Over the years, I’ve worked with a lot of people who were just taking their first steps into performance measurement. Without guidance, it is very easy for those first steps to involve looking over someone else’s library of 1001 indicators & metrics and picking a couple dozen that look good at the time. But that approach is likely to require too much data collection effort and fail to produce the kinds of successes your business needs. Here are my top 5 Tips for ensuring that your performance indicators focus your business on achieving its own goals and identifying watershed moments.

Take a Balanced Approach

Performance measurement should further your corporate strategy. In order to avoid measurement for its own sake, establish a clear link between each performance indicator and an organizational goal. I’m a big fan of the Balanced Scorecard since it helps you keep your focus on a balanced view of what’s important. Start by setting goals in each perspective of the Balanced Scorecard – Finance, Customer Service, Internal Processes, and Employee Learning & Growth. Set one or two goals in each perspective. Over time, you can build from there. Viewing your organization through all these perspectives will give you both an assessment of past performance and of activities which will create future value.

Choose Objective Measures from Existing Sources

Subjective statements, such as aiming to “be the best” in your market, have their place. But they are not well suited to performance management. Performance measures must be verifiable, which also means they must be quantitative. As much as possible, choose performance measures for which numerical data is available from existing sources. Data sources like sales figures, production numbers, training initiatives and customer surveys which you are already collecting have the added advantages of avoiding disruptions to your business, while reducing your implementation time. Look carefully at the sources of information you already have and choose performance measures you expect to have the greatest impact on achieving your goals.

Monitor Opposing Forces

For each performance measure you identify, it is essential to evaluate whether it is possible to game that measure to the organization’s detriment. For example, increasing your rate of production or speed of service could also result in increasing the number of errors or the cost of rework. Therefore, any such measure should be paired with a measure of potential adverse consequences.

Record Whole Activities Instead of Indicators

If your goal is to increase each day’s total sales, it will not help your cause to set up a performance indicator so that each day you enter a date and a total. Instead, enter all the relevant information about each sale that occurred: when, where, by whom, to whom, why, how and how much. By doing this, you preserve your ability to analyze and gain insights you cannot yet imagine. The data you enter in this way will allow you to present reports and scorecards with multiple levels of abstraction which will have meaning to executives, department heads, line employees and even customers.

Make it Interactive

Performance measurement is valuable because it communicates a set of priorities. Letting people know what’s important encourages them to make focused decisions. If your scorecard is not interactive, it will rob your people of the tools they need to make data driven decisions. Select a performance measurement tool that lets your people put indicator scores into a context that is meaningful to what they are doing at the moment. Letting people select the time period they want to review is not enough, they also need to have access to results by customer, location, and a range of other meaningful criteria.

What do you think? Are there other factors that should be considered when developing corporate performance measures? Let me know in the Comments.

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1. Watershed Moments: How Managing Strategy Execution Improves Business Performance

The next time a situation arises that dramatically alters your business environment, will you notice it? How quickly? Watershed moments in history have shaped our world and our view of it. The impact these changes have on our lives can seem to be a matter of chance. But in business, they are as much a matter of leadership and execution.

Everyday shifts in customer preferences, regulatory changes and other events create the potential for watershed moments in business. Successful organizations recognize the risks and opportunities that arise and then execute timely responses to capture new business. The next time a watershed moment comes along for your business (or a client’s business), who will notice? Will it be the CEO, someone several rungs down the ladder, or no-one at all?

At companies without formal strategy execution in place, as few as 8% of employees are even aware of the corporate strategy. It is not surprising then, that merely half of those companies will have achieved success in their last major change effort as compared to 97% of companies using strategy execution systems. Viewed from another perspective, while 70% of businesses with strategy execution systems consistently outperform their peers, only 27% of businesses without one do. Strategic success is 2-3 times more likely with formal strategy execution systems in place.

Strategy execution provides a framework for translating strategy into action by ensuring that the behaviors of employees at all levels of an organization are aligned with strategy. The key implication of this is that the system has to be implemented organization-wide and has to be used and understood by all employees if goal alignment and focused engagement are to be achieved. Measurement, combined with effective communication of information and ideas increases the likelihood and extent of success.

If employees lack a common purpose, motivation and coordination of efforts suffer. The organization’s leaders will not be present for every customer interaction. Leaders will not directly observe every environmental change in risks and opportunities. When aligned and engaged, employees and stakeholders provide invaluable resources for surveillance and response. To be effective in that role, employees must understand the direction in which they are heading. They must also be empowered with tools that provide ongoing feedback to discover what works so they can focus their efforts on doing more of it.

Research suggests that the majority of large firms are already utilizing strategy execution and performance management systems to achieve their alignment and engagement goals. Research performed by the BSC Collaborative suggest that of the firms not currently using the Balanced Scorecard (the most popular such framework), 43% are planning to utilize one soon and a further 48% are considering using one. It used to be the case that a lack of expertise and high upfront costs kept strategy execution software the domain of large businesses. Now, small and midsized business can access the same benefits as their large competitors at affordable rates.

By making better use of information they already have, businesses large and small can empower all stakeholders to execute their unified strategy, detect watershed moments in the business environment and achieve greater success.

What do you think? Does frontline staff have a role in seizing strategic opportunities? Let me know in the Comments.

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