Effectively leverage “The Force” of performance measurement and keep your metrics from going to the “Dark Side.”
Throughout history, a company’s performance often directly relates to what and how it measures success. Acquisitions and rapid revenue growth can easily hide inadequate processes and performance issues, which eventually leads to margin erosion and reduced financial performance.
In a Database Far, Far Away…
The ability to manage both the top and bottom line means you need to measure your performance in ways that build an alliance across many aspects of the organization. One way to achieve this connection is to identify the relationship to your operational processes clearly. This simple link lets you become more proactive, maintain your power, control your destiny, and prevent the fear that could lead your company to the “Dark Side.”
At Centric, one of our key offerings from our Process Excellence (PEX) Framework is performance measurement. It focuses on the health of your company, what you measure, how that measurement drives decision-making and impacts customers, and, ultimately, your bottom line.
Unfortunately, most companies believe they are competent in this arena. Yes, your company may be measuring performance, but do you measure correctly to tell the story? As a result, performance measurement is probably the single most difficult service to sell or get leadership buy-in to the value.
While any project can build its measure of success, linking and cascading those measurements to a corporate strategy has a far more significant impact. When done correctly, this linkage empowers the business, drives performance, and provides your company with a high level of understanding how well you execute and meet your customer’s needs.
Getting leadership to reflect inward — i.e., become self-aware — on how their leadership skills may be driving the wrong behaviors is not an easy discussion to have. However, getting the appropriate help to identify gaps and correct these traits enables your company to move from “norming” to “performing.”
The power of performance measurement through an empowered workforce can shed light and expose the evils of the dark side. Nurturing all aspects of the company with consistent feedback and analysis has many benefits; it helps you simplify processes; improves quality; speeds up decision-making, and empowers your employees to do the right thing for your customers.
Tapping into that force is one of the most rewarding things we can do. Peter Drucker said, “Management is doing things right. Leadership is doing the right things.”
Checklist for Performance Measurement
There are a few key questions you need to consider:
- How do you measure your business?
- Does it link with your corporate mission and vision strategies?
- Do you have a routine process throughout the year to review performance and projects to ensure you achieve the desired results, and the projects drive the expected performance improvement?
- How would you react based on what information you measure today?
- Does every employee know how their work ties into the overall strategy?
- How does what you measure change the actions or behavior of the people?
- Is it driving the right behaviors?
- Does everything you do and every project you run link into your performance measurement plan?
Establishing the Jedi Council – Building a framework for success!
Setting the right framework for performance measurement is key to assuring success for your company, business unit, or project. The ability for companies to establish a strategy with a simple mission and vision that changes over time due to competition, customers, or product trends allows for longevity and survival in the market place.
During my weekly trek to the airport, I was listening to an NPR interview with a Supreme Court Justice. In the interview, the Justice discussed how they interpret the Constitution. I’m paraphrasing, but the quote that stuck with me said, “the Constitution does not change, but understanding the intent and how that applies to today’s environment is what matters.” For me, this statement correlated directly to how to measure your performance best and interpret its alignment to corporate strategy.
Your company’s strategy, core values, and culture should not change. How you execute them, how you interpret the needs of your customers, and how you respond to market demands, however, should continue to evolve.
Establishing a metrics framework that stands the test of time is critical, and it’s one of the most poorly executed aspects of business today. Like Robert Kaplan said, “Step back regularly, and honestly ask yourself some questions about how you’re doing and what you may need to do differently.”
Building Balance in the Force (Measuring all aspects of your Company)
Once you establish the strategy, mission, and vision of your company, you can then help translate these into business metrics for your organization. Utilizing your organization’s end-to-end (E2E) processes, you can then use a balanced approach to help define the overall health measurements of your business.
Balanced scorecards have stood the test of time, and their core theme is still necessary today.
“Imagine entering the cockpit of a modern jet airplane and seeing only a single instrument there,” said Kaplan
While researching balanced scorecards, one of the companies that popped up was Sears. Sears was an early adopter of this methodology, according to “The Balanced Scorecard: Translating Strategy into Action” by Robert Kaplan and David Norton.
While it successfully used the scorecard framework, its ability to assess and evolve its metrics helped to contribute to where it is today. Changing market dynamics, and customer expectation should have redefined what they should be measuring.
“Scorecarding” is not a one-time event. There needs to be a culture of continuous improvement when using your Lean skillsets. Meaning, you must continuously assess your company’s strengths, weakness, opportunities, and threats to truly be an agile organization.
The Power of Four!
Let’s take a more in-depth look into the four aspects of the balanced scorecard:
Internal (Employees): Start here! Without employees, there is no company. This touches on the most forgotten or neglected asset in many businesses. Employee performance is sometimes the hardest area to measure and gain meaningful metrics. Try these metrics on for size:
- Voice of the Employee (Company Surveys, Glassdoor)
- Learning and Development (Capability building)
- Turnover Rates
- Performance Feedback and Mentoring
External (Customers): This area is one of the most critical to understand and continue to refresh based on needs, desires, and expectations. I continue to use ways to define internal and external customers, along with what their basic needs are up to excitement factors. Here are just five metrics to look into:
- Voice of the Customer (VOC)
- Customer Feedback
- Customer Service
- Net Promoter Scores (NPS)
- Customer Segmentation
Forward (Process): Establishing key performance indicators (KPIs) for essential parts of your E2E processes helps balance the lagging indicators with leading indicators. These should help predict issues before they happen and set customer expectations:
- Production Defects for Manufacturing
- Coding Defects of Software Companies
- Turn Around Time (TAT) — i.e., lead times vs. touch times
- Service Level Agreements (SLAs)
Companies often measure in averages, but did you know that your customers “feel variation,” not averages? Look beyond the mean to the range or variation that defines the spread of measurements. “Companies should decide what processes and competencies they must excel at and specify measures for each,” said Kaplan.
Rearward (Financials): I saved this one for last as it is the one area that every company does — but rarely is it done well. Every public or private company does its financials monthly, but to use this information to help define or make decisions is the key to understanding and gaining feedback on what has already happened.
- Revenue (Sales)
- Costs or Expenses
- Inventory Levels or Turns — Working Capital
- Project Savings, Such as ROI, NPV or Payback
- On-Time Delivery
- Fulfillment Rates
Use the land speeder analogy to get a firm grasp on your balanced scorecard. Looking forward is through the windshield — processes — and then looking backward is your rearward, or financial, view. The internal passengers are your employees, and everything external is the customers. You must keep all elements “in balance” to have a successful journey.
The steering wheel is your Business Process Management (BPM) — i.e., strategy, mission, and vision — that define where you should be heading. Note: Land speeders don’t have mirrors.
“These are not the Metrics you are looking for.” Anonymous
Becoming a Jedi Master for Metrics and Warping It Up: Getting the Most Out of Your Performance Measurement
We have accelerators to help with the performance measurement framework. Kaplan said, “If you can measure it, you can measure it.” We typically break the work into three phases: Define, Assess, and Deliver. Depending on the needs of the business, and where you are with your performance measurement maturity, we can select specific steps to help get to the desired results.
Performance measurement is a crucial component to any BPM or PEX organization, but you do not need those organizations to deliver value to the business through thoughtful and meaningful metrics that help define, direct and assure your business is on track to fulfill your goals.
Yes, I crafted most of this while Star Wars: Episode 1 through 3 were playing in the background, but I hope you enjoy the connection!