Do you measure up?
The best measures encourage behaviour that enhances the achievement of strategic goals. When both lead and lag measures are used together, forecasts for future performance are more reliable.
One of the most challenging areas for KPI development is human resource management. We know that highly motivated people underpin productivity and growth – they help the workplace buzz with energy and are magnets to the brightest and the best – but what are the measures which will encourage this?
Traditionally the focus has been to increase satisfaction and so surveys abound with questions that rate the interaction between the individual and the firm. In my opinion these are limited, not because they have little use as they are very useful, but because they focus on what has already occurred. To create a firm’s future we need to identify measures which will highlight the route we need to take.
So let’s start at the beginning, or should I say, at the “end”. Let’s take a picture of what your firm or division will look like when it’s successful.
My prediction is that you desire your firm to have the people, clients and suppliers who you enjoy being with, where your people all work together to the same goal, where the firm is able to deal with every surprise without disruption and where its financial results strengthen year on year. I also predict that you wish to work to the best of your abilities, as do each one of your people. Regardless of my accuracy, your goal must be clear to everyone to get the results you want.
Draw me a picture of the people in your goal please: What are their behaviours? Where do they come from? How do they work together? What are their skills? The greater the number of ‘pixels’ the more likely your picture will come true. The greater the clarity, the more likely you will create measures that actually work. So dig deep and imagine, in the largest number of pixels that you can.
Consider the measures you have now. Which are promoting the behaviours you want? When was the last time you assessed their usefulness. If you are like my clients then you are regularly considering the measures, but not all firms are like this. Don’t worry, everyone has to start somewhere.
Lead and lag measures
There are two types of measures: Lead measures and lag measures. Lead measures are activities which lead to a goal. Sales calls are a lead measure as they lead to the lag goal of sales. Lag measures record the past. Used together lead and lag measures can predict the future.
Let me illustrate.
Lead Measures Case Study:
Let’s describe your firm: It is made up of five divisions: Marketing and strategy, Service delivery, Service development and technology; People; Finance and administration. You have six service delivery offices located in Australia and elsewhere. You pull people in from any location to meet client needs. You provide several services and clients can use the whole suite, or only one or two. Generally a client comes in with one service in mind but it is likely that they need more than this. Your firm is proud of its ability to tailor its service to each client.
One of the behaviours in your ‘end goal’ is teamwork. Teamwork can mean different things to different people. You and your people have identified that success of the firm requires the following team behaviours:
- People feel as though they are of one firm, not 6 separate offices
- Product development comes from meeting of all minds, not just those in the division
- Client experience is everything – When working on one project, all personnel and suppliers seek to identify new services which can achieve the client’s profit and other goals
- Creativity is underpinned by diversity of thought (DoT), meaning race, gender, age and religion
- Standards are high
There are many measures that could be applied to each of these. The way they are created depends on the activities in the process. I will show each against the behaviours already noted.
- People feel as though they are of one firm, not 6 separate offices – Measures – Number of global face to face meetings; For every assignment, number of locations from which staff are pulled
- Product development comes from meeting of all minds, not just divisional minds – Measures – Number of cross functional teams; Duration of teams
- Client experience is everything – When working on one project, all personnel and suppliers seek to identify new services which can achieve the client’s profit and other goals – Measures – Number of mid project meetings where the agenda includes opportunities; Number of followup meetings with client
- Creativity is underpinned by diversity of thought (DoT), meaning race, gender, age and religion, division – Measure – Decisions are noted against DoT criteria
- Standards set high – Measures – Number of celebrations for stretch goals met and for failures where something is learnt
You may disagree that these are teamwork indicators believing they fall under respect, innovation, service or something else. It doesn’t matter what you call them, what matters is identifying the steps to the goal, and then measuring it.
The chosen lead measures will be determined by you and your people as those key activities which will build the culture and results needed for your firm’s success. On their own however lead measures are limited. Lag indicators are also required so that the impact of the measured behaviours is known. Oftentimes results are not as expected so both need to be used.
The following are some examples of lag measures.
Employee Satisfaction data
- Absentee rate (or number of workdays missed)
- Annual turnover of full-time permanent employees
- Average length of service for employees
- Average number of employee suggestions implemented
- Employee turnover rate
The ultimate measures are of course profit and business value. If your measures are doing their job, then both should improve.
Lag indicators are generally easy to identify and collect as they come from your data system. By using a combination of lead and lag measures you are able to trial behaviours and then see if they produce what you want. You also improve decision making as cause and effect is clearly seen.
Measures in general
Measures must be influenceable by the team or individual. That is why the measure of profit does not always get the result desired. If a Manager is charged with an increase in profit but only has authority over a small element of its creation then the measure may not the incentive desired.
The number must be “enough”. The number is to suit the situation and ability of the individual or team. A measure that influences the behaviour of an Executive Assistant will likely be different to that applied to a Divisional Head.
A great KPI story is about British Airways which was reportedly turned around by focusing on just one KPI: Flight departure delays. The Chairman was to be notified wherever he was if a plane was delayed. The senior BA official at the relevant airport knew she would receive a call from the Chairman so BA planes soon had a reputation for leaving on time.
The timely departure of an aircraft was a lead measure and one which was essential if BA was to achieve its goals. It contributed to customer satisfaction, and pointed to problems with suppliers, possible additional costs from penalties and passenger overnight stays, and more.
The Chairman only needed this one measure to evaluate his performance, but his team needed to be across many more.
Creating measures must suit the situation and the ability of the person to control the result. Only then can the ‘right’ number of measures be determined.
Remember: What gets measured gets done.
My challenge to you today: Design your measures keeping the end in mind and be prepared to test a few until you get the result you want. And don’t forget to track the results you may find the predictive abilities useful.
Let me know how you go.
Jennifer is a strategy implementation coach who helps leaders turn their strategies into results.
She assists executives and business owners to achieve goals such as improved profit, productivity, leadership skills, business value. Her services are Business and Executive Coaching, Group Facilitation, Strategic Planning, and advising on Board Governance.
To find out how she can help you, call +61 439 520 182 or email.