Monday, 1 August 2016

Only meaningful measurements matter

In the early days of my corporate career in the 1970's there was an obsession with 'management by objectives' (MBO), a Peter Drucker concept he introduced in his 1954 classic book 'The Practice of Management'. There was a lot right about Drucker's idea:

Each manager, from the “big boss” down to the production foreman or the chief
clerk, needs clearly spelled-out objectives. These objectives should lay out what
performance the man’s [sic] own managerial unit is supposed to produce. They
should lay out what contribution he and his unit are expected to make to help
other units obtain their objectives. […] These objectives should always derive
from the goals of the business enterprise. […] [M]anagers must understand that
business results depend on a balance of efforts and results in a number of areas.
[…] Every manager should responsibly participate in the development of the
objectives of the higher unit of which his is a part. […] He must know and
understand the ultimate business goals, what is expected of him and why, what
he will be measured against and how (Drucker 1954, pp. 126-9). 

The trouble with MBO in my experience was that the measuring became more important than the doing, and the meaning behind the measuring got lost.

Not a lot has changed in many businesses today where the obsession with data means 'analysis paralysis', and the right intention of having measurements that are meaningful for people has been forgotten or ignored.

Another edict that was prevalent in my early days (and still is in some workplaces today!) was the concept 'what gets measured gets done.' Ruth Henderson, one of the Founders of Whiteboard Consulting Group Inc., makes 4 great recommendations about this concept, and meaningful measuring in general, in a Forbes article here.

Her recommendations:
1. Understand the difference between a measure and a metric.

2. Understand the difference between an Outcome metric and a Performance metric.

3. Figure out what you want to know before you start measuring things.

4. Design your report to tell a story.

The Balanced Scorecard book by Robert S. Kaplan and David P. Norton, published 20 years ago, put forward a key premise for creating measurements of performance that are meaningful for people, that of measuring the intangible being just as important as measuring the tangible. I value the book and it's insights.

I've observed a myriad of 'balanced scorecards' in operation in businesses. Sadly most fail because of too many moving parts, and the same problem I encountered with MBO is evident i.e the measuring has become more important than the doing, and the meaning behind the measuring therefore is lost.

Solutions

Embrace Ruth Henderson's 4 recommendations in your own best way. 

Begin by ensuring that you fully understand the difference between measures and metrics, then start with number 3., then focus on performance metrics (lead measures), and finally excel at number 4 i.e. visuals that tell a story. 

My blog post here will help you with lead measures in particular.

A strong recommendation is that you work with individuals and help them to focus on no more than 3 lead measures per quarter that are in alignment with their personal goals as well as those of your business.

The founder of Buy One Give One Masami Sato's 'Impact Score' is a fine example of the power of a visual to tell a meaningful story.

Interesting take on lead measures and visuals (as below) from Verne Harnish here.


Be remarkable.
Ian

PS Give me shout if you'd like some help in ensuring meaningful measurements are in place in your business. My number is +61 418 807 898.
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