Measure what you want to manage (not the other way around). To understand why, let us start with a case study:
Like many organisations, this FTSE 100 Company’s executive team had a vast amount of data at their fingertips. Their monthly report contained around 120 measures. The Chief Executive could drill down to individual retail outlets, and look at Saturday’s product sales for all their categories, first thing Monday morning.
We had been brought in for a relatively common problem. As the Chief Executive put it, “They don’t get the strategy”. So we read through their strategy documents and interviewed the executive team to understand the strategy. At the first workshop it became clear that what was in the paperwork was not what they considered important. Like many organisations there were vast reams of documentation and thinking in some parts (retail offering in this case) yet very little about the store positioning (having the right offer in the right place).
Getting down to 26 measures – measuring what they wanted to manage
Why they didn’t get it is a story for another newsletter. By the time we had finished the Executive team were down to 26 measures to manage the strategy for their business. But here is the interesting bit: Only 12 of those measures were amongst the 120 in their monthly management report. The other 110 in their management report were useful diagnostics and detail, but they were not part of changing behaviour and driving the organisation forward. Performance measures vs managers of performance. Moreover the 14 missing measures were spread between
- Those concerned with the culture, skills and behaviours that would help to change the organisation and move it forward
- Measures of what the customers actually thought.
Aspects of the strategy that were not represented in the management report. In particular this covered the vital new product & service development pipeline and store portfolio management.
In other words they were now starting to measure what was important and what they wanted to change, rather than what they could measure. So…
“Measure what you want to manage, (not manage what you can measure)”
Yet this behaviour is so common, so it is important to understand why. Why do organisations end up having so many measures that they cannot see the wood for the trees? Why do they tend to measure what they can measure, rather than standing back and thinking what should we measure.
Well there is a simple reason for this. They are doing it because it makes sense. Imagine for a moment you have just taken over a new role. It’s a department, unit, organisation, product you do not know. So what will you do? You’ll dig around, walk about, talk to people and gather as much information as you can. It makes sense when, as a manager, you are in a diagnostic and fact finding mode. You are trying to find out what is going on with a unit, department, product or process. You gather as much information as you can to piece together a picture and diagnose the underlying problems and causes. You put in place ways to measure what is going on.
But this is completely different to motivating someone. If you want to influence a person’s, team’s or organisation’s behaviour how many measures would you use? 120? 100? 50? Of course you wouldn’t. You would use maybe 3 or 4 or perhaps 6 at most. Any more and that would confuse the issue, wouldn’t it. So this leads us to the next principle:
“Be absolutely clear what you are using your scorecard for”
There are plenty of examples of this in the private sector but an interesting (but not amusing) example comes from the public sector. In the health service some measures are generated by parliamentary questions. An Member of Parliament asks a question and a measure is set up to answer the issue that is raised. All the hospitals in the land are not responding to the Department of Health’s requirement to provide more information. So a measure is created. But what stops it being measures. The MP get their question answered and moves on. Yet now all these administrators are collecting this information, which is no longer required. They get added to. They do not get removed. When I was first told this story it included a room in Leeds where the printouts are piled up and locked away and no-one ever looks at them. Whether that is true or not is irrelevant. Most organisations have done similar things in the past.
A test of a good balanced scorecard
So a useful test of any scorecard or strategy map is, “What am I trying to achieve?” “What purpose is this serving and what effect will it have on the organisation?”
You will appreciate that this is why we spend time with clients working on what the information is used for and helping them move from continual diagnosis to influencing behaviour and checking that it happens. You will of course recognise that as performance management.
As you think about how your organisation does these and what diagnosis would help you can think also about the workshops we can customise to suit your particular circumstances and needs. When you want more information on these take a look at Seminars, training and workshops
By paying attention to just why you are measuring, you will start to improve the value of your balanced scorecard in your business. Of course, you realise, there are other key principles that will make a difference. In your next few newsletters we will look at how strategy, people, focus and ownership affect things. In subsequent newsletters we will also set out
Of course if you are impatient, we can do on-site seminars and workshops to help your organisation make sure your investment in performance management and its strategy make a real difference.