What Gets Measured, Gets Done

I spent nine years running a US subsidiary of a Germany company. Their obsession (at least the group I worked for) with metrics gave me an appreciation for the power of metrics to elevate the performance of individuals and organizations.

The terms “metrics” and “performance indicators” are used synonymously. Most companies use some level of financial metrics for performance reporting to stakeholders. The focus of this article is on using metrics for performance improvement.

The value of written goals has been discussed in hundreds of business and self help books. What is often missing or understated is the critical process of quantitatively tracking the progress towards achievement of the stated goals. Without the appropriate metrics, there is no accountability and little chance of goal achievement.

Metrics create an environment of accountability throughout the organization. An organization that closely tracks performance indicators or metrics creates a culture where goal achievement is the norm and where there is no room for mediocrity.

These performance indicators also provide a way to convey corporate goals to the organization in a tangible form and get buy-in at all levels. It also sets an example that the company management is holding itself accountable for success.

How do you know what performance indicators you should be tracking in your business?

1) Start with your strategic plan and the goals you have set for the organization. List the general topics that relate to the goals i.e. customer service, asset utilization, financial performance, market share, employee retention, etc.

2) List critical success factors for each topic that if achieved, will directly contribute to attaining each goal.

3) Define a specific metric for each critical success factor that will track progress towards its achievement.

Just as the attainment of goals can be chunked down into components that can be delegated in the form of individual objectives, the associated metrics can likewise be used to create accountability for groups or individuals and thus align effort within the organization.

Metrics are important for reporting performance to stakeholders and for making fact-based decisions. The real power of metrics comes from creating the accountability that drives performance improvement. Consider adopting the “metrics obsession” like my friends in Germany. It will do wonders for your business.

“We promise according to our hopes, and perform according to our fears”
-- Abraham Lincoln

The High Cost of Being Right

It’s human nature to want to be right. Have you ever pursued a course of action (or inaction) that in hindsight, seemed to defy logic. We all possess the capacity to rationalize a decision; a capacity which may dissuade us from paying attention to what our instincts are telling us about a situation and postpone a corrective plan of action. In this sense, “Being Right” is a high price to pay.

In my own career I have been guilty of this on more than one occasion. I once hired a VP for a remotely located business unit and within 30 days of his start date, my gut was telling me this was not the right person for the job. I continued to invest in this person for 8 more months to prove to myself that my original decision was right. The opportunity cost to the company far exceeded the actual cost of paying this person’s salary.

I see examples of this in just about every business I work with. Often it occurs in important areas such as strategic decisions to enter a new market, sell a new product or service, or work with a new partner. People get so invested in their original decision that cutting their losses and moving on happens much later than it should. This results in a real cost plus an opportunity cost to the company that could have been significantly reduced.

So how do you thwart human nature?

Here are a few suggestions that have worked for me:

1) Set unambiguous, quantitative objectives upfront that must be met in specified timeframes (30/60/90/180/360 days) for the strategic decision to be viewed as a success and on-track.
2) For decisions related to people, the early objectives should be behavior based i.e. within their direct control.
3) If objectives are missed, don’t rationalize. Have a peer, who is not afraid to tell you like it is, review the situation. This will help you remain objective.

Being objective and being persistent are not mutually exclusive. Persistence is the key to most successful endeavors. When persistence is combined with objectivity, you have an unstoppable combination. Marshall Sylver refers to this as “failing forward fast”. This is to quickly recognize when a decision or course of action is flawed, cut your losses, adjust your course and move on toward the ultimate goal.

“Confidence comes not from always being right but from not fearing to be wrong”
- Peter T. Mcintyre