Manage metrics in this modern age
A new world of data records
The development of economies and our passion to digest information leads people and business into a maze of metrics. The intent to understand, learn and improve variables in life and at work opens new doors of opportunity but also a feeling of helplessness.
The use of these metrics requires execution and high response speed to maximize results. Companies measure the lighting lux value, office temperature, number of customer calls, sales conversion rates, employee satisfaction, on time delivery – indeed the list is almost endless.
Chasing the numbers
A good manager prides themselves on the knowledge of their metrics. They understand the performance trends and operate an ability to control them. This helps develop a brand and robust performance for the department and business. I have witnessed many meeting debates where excessive time and energy is spent on the merits of different metric methods. Have you also experienced the same? You may find yourself chasing the latest trend in data visualization to share metrics that no longer engage staff. The sea of traffic light and smiley face presentations give way to percentages and pie chart visual chaos.
Headless chickens in the office
Do you find that many of your metrics are no longer being statistically significant and traced to a direct strategic goal? Instead of fewer but more relevant metrics, there is a competition to display how many areas of the business are “in control”.
The department heads seek to gain more attention of people, technology and budget resources through a display of metrics to justify their means. To avoid such scenes senior leaders need to emphasize and reward a focus on the key and strategic measures as a priority.
Questions to the reader: How do you differentiate your metrics and priorities to generate success and improved performance? Do you feel you are in an office of headless chickens running from metric to metric?
If your management team, IT departments, leadership and operational staff are too focused on metrics then it becomes clear to see. There are heated discussions in the board room, managers try to out show each other’s metrics or argue over the context of the data shown.
Dashboard and white boards are covered with noisy metrics and a display of charting is in dominance. The conversations at the coffee machine equally highlight the frustrations.
Business strategy impacting metric design
A lack of clear business strategy is one of the compelling reasons for too many metrics. If your business and department has a clear understood set of values, vision and mission from which key strategic goals are generated then you have a bigger chance to control the number of metrics.
Does your company strategic vision generate metrics?
A business will focus on the strategic relevance and significance of each measure during its development. So, a business that needs to improve the payment terms of suppliers for improved cash flow purposes may track a payment term metric until it is under control. The metric should then be dropped and managed through future purchasing contracts regulation.
Clarification of KPI's and critical success factors
Read this prior article to understand the differences between Critical Success Factors and Key Performance Indicators. Within the article we bring you to a conclusion for setting unique characteristics of your business into metric design.
The digital paradox of computer power
The paradox of computers is not the ways in which they make life easier, but the ways they allow us to think we should control ever more information.
The needs of new metrics are understandable. New metrics can be created from regulation, customer needs but also interests and desires from change of management.
If metric reviews are not taken on a periodic basis, then the manager runs the risk of spending time and effort on out dated and less relevant metrics.
Value and cost factors
The time spent collecting, reporting, processing and controlling out of date metrics could be spent on more value adding strategic improvement actions. I find the areas of “quality” and “performance” becomes almost the untouchable areas of review. Within your business, who recently asked “what is the fit for purpose of this metric to our strategic goals?”
The changes to performance management, KPI and Enterprise Performance Management systems have generated an upward trend of metrics and new “KPI’s” generated. Seldom is there a challenge of existing metrics. A review of the value and costing for performance is necessary to retain a lean business.
Creating metrics control
Here are some take away steps to create and generate improved control of your metrics:
· Current state – Start with a review of your vision, mission. Then review the needed critical success factors, key performance indicators as based on long term strategic goals. Understand any short term events/impacts/opportunities that can help speed up progress with a short timed effort (see payment term example used above).
· Create a performance management framework – Design the needed metrics and KPI’s for a 3,6,12 and 36month basis. Keep these intervals so fine tuning of the system effectiveness can be developed and reviewed. This creates a platform of strategic control and priority across the business functions.
· Education – Ensure a technical understanding of metrics versus KPI’s and critical success factors exist. Ensure basic levels of statistics are understood by decision makers. Ensure that the method of visualization and frequency of reporting is agreed for the benefit of the business.
· Accountability – Define the rules of engagement, responsibility and accountability at individual level for KPI’s. This helps improve the cultural responsibility and provides the foundation of recognition and rewarding for high performance. There needs to be an admission that not every measure and metric can be controlled, the question is to find the most significant and impactful ones.
· Measurement is OK – The difference between data collection through measurement and creating metrics can have a significant impact on resources. Understand that low cost and minimal maintenance of automated measurement data is OK and can be of great use at some future time. However there is no urgent need to create a defined and agreed metric from each data set.
