Measuring business activity properly can mean ensuring an intimate link between the measurements and your overall strategic objectives. Jerome Long explains why
Any business initiative or organisational activity needs to be measured. Doing so efficiently, effectively and with your overall objectives always in your sights is as important as any other activity designed to realise your objectives.
Measurement techniques need to have the flexibility and capacity for continual small adjustments of direction that you might expect from a magic arrow. And, like a magic arrow, they should be able to effect a very significant transformation in whatever you're aiming for.
The question is: how do you actually get to grips with doing the measuring? There are, logically, four things to think about here. These are:
• Why are we carrying out the measurements?
• What should we measure?
• When should we measure it?
• How do we measure it?
To understand something we first have to find a way of measuring it, and it is close to impossible – in fact, it may even be impossible – to manage something you can't measure. Knowing whether an activity is getting better, staying the same or getting worse is powerful information when considering what actions are appropriate.
In practical terms what this means is that the reason why you are doing the measurement is to get everyone at your organisation aiming in the same direction. Measurement in effect 'tells' your people what is important in working towards your goals and gently points them towards achieving those goals.
Measurement tends to drive behaviour, and so by carrying out the measurement process properly you can help to create the behaviour your organisation needs for maximum success.
Generally, people tend not to do what you expect, but what you inspect. This fact, plus the observation already made that measurement tends to drive behaviour, constitutes an unassailable argument that what you need to measure is the efficiency and effectiveness with which the processes that are vital for your organisation's health, are carried out.
What you decide to measure must derive from your strategy because measurement doesn't just passively measure progress to date in realising your strategy, it is also a key means of actively getting a powerful handle on your strategy and making sure your strategy gets promoted and implemented.
The way to do this – to link measures to your strategy – is to map and measure your processes. Remember that a process is, after all, a series of activities that produces a deliverable to meet one or more needs of the process customer, and that your strategy will encapsulate your organisation's unique way of adding value and meeting the needs of your customers.
Ultimately, what you should be measuring are, therefore, the parameters at your organ-isation that are of vital importance for yielding information on which to base those decisions
In technical terms, there are broadly three things you can measure about a process:
• The efficiency with which it is delivered
• The quality of its deliverables against specification
• How satisfied the 'customer' of the process is with what has been delivered.
You should certainly be undertaking measurement regularly to make sure you're on target and to allow you to act on the information collected. Precisely when you make each of your measurements and report on them will depend on your capacity to absorb the information, how quickly time erodes the value of the information, and how costly it is to measure.
You will need to make crucial decisions about whether you need to measure certain factors in real-time or over a longer time period. Fortunately, excellent computer software is available that can give you a powerful handle on real-time measurements
In the organisational world, there are numerous frameworks for measuring business performance. One popular framework is known as the 'balanced scorecard'.
This approach to measurement involves focusing on a group of key measurement themes, and the development of performance indicators within them. Usually they focus on customer satisfaction (this includes external and internal customers), business processes, shareholder value and organisational learning.
What the themes are and what is measured within them will depend on what the organisation's strategy is and how it creates value for its stakeholders.
Implemented properly, the detailed balanced scorecard should follow from a process of strategy analysis or mapping, and the link from strategy, value and process to measurement themes and indicators.
Another popular measurement methodology is known as 'six sigma'. This focuses on measuring and eliminating errors in each stage of a process, which gives confidence in the process to a level of six standard deviations that is, six sigma. The key is essentially one of mapping and improving processes so that waste and error is eliminated.
The overall aim of these measurement frameworks is then to 'cascade' the measurement strategy throughout all areas and departments of the organisation; to generate key performance indicators (KPIs) and measurable objectives, the measurement and achievement of which will support the execution of the strategy.
Ultimately, whichever measurement strategy you eventually opt for, the prime requirement is to build into the strategy a real focus on the customer and your processes, then develop the KPIs that will promote the right activities, and cascade them throughout your organisation.
Your measurement process should then deliver measurable objectives which include the following parameters:
• Direction – increase or decrease
Business software 'dashboards' can also be programmed to show charts, gauges, graphs or traffic lights for the main KPIs that are relevant to each role, allowing for quick and easy interpretation of the performance information. Each area of organisational activity or element in the business initiative could have different KPIs and/or objectives and/or dashboard lay-out depending on what processes they participate in or manage.
Having answered the four key measurement questions why, what, when and how, we can now summarise the best approach to carrying out measurement at a practical level and to ensuring that it really is the magic arrow in your quiver of management skills:
• Define the vision and strategy, making sure you understand where you are going and how you create value for your customers and other stakeholders
• Develop your processes to make sure they support your vision and strategy and that they deliver the right things to their customers
• Break down your strategy and your processes to identify KPIs which will both communicate and promote ways of working which will help the achievement of your objectives
• Identify the measurable objectives (including KPI, baseline, target and timeframe) to support the vision and strategy
• Link the objectives to individual managers' performance
• Communicate the high level vision, strategy and objectives so people understand the thinking behind the organisation's goals and measures
• Cascade down to all levels to identify KPIs and objectives appropriate for each process/role, linking to individual performance
• Communicate KPIs and measurable objectives (including baseline, target and timeframe) at all levels
• Measure, report and monitor
Adjusting the magic arrow's trajectory in flight
• Use the information gathered from your measures to make informed decisions and take appropriate actions to keep you on track to meeting your targets and objectives
• Review performance and measures, including getting feedback from all levels to make sure the measures are still the right ones
• Update measures as appropriate.
At first sight, measurement does not seem like the most glamorous and exciting aspect of running your organisation and is, therefore, often not accorded the thought and attention it absolutely deserves and requires. But as with so many things in business and life generally, appearances can be deceptive.
The truth is that it is only measurement that gives you a real understanding of whether your organisation is doing what it should be doing, and whether the people within your organisation are on-target and on-brand in every sense.
Without measuring the impact of any 'improvements' we make, it is impossible to know how much things have improved – or even if they have improved at all. The truth is that your magic arrow – measurement – is an incredibly powerful business tool to help you achieve success. IT
Jerome Long is a consultant at Decision Focus, a professional services consultancy that specialises in delivering performance improvement through process