This part of the journey is about asking if you are measuring the right things today. This seems like an obvious point but reporting systems are often put in place around those things that are easy to measure rather than those things that are important. Over time, systems are replaced but this can make things worse not better. It is all too common for the new system to deliver more or less the same information but in a new technology. Faster, sexier, more charts, in a dashboard, around a scorecard, through a browser but essentially the same old information the organisation has always reported.
To determine what needs measuring requires a more considered approach, a step back. It requires an understanding of the few critical business goals or objectives that are important today. Obviously, this will depend on who in the business you ask. Ask the board and the response is likely to include the strategic objectives and financial outcomes that describe how the company creates value for its shareholders. Ask a functional head and the response is more likely to include those things that contribute to financial outcomes. Sales Management might be looking to "improve sales productivity", engineering to "increase number of product launches" and marketing "increase campaign effectiveness"
There are techniques for organising the various objectives across an enterprise into a coherent whole but it is too large an undertaking for me to cover here. Similarly, I am not advocating a lifetime of paralysis through analysis here. At this stage it doesn't matter about the level. Some objectives will be strategic, some tactical, some board level and some departmental. Whichever part of the organisation you are engaged with will both constrain and influence the answer to your questions, what matters is to ask about objectives, vision and goals. For example, I recently worked with the European Management Team of a global engineering company. They were tasked with growing revenues in a market that wasn't growing. This obviously meant taking market share.
Their approach to achieving this was to go after larger deals through the direct channel whilst growing their indirect channel to pick up deals in the mid market. This strategy could be articulated as a number of objectives;
- Grow indirect sales
- Close more deals that of €1m or more
- Retain existing customers
- Increase account share
The next step was to identify the metrics by which these objectives could be measured which included;
- Grow indirect sales (% Indirect Revenue Against Total)
- Close larger deals (#Deals >=€1m)
- Retain existing customers (Renewal Retention%)
So it is really straightforward. Ask the business what it is trying to achieve, to articulate the objectives and then determine how they can be measured. The example above is fairly high level and strategic but the approach to more tactical requirements is exactly the same. What are you trying to achieve? How are you trying to achieve it? How do you measure it?
The next part of the journey will require that you understand the initiatives that support these objectives and then further, the metrics that drive those.
This series of posts draws greatly from the work of Kaplan and Norton and their approach to Corporate Performance Management using the Balanced Scorecard and Strategy Maps.
