CEOs: just start measuring

08.16.12 Thumbnail MeasureFor every leader who loves numbers, there is a skeptic. They both have points — without measures, we cannot tell how we are doing, yet many metrics seem arbitrary or measure the wrong thing.  Meanwhile, often the right goals seem immeasurable.

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08.17.12 Blog Measure“It is better to be approximately right than precisely wrong.” — Warren Buffett

For every leader who loves numbers, there is a skeptic. They both have points — without measures, we cannot tell how we are doing, yet many metrics seem arbitrary or measure the wrong thing.  Meanwhile, often the right goals seem immeasurable.

To make the best use of metrics in managing a team or an entire business, take the best of both perspectives.  Here’s how.

Just Start Measuring
Consultant and former CEO Jim Grew says you should just start measuring things, without worrying too much at first about what they are.  If you expect your metrics to evolve, you won’t get caught up in the “perfection” trap.

Start measuring, in order to create a habit around measuring.  Once people cannot escape all measures, they’ll start to push to improve the measures.  And the flaws in your metrics will quickly become apparent.

Generally metrics fall into three categories:

1. Quantity – how many we did
2. Quality – how well we did
3. Time (frequency, speed, lag, cycle time, etc.)

For each function or team or group, pick one metric in each of these three categories, centering around the group’s mission.  I recommend having daily metrics, in addition to slightly more elaborate weekly or monthly numbers.  When you have your daily huddle, report the prior day’s metrics, and include a line graph or other visual of the prior numbers.

For example, in my work as an interim executive, I will frequently manage a team or department.  For a group of medical assistants, who had a mission to serve patients quickly and with great care, we would measure:

1. Quantity: Number of patients each day
2. Quality: Number of errors detected (via existing proofing and error correcting methods)
3. Time: Staff hours

For a group of IT support engineers, who had a mission to fix customer problems quickly and correctly the first time, we chose to measure:

1. Quantity: Number of cases closed
2. Quality: Customer satisfaction, or closed cases that had to be re-opened
3. Time: Billable Hours
4. Using Metrics Correctly

Your best results with metrics will come when you treat them like a flashlight – to illuminate a situation – not like a club with which you bludgeon people.

Metrics that Motivate
The vast majority of human beings want to do good work.  As a leader it’s your role to help define what good work is, and then help your people see how well they are doing.

When you give someone clear feedback that shows them they are making progress on a topic they care about — a worthy goal — that sense of forward movement is inherently rewarding.  This is the subject of the outstanding book “The Progress Principle.” (Listen to my interview with the authors here.)

Metrics and Strategy
You should also use numbers with a weekly, monthly and quarterly tempo to drive your execution of your strategic plan.

Once you’ve drawn a picture of your Strategy Map, you’re ready to create a Balanced Scorecard and plug in metrics.

Pick some numbers to track in these four areas:

1. Learning, Personal/Professional Growth, Alignment
2. Internal Operations
3. Customer Facing Operations
4. Outcomes

It’s smart to have 4-6 key metrics in each area.

How to Measure Anything
As ably pointed out by Douglas Hubbard in his best selling book “How to Measure Anything,” everything that truly matters in business can be measured somehow.

This claim always generates push back by people who either haven’t thought their outcomes through, or who think “measure” can only ever mean “measure precisely with a meter using an internationally defined standard unit.”

Here’s a way to create a “good enough” and “useful enough” measure on a squishy outcome.  Suppose you want to measure “employee engagement.”  What does that even mean? How could you possibly measure it?  Why would anybody believe your measures if you reported them?

Some best practices for devising metrics for hard-to-measure things:

* Visualize what the result of this thing is
* Decompose variables into parts
* Find others who have measured it

So, for “employee engagement” — suppose you suddenly had a lot, lot more of it.  How would you know? What would you see, hear, taste, smell or touch?

Maybe, if employees were “engaged” more, their morale and productivity would be higher.  They might treat customers better.  They might not get discouraged and quit. Maybe they would volunteer more ideas.

So, are any of those aspects of “engagement” measurable?  Yes, some are.  For others, we need to decompose them more.

Morale – measurable with an employee survey
Productivity – measurable by output per hour
Treat customers better – measurable with customer satisfaction survey
Not quit – measurable by annual turnover rate
Volunteer more ideas – measurable if I have a place to record and track employee suggestions

Think you have an outcome in your business that “can’t be measured”?  Email me.  Examples will be posted here, and anyone who stumps me will earn a cup of coffee on me, at a place and time of our mutual convenience.

Tom Cox is a Beaverton consultant, author and speaker. He coaches CEOs on how to boost performance by building workplace trust. Email comments to [email protected].

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