Startup business Metrics Case Study
A new business seeks to understand if there is a viable market for their service or business. Many companies and founders will pursue what is called as vanity metrics. These are the metrics that show website visits, events attended, recording what is said. However the best uses for impactful metrics in these cases are best as follows:
How many people have been engaged and spoken to?
What is the difference between what the market states and how it behaves?
Established business management reporting case study:
If your metrics, KPI’s and dashboard are not creating questions, answers and action then your business may be operating in a phase of delusion. Consider the following company names Nokia, Motorola, Kodak, Rover, and Myspace. Each company was industry leaders and had the full capacity and capabilities to create new markets, expand and grow. Each business however failed despite their market positions because their focus on KPI’s and metrics did not correlate to the actions needed to support their market.
Designing the relevant metrics
Metrics are created from various input measurements. The mix of Qualitative, Quantitative and Comparative measures within a business helps to create a balanced and validated focus on the most impactful decisions and performance improvements for your business.
Your relevant metrics should be combined using various measures that support and help make management decisions on the resources your business uses, improvement and prioritization of core activities and your desired future core competencies with a clear strategic outcome goal.
Agreeing the correct trend and bias of leading and lagging metrics is important as your business model and environment changes. The lagging metrics helps steer performance relative to prior measures and leading metrics help move the business into a future desired state of performance.
Lazy metrics management traits
One of the biggest errors seen in generating an overabundance of metrics within a business is to have the specific and relevant metrics for your business and then adding “industry standard” or “competitor installed metrics”. The risk of measuring what everyone else is doing is confusion to priority, resource management and generates too many external distractions away from your own business/departments focus and strategy.
Confusing metrics for data science.
Our abilities to track and trace a pair of socks ordered online have high relevance at times of forgotten grandparent’s birthdays. Most other times of the year the relevance is low. However the delivery business and supplier cannot know what is relevant per each order and so often your inbox will be loaded with battery delivery information and other low priority items. The fact that we can monitor these data points often means we do. This also brings a paradox seen with the use of analytics, big data and business intelligence systems.
We see the collection points of every area in the business, from coffee break times, to telephone usage times, to critical process costs, sales transactions, warehouse product churn rates, social media likes and an endless number of other listed, noted and recorded activities. This data is then placed into analytics software and business intelligence tools for review.
A busy manager often uses the collection points of these sources and seeks to manage them through measures, plots and analytics. I do not doubt that you have seen cases where trends are shared and reported upon on areas that quite simply are just needed and offered low impact of value to the business.
What are the top 3 areas your business measures low impact and low value metrics?
The key message is that not all measures are worthy of sophisticated analytics. Simply put, there may be no need to apply a data scientist to work on information that should be ignored or simply managed.
How to apply a decision tool to review metrics
Placing your metrics and KPI’s into a visual tool offers fresh perspective and insights for management decisions. The below tool is used by JAMSO clients as a first time review to group and gain the correct oversight of the existing metrics and KPI’s used within a business. JAMSO offers more complex tools for deeper analysis but for the purpose of this free article we offer you this specific matrix for your free use and reference.
1) Ask leaders, managers and relevant stakeholders to place the metrics separately into the specific quadrants with a next 12month and separately a 36month time window aligning to the company’s strategic goals and vision.
2) Present and discuss your findings with each other to agree a common business of the correct placements for the 12month and 36 month time frames. This often highlights priority and silo debates so may require strong facilitation and moderators.
3) Implement a commitment to trial the new metrics for an initial 6 month period. Reviews should be held at monthly intervals and a deeper discussion at 3 month intervals.
We find this tool has helped all stakeholders gain clarity and a shared vision for performance measures.
The steps and overview we have presented today offers a first step improvement and foundation stone for business reviews. No company wishes to join the examples of Kodak and many other businesses that have fallen foal in the wastes of business history simply due to managing too many tactical and low relevant details.
Indeed the examples of correct strategic focus and clear metrics and key performance indicators enables companies to transform their staff retention levels, improve customer satisfaction and bottom line values.
This can be seen with leading examples of companies whom have applied the OKR methodology. See my article on that process here.
Have you other questions on the subject of how to manage too many metrics? If so then write a comment below or send us a message so we can respond to you directly.
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Written by James Doyle, founder of JAMSO. We have over 200 free articles, tools and resources for your success.
JAMSO helps people and business in the areas of metrics, goal setting, key performance indicators and performance management.