What Are You Measuring, and Why?

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No doubt about it, measurement is popular today. At seminars and conferences, and in the management trade press, the subject of metrics is everywhere. The idea of quantifying business performance (and managing investments in business improvement) is very attractive – especially to technical types who strive for accuracy and precision in their work.  It’s a compelling objective.

Moreover, measurement is also important to business focus.  There’s good sense in the old truism that “what gets measured, gets done.”  (And it’s clear that the opposite is true as well: objectives desired but not measured usually don’t happen – or happen well enough). Many non-technical managers (for example in Marketing, Sales, or Human Resources) too often soft-pedal rigorous measurement.  In a business environment where proof counts more than faith, this is the wrong way to win the hearts and minds of leaders.

So metrics are indeed important, but it’s crucial to get them right. Here are a few thoughts of mine on measurement – based on some recent experiences:

Focus on the important stuff – Today we’re awash in information, most of it useless. The trick is to cut through the crap to find the useful stuff. [Is it really necessary to know what percentage of firm principals work on weekends, or how many have their incoming calls screened? (In my experience the answer to both questions is “too many.”)] Most successful businesses are managed well with just a few key metrics.

Benchmark outside your industry– Yes, there’s a time and place for intra-industry benchmarking, and several organizations provide this information. But today I think it’s more compelling to ask broader and bigger questions – for instance not how to become a better engineering firm marketer, but how to become a better professional services firm marketer, or perhaps better still a marketer in general? In other words, it’s important to consider with whom you’re comparing performance.

Beware of statistics – We’re all aware that data can be manipulated to support a specific point of view. In today’s sound-bite driven culture this is especially dangerous. As author Leonard Courtney wrote (in 1895) “There are three kinds of lies: lies, damned lies, and statistics.” I was reminded of this again recently by a CNBC study on Americas Top States for Business,http://www.cnbc.com/id/100727942.  The news flash featured Hawaii as the top-ranked state for quality of life.  But surprisingly, the actual study listed Hawaii dead last in overall ranking for business.  (Quality of life was just one of many study parameters).  The point: be careful what you’re measuring, and how you define success.

Balance the short and long term– When it comes to quantifying success it’s usually not enough to measure only the end point results.  Interim measures are also important, particularly with processes that take time to unfold. If you’d like to one day see your child become a successful medical doctor, you don’t measure his or her fifth grade performance against the final outcome (did you graduate from medical school today?). Instead you focus on a relevant interim goal – like performance on the math test this week. Comprehensive business systems (e.g. Sales and Marketing) require multiple objectives and appropriate measures. (Download our complimentary e-book Marketing, Made to Measure at www.jdoehring.com for specifics on this approach).

It’s not complex, just hard– Technical professionals tend to think in terms of complexity. Challenging technical issues often demand complex solutions. But with most business issues, this isn’t the case. In business the opposite of simple is usually not complex, it’s hard.  Optimal solutions are often elegantly simple. The difficulty is in execution, in the doing and accomplishing. In fact it’s all too easy to over-engineer measurement systems (which are then nearly impossible to use). And even enterprise scale systems such as Sales Management still boil down to a few basic parameters of success, like numbers of leads, prospects, proposals, project wins, and client revenues.

Defining appropriate metrics for managing business performance is important. Key performance indicators and balanced scorecards are useful in pursuing and achieving firm growth, profit, and success. But it’s also possible to overdo it – to become so enamored with metrics that the business itself suffers. As with most things, successful leaders must navigate through the maze, to find the right balance for managing and leading the firm.

That’s what I think – how about you?

John

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