Thursday, 31 December 2009

Developing Performance Metrics

It’s possible to have successes without relying on metrics. With smart people making decisions, even with imperfect information you will probably get more right than wrong. And in relative terms, compared to your competitors, you may even exceed their results over time.

But you will never be great. To be great implies sustaining excellence over long periods of time and across changing circumstances. It requires planning and execution AND measuring yourselves against your goals to see how you have done. If you have missed the goals, metrics help you figure out why you missed them, so you can adjust. And if you achieve them, then you make new, loftier goals.

And you keep doing that until you are great. You may not even realize that you’ve achieved greatness, so focused are you on constant refinement & improvement. But your customers will, and your shareholders will, and especially your competitors will–because you’ll be the standard by which they are being judged, and falling short.

Arriving at metrics is a trial and error process. You may (and should) explore many avenues before you find the measures that you are looking for. That’s a good thing. All of that exploration, even those avenues that turn out to be dead ends, helps to inform you about the terrain that you are exploring.

There are no bad theories, or dumb ideas, only differing degrees of usefulness. And the job is to come up with the most useful metrics from the point of view of achieving your goals.
There are two broad categories of metrics, measuring organizational performance and individual performance.

For organizational performance, the questions you ask sound something like, “How do I know that my department is succeeding?” or “What are the things that define & describe success for my department?” or “What does my department’s success look like?”

You have to answer those questions first or you won’t have a chance of arriving at the most useful metrics, which are the ones that give you an immediate basis for assessing how your department and the company are doing, and tell you where you should be focusing your attention.

For individual performance, sometimes organizational metrics lead to individual metrics. For example if you define one of your department’s metrics as retention rate, then it makes sense to have individuals accountable for their own retention performance. But it doesn’t always line up that neatly.

When it doesn’t, there are similar questions as the organizational ones. “What is the reason the company created this job?” “What are the two or three most important duties in this job?” Or ultimately, “What are the most important ways a person doing this job should spend their time?”

The answers to both sets of questions should be a lot of help in identifying the measurements that will be helpful to you. Once you have that, then you can start to talk about ways of arriving at those measurements.

At the end of the day though, the most important thing to do is come up with ideas that you can sift through, test out, and choose from.
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