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‘If it matters, measure it’<\/p>\n
There are many variations in that old saying, but it holds true. How therefore do we end up with hundreds of measures that seem not to matter?<\/p>\n
Fear.<\/p>\n
Fear of missing a measure that does matter, so we create metrics for every-bloody-thing to ensure that we do not miss one.<\/p>\n
That is crap management.<\/p>\n
Let\u2019s think about measuring stuff that does matter, and then measuring it at the point where the decisions and actions that influence the outcome are made. This is tying cause and effect together at the point where they intersect, not looking at a range of data and wondering what happened to cause that!<\/p>\n
How do we define what matters?<\/strong><\/p>\n To me it is simple, if it moves the performance indicator, it matters. Clearly, the converse is also true.<\/p>\n Ask yourself, does the number of Facebook likes you have impact your profitability? If it does not, and I would contend it never does, so why use it as a KPI? It is simply a readily available metric that has no relevance to performance. It is what those ‘likers’ do with your information that counts, much harder to define and measure, but if you understand that, and the cause\/effect chains, it just might move the performance needle and become a KPI worth measuring.<\/p>\n In short, behaviour<\/a> determines the outcomes, so set out to measure the behaviours you need to deliver the performance<\/a> you are looking for, not the other way around.<\/p>\n How do we measure what matters?<\/strong><\/p>\n A measure without a target is not of much value, as we cannot see if any movement is relevant to performance. A measure should articulate the performance against which we need to move the performance needle in a strategically significant manner. This setting of targets is challenging if we do it properly. Applying a 3% increase in last year\u2019s performance is not doing it properly, it is just extrapolating, accepting that history will repeat itself.<\/p>\n To measure properly, we need to consider the factors at work that will influence performance, seeking the causes, and measuring them, not just glancing at the metrics and having no idea of whether or not any movement is significant. Holy cow Batman, we just got another 5,000 likes on the Facebook page. Wow! But so what?<\/p>\n A further caution. ‘Sandbagging’ so called KPI’s is common in situations where there is little strategic linkage, and analysis of flow on impact. Two examples. Sales people when incentivised only by a target will be tempted to keep the targets as low as possible in order to achieve their bonuses.\u00a0 Who has not seen that? Purchasing people incentivised only by purchase price will not care too much about the performance of the cheaper version they opt for, which in the factory, may corrupt the efficiency numbers, and have a far greater financial impact than the saving of a few bob on the initial purchase price.<\/p>\n Do not focus on averages.<\/strong><\/p>\n Too many times I see piles of measures, taken at a high level, so that they reflect the average of a whole lot of other factors. If I have one foot in an ice bucket, and the other in the fire, on average the temperature of my feet is about right.<\/p>\n Nonsense.<\/p>\n Measure the outliers, the things that are unseen in averages in order to better manage them. For a KPI to be meaningful, it has to influence the outcome. Removing one foot from the fire will influence the average, but if I have not realised that the effect is caused by the removal of the foot in fire, I will at some point put my foot back in the fire.<\/p>\n