Jun 15, 2020 | Management, Operations
Metrics at their best deliver game changing insight and wisdom. At their worst, they are misleading , irrelevant and a pain in the arse to collect.
So, what are the two characteristics that make a great metric?
The metric is a leading indicator.
A Leading indicator is a reliable measure of what will happen.
For example, if you have the data that shows that for every lead you generate, you convert 5% at an average purchase price of $50, and those customers buy twice a year for an average lifetime of 3 years, you can calculate with some confidence what each lead is worth to you. In this case, it would be: 100 leads X 5% X $50 X twice a year X 3 years = $1500.
The metric is causal.
The most common mistake I see, is metrics that confuse cause with correlation. There are many things that correlate, despite the fact that there is no relationship between them. One does not cause the other.
For example, there is a correlation between ice cream sales and drownings, which on a graph looks identical, but there is no causation between the two. Look deeper, and you might see that on sunny days, more people eat ice cream, and more people also go to the beach, swim, and therefore risk drowning. There is also a close correlation between ice cream consumption and a shark attack. This second correlation would also suffer from very ‘thin’ data, which make any sort of causal relationship even further from the truth. However, a glance at a graph, which takes on some credibility as someone has actually created a graph, would suggest there is some causation.
For a metric to be of any real use, it has to be the catalyst that changes behaviour, and delivers a predictable result. It is not always easy to sort the causal from the correlative. When you need some experienced wisdom, give me a call.
Jun 12, 2020 | Governance, Management
Preparing forecasts is an integral part of most jobs these days, even if it is just how much available capacity there might be on the machine tomorrow, and how best to fill it.
Most forecasting I see is based on the financials, and is one of two methods: The ‘spreadsheet method’, where 4.5% is added across the board, and bingo, a forecast. Easy. The second method is driven by numbers of a different sort: the Net Present Value equation, the present discounted value of forecast future cash flow, which is more often than not driven by spreadsheets with hurdles imposed.
Neither is much good by themselves.
More recently, a range of pretty sophisticated modelling tools have become generally and cheaply available, which despite their sophistication, still have to be fed data and assumptions to spit out an answer.
Effective forecasting takes in a range of qualitative factors, some of which can be massaged into the algorithms, with the caveat that they then have some sort of relative weight applied.
- A realistic assessment of the resources required to reach an objective. Of increasing importance in this calculation are the capabilities of the people required to deliver the outcome.
- An assessment of the strategic, competitive and regulatory environment in which the forecast lives. Generating forecasts without due consideration of a range of factors external to the business, over which they have little if any control, becomes little more than wishful thinking.
- An assessment of the impact the successful initiatives will have on the external environment, particularly competitors. I see way too many forecasts that ignore the simple fact that competitors will not sit still while you eat their lunch. Failure to adequately anticipate and accommodate their reactions in the tactics to be deployed, and their forecast outcomes, is just plain dumb.
- A continuous and rolling After Action Review process. This process ensures the impact of tactical actions can be assessed, and the lessons applied to following forecasts. A forecast should be a ‘living’ document, something that accommodates, adjusts and builds on the facts and changing circumstances as they emerge.
Back in the day when I ran large marketing departments, forecasting was a key part of any project plan. When product managers came to me with their forecasts, I was not so much concerned with the numbers, as I was with the assumptions included and the relative weights of those assumptions. I also insisted that any forecast had three components, a best case, worst case, and forecast case, prepared separately, with different weights allocated to the variables. This gave us a range with which to work, and importantly, ensured some thought had been put into the implications of the ‘pear-shaped’ outcome.
The disturbing thing was always how inaccurate our forecasts were, no matter how hard we worked. This does not mean we did not try hard enough, simply that telling the future is a challenging task, not to be undertaken lightly.
Once again, my thanks for the header to Scott Adams and Dilbert.
Jun 8, 2020 | Leadership
It has been a busy year so far for marketing departments, especially those without any real foundation and understanding of why people might engage with them, and their lousy products.
