Taking the right Measures

Planning for success is a science rather than an art.  I’m sure someone will come back to me on this statement.  Let me state my case…

Most business plans get to a stage where the Directors can thrash out the top line view, the ensuing investments and the resultant profit forecast.  Nice and simple to do (give or take a few arguments) and put into operation for the coming Quarter or Year.  It then becomes important to keep to plan by managing the business.

Directors and Operational Managers need to be able to make decisions to keep on course with the plan and to sustain this going into the following year, the continuum, that we have talked about in past blogs.  The way that they can do this is with a dashboard of critical metrics, a sort of blended alchemy for your type of business that can tell you if the company is beating irregularly and if there are issues with the main arteries of the business processes.  The ‘organs’, aka Business Functions, themselves need critical unit specific monitors to ensure that they are operating ‘to plan’ and contributing what is required.

For the Strategy to be monitored you need a Balanced Scorecard and for the Business Plan you’ll need to have critical lead and lag metrics that give you good insight and foresight on the health of your operations.  The science is to have the right blend of Metrics, but you can also be bamboozled by having lots of other colourful metrics. This is a common failing. Making a decision is hard enough, but if you can’t see clarity in your key metric or it has a contradiction measure by the side of it, the decision can be delayed and you are possibly on the road to failure.

Metric design should be a discussed and agreed with the Executive team and then a process with one acknowledged data source and a common definitive algorithm for its calculation, with quality processes put in place to make sure it delivers to schedule.  Don’t be afraid as an Executive Team to spend time on definitions for the Metrics as it is important that there is no debate abaout validity after they are built. It is also OK to have Metrics from different time lines as long as the Executives agree that the measure is in sync with the causes behind sister metrics.

So what goes wrong in Business?  I see five main areas that cause problems for Companies.

  1. Too many Metrics are produced.  Like trying to understand a Jackson Pollock painting.
  2. Measures are invented for a Business Review e.g North Region Sales presents differently to South Region Sales
  3. Central Metrics from the definitive sources conflict with a ‘Local’ view from a Functional team
  4. Measures fall out of sync with each other, timeline wobble, product revenue creep etc
  5. The Algorithm for the calculation changes

When problems 2, 3 , 4 and 5 happen, a confident Manager can paint a positive or negative picture with available data which will lead to poor decision making.

So, I come back to my original Science statement.  Be creative with the ideas for running the business, but stay scientific in the selection and preparation of your metrics if you want to stay in control of your business.

About David Dugdale
Business Transformation Consultant

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