefit of the behavior that is measured.

An organization should never use data collection methodologies where the cost of collecting the data exceeds the benefit. Organizations are often surprised with just how many metrics they may already have at their fingertips where the cost of collecting them is close to zero. Every organization is experienced with metrics and invests in them. Financial metrics are a requirement and entire teams of people are deployed to collect these metrics so that income statements and balance sheets may be prepared, taxes paid, payroll met, etc. The most expensive metrics to gather are those that are in the past. Transactions need to be researched and reports prepared. It is always easiest and most cost effective if metrics can be built into the day-to-day processes that an organization conducts, so that at the end of each period, the measures are easily available.

The Denial of Uncertainty

Probably the biggest challenge to good strategic planning is those who are in denial of uncertainty. Regardless of what they may say, these people's actions indicate that they do not believe in uncertainty. They deal with the uncertainty and unpredictability of the future by creating concrete action plans, along with detailed task lists designed to achieve success. Their belief in the certainty of the future is reinforced by the coincidence that the future does, in fact, often behave like the past.

Where this belief falls apart is when the future is complex or long term horizons must be considered. In these circumstances, the risks of unpredictability become greater and more robust planning methodologies need to be employed in order to avoid surprises.

Scenario planning is one way of anticipating the future's surprises and developing a response for MANY possible future worlds instead of just one fixed view of the future. By anticipating many possible futures, we can understand commonalities between them, assess risks more realistically, and when liklihood and impact of a possible future is great, we can take actions to either mitigate or take advantage of that future state.

Those who are in denial of uncertainty are guilty of either oversimplifying the planning process, or of the false belief that when there is uncertainty, there is nothing we can do about it, so we may just as well ignore it. Good strategic planning always embraces uncertainty and builds plans that are robust enough to address multiple possible outcomes.

Retorts to "That's Not Measurable"

Here's a great list from Stacey Barr, the performance measurement expert at www.staceybarr.com

So when someone tells me something’s not measurable, here are seven of my favourite retorts:

1. If that goal were happening now, what would be different?
2. How would you know if you’ve reached that goal or not?
3. How would anyone else be convinced whether or not you’ve reached this goal?
4. Imagine you’ve already reached that goal – what would you be looking at to convince you of this?
5. What exactly is this goal trying to change or improve?
6. What problem is this goal going to solve or fix?
7. If you don’t have this goal, are your or others going to miss out on?

Now you’ve got some more productive alternatives to giving up, next time you here those words, “That’s not measurable!”

Seven Lenses of Innovation

There are a lot of ways to innovate and coming up with the latest 3D computer mouse does not have to be the only way to achieve competitive advantage through innovation.

Some will have you think that innovation is something that just "happens" or is a rare thing like getting struck by lightning. If you want to create a culture of innovation in which innovation is a regular and expected part of doing business, then you will want to think about what kind of process will create continual innovation and what spheres in your organization are most ripe for innovation.

One way to systematically think innovatively is to apply "lenses" of innovation to your organization. Lenses are ways of looking at something in order to find opportunity. I like the lens metaphor because innovation rarely occurs in just one area of an organization. You may find that your innovation encompasses two or more of the lenses listed below by the time you have successfully implemented it.

Think of each of these seven lenses of innovation as a "question" that you ask yourself about how your organization operates. Do the homework and study internal and external trends in a rigorous way in order to determine if these lenses show you strengths or weaknesses, opportunities or threats for your organization.

Brand Innovative ways of creating an experience and message around your product or service. The brand encompasses everything else the organization does. Starbucks created a new experience around coffee that became its brand.

Process Innovative ways of doing things to increase competitive advantage. Provide faster, stronger, cheaper goods and services by applying process changes. Ford Motors' invention of the assembly line forever changed the manufacturing process.

Supply Chain Innovate in how products are sourced and produced. Dell innovated in the supply chain by creating a "mass customization" model that allowed customers to order a custom computer that was rapidly manufactured and delivered.

Distribution Chain Innovation in how products are sold. Redbox innovated in video DVD delivery by creating automated vending machines with a low cost $1.00 per day model vs. using high cost, outdated stores.

Product: Innovation in product or services, hybridizing or finding new ways to use existing products, incremental or total innovation of product or features within products. Apple reinvented the cell phone with its iPhone product.

Market Innovation in finding new markets for new or existing products or services. Demographic shifts create shifts in demand due to new economic conditions (think consumerism in China), age (think retirement communities in the U.S.), environmental issues (think water conservation in Africa). GE used a combination of product and market innovation to create a low cost electrocardiogram (ECG) machines to open new markets for healthcare product in India.

Business Model Innovation in one or more Types such that the entire business model is new. Southwest Airlines simplified their process and reduced prices to gain competitive advantage with a new and unique business model

When Scenarios Don't Go Far Enough

Scenario planning can take on many forms. In its simplest state, scenario planning may include multiple outcomes, but only under certain circumstances. Because we cannot develop scenarios for the infinite number of possible futures, we need to be able to evaluate our scenarios constantly in order to understand when they are no longer effective.

This circumstance happened to me during the recession of 2007-2010. I had developed a scenario based recession plan for a firm with the foresight to see a downturn coming and to prepare itself for the worst.

We developed a set of leading indicators that were both external (interest rates, capital availability, new housing starts, etc.) and internal (profitability, staff utilization rates, new business won, etc.) A dashboard was created and monthly updates were reported to the board.

Targets: For each leading indicator we had targets. If a particular office was hitting its targets, then it would show as green. If it was below the target, within a range we had specified, then it would show as yellow, and if it was far below the target, then it would show as red. This system allowed managers to see which offices were performing and how the firm was doing overall with just a glance.

Because a good scenario plan should be action oriented, there were actions related to each of the three levels. When yellow ranges were hit, then certain costs such as travel would be cut. When red levels were consistently hit, then staff reductions were recommended. After a certain amount of time, consistent "red" performance led to the closure of an office.

This system worked great during the first portion of the recession. It made sense to limit costs and to reduce staff in order to match resources to workload. After three or four rounds of layoffs, however, the company had closed several offices and lost key people along with their knowledge and business contacts. Within two years the firm was down to half its original size.

You can say that the recession scenario plan worked because the company is still solvent and in business today. The downturn has leveled off and staff are optimistic about new business on the horizon as the economy recovers.

The critical point of view would say that at a certain point, cutting costs was no longer effective. Had the scenario analysis been fully fleshed out, there may have been triggers for taking time out to reinvent the firm. This could entail analyzing the new competitive environment and understanding the changing needs of clients. Studying social, technical, economic, environmental, political and legal trends would have revealed new opportunities and threats. Re-engineering processes in order to be able to do more work for lower costs would have improved the company's competitive position and positioned it to come out of the recession stronger than it was when it went in.

The lesson learned is that scenarios must be continuously reevaluated and redeveloped as situations change. Sometimes drastic innovation is easier in times of crisis than when everything is working well and people have the "if it ain't broke, don't fix it" attitude.