Each of the three has been taken as an opportunity for many marketers to show their humanity and support for those impacted by tweeting, posting, and even making expensive TV ads, to demonstrate their support and humanity.
By the way, buy my shit, because I ‘reached out’ to you!
We recognise those real acts of humanity and courage: volunteer firefighters risking their lives to save homes, (while some of them lost their own); medical teams and carers risking their lives to save our loved ones; business operators fighting to preserve their livelihoods while serving their community – those employers who’re quietly revising apprenticeship schemes to ensure the young, those most at risk from social injustice, get an even break.
My nephew is a highly skilled tradesman. He is willing to take on (what his mother calls), ‘rescue’ kids. He teaches them work ethic, trade and life skills that will enable them to survive and prosper as they move on from their apprenticeship. He’s making a real difference by putting his skills and energy into education and training; he is saving lives.
The so-called marketers ‘reaching out’ make no difference at all. They are talking to themselves from inside their bubble, making themselves feel good because they can. It is like taking a shower with a raincoat on: no value, and stupid.
Even worse than the deluded wankers who call themselves ‘marketers’ are the ones sitting in Boardrooms who condone this crap. They spend money that is not theirs on some consultant to develop a ‘Vision’ and ‘Values’ statement that no-one cares about, or believes. They give a nod to social responsibility while operating with transfer pricing with a Head Office in some tax haven so they can minimise taxes – the very means by which a society services their communities and by which they can address inequalities. They use the “Kerry Packer” defence: that governments are stupid, lazy, and waste the money so why pay them a penny more than is required by the laws that cannot be avoided? And yes, governments have their contingent of arrogant, self-interested people who mouth platitudes to get elected and gain the trappings of power and money, however, they are outnumbered by people who’re doing the best they can with what they have and taxes are their only tool to fund changes that will help others … like our volunteer services, our health professionals, our independent business communities – people like my nephew – who are keeping it real and doing genuine good.
Get out of your bubble, and do something useful, and for Christ’s sake stop reaching out to me with automated emails and flatulent advertising, to make sure I am OK!
Jun 5, 2020 | Governance, Leadership
Observing the virulent spread of ‘The Bug’ and the institutional responses from around the world, there is a disturbing commonality that points at a deficiency in political and ethical leadership, until the horses are running free, and the stable almost empty.
In this country, at least we have been consistent.
Consistent in denying there was anything to worry about until the crisis is upon us.
Since the 90’s there have been strident calls by scientists that we need to get off our collective arses and address the emerging human causes of climate change.
Ignored, until people die in fires, and then slowly, edged towards the backburner.
Similarly, the clusterf**k that has been the management of the Murray Darling basin, although people may not have died, water has been ‘allocated’ under dubious circumstances, natural flows disrupted, investment distorted, and money made on the ‘QT’.
Now we have the Bug, and people are dying as it spreads, and particularly in the US, the systems are now seen as having been gutted, and are grossly inadequate to manage the crisis. That crisis is now escalating beyond anything foreseen to racial violence, unleashing forces from what now appears to be a cultural pressure cooker with devastating results.
In commercial life, the situation is the same. BP engineers knew that the Deepwater Horizon rig was a bomb waiting to go off, Boeing engineers knew there were problems with the 737Max’s software, executives in Australia’s banks and insurance companies were ripping off the estates of dead people, and enabling payments to the makers of child porn, and that ‘oldies’ were dying of neglect in aged care facilities.
There is a pattern to this political and corporate selective blindness that should deeply disturb us all.
The problem is known, when it is called to the attention of senior management it is seen as ‘inconvenient,’ so it is ignored and buried in favour of short term profit. Those doing the questioning are shut down, fired, or intimidated into silence. The problem persists in the dark corners until a crisis occurs, followed by hand wringing, press releases, provision of a sacrificial head for public consumption, and promises to do better.
The only antidote is what Ray Dalio calls radical transparency.
Shine lights in all the dark corners, create a culture where those lights are not selective or optional, but core ingredients of the culture.
Jun 3, 2020 | Change, Leadership
Have you seriously considered the implications of the apparent recognition that remote working can, and will, be a greater part of the employment mix in a post corona world?
There is a loud noise that ‘everything will change’ reverberating, an echo chamber of that view amplified by digital tools. It seems to me that human beings are simply insufficiently flexible to change ‘everything,’ although it seems the trend towards remote work has been accelerated a decade by the bug.
I have worked remotely and in offices, mixed about in a pretty random fashion for 25 years. The recent past has brought into focus some of the factors that I think are worth consideration.
‘Industrial’ management, the norm for the last 100 years, made in the image of Frederick Winslow Taylor assumes that in the absence of close supervision, little work of value will be done. At the extreme other end of the scale, you have enterprises like ‘Automattic’ the parent company of WordPress, that has remote workers around the world, and no head office of any type beyond the current location of Matt Mullenweg, the CEO and co-founder. It is a continuum on which we all fall somewhere, and it is evolving quickly.
The change in management style to remote will be for some, too much, as it adds several dimensions to the task that many managers are simply not up to doing.
Managing remotely adds a number of challenging dimensions:
Tools are needed that are not familiar or easily learnt by many, so simplicity is key. In addition there is a host of newer challenges to be addressed relating to the provision of the tools from software to the hardware, and the security questions hanging over everything digital.
Behavioural norms established in an office environment have been thrown out the window. Suddenly, we need to consider things like the interruptions of children, the family dog, and flexible working hours. In particular, the move to being available at all hours which was evolving as a result of the digital connectivity we had while still working from an office, has been supercharged. Suddenly, working 24/7 risks becoming the norm, unrestrained by reasonable office hours. All of these, and many others indicate that a very different way of measuring performance will be required.
‘Meetings’ from the casual gathering around the coffee machine in the morning, to the established and regular formal meetings deliver a rhythm to the day that is suddenly absent, and needs to be replaced somehow. The formal meetings can be done using one of the many tools, but the casual, unplanned meetings that happen in an office, that can be hugely valuable, present a different challenge.
Culture. The glue that holds the workplace together, will undergo radical surgery. Human beings evolved in small groups that looked after themselves by looking after each other. While this has eroded somewhat over the last 250 years, the need to be ‘together’ is nevertheless hardwired into our collective DNA. I suspect this will be the largest hurdle for management of the remote corporations to address.
Recognise the ‘God Syndrome’ and kill it. I cannot help but wonder if the challenge of leading remote teams is no more than a light being shone on existing failures of leadership that went largely unnoticed. Those in senior positions do not have all the answers, often they have very few of them. Unfortunately, those in leadership positions are often there partly as a result of being able to convince others they are right more than anyone else, and they play ‘the game’ more effectively. The reality is that they are usually as confused and uncertain as the rest of us, they just hide it better, and sometimes ask better questions. The tide has gone out, so the rocks are exposed, the failures of leadership are more obvious. Humility is the common characteristic of every really good leader I have seen.
Deliver Psychological Safety. Everything I see and read about the psychology of human beings is that we seek ‘psychological safety’. This is the place where we feel safe to do and say things that really reflect what we think, without fear of any sort of retribution. Achieving this in any workplace is really hard, and is the result only of truly great leadership. Achieving it when many of us are working remotely, away for the ‘safety’ of those few we know well and truly trust, will be a monumental task.
When you strip it all away, the reason workers are congregated in offices is to achieve the objective of making money for their employers. It is however an artifice forced on us by the industrial revolution, and is somewhat inconsistent with the way we humans evolved. The recent past has demonstrated that this congregation may not be necessary to achieve that commercial objective. Almost certainly it is not necessary in the form that it evolved, as a means to find a way to manage operational scale. Therefore, a rational management will set about reducing costs, and expensive CBD office space has suddenly become a soft target.
Cartoon header courtesy Scott Adams and Dilbert.
