The ‘Magic Arrow’ of Measurement

publication date: Jun 7, 2007

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author/source: Jerome Long (June 2007)

This month, Jerome suggests that organisations have some flexibility in selecting themes and if appropriate they can be modified or others can be added. What the themes are and what is measured within them will depend on what the organisation’s strategy is and how it creates value for its stakeholders

PART II

In Part I, last month, Jerome Long – consultant at Decision Focus – outlined his ideas for measuring business activity so as to ensure an intimate link between the measurements and overall strategic objectives. Namely:
•    Why are we carrying out the measurements?
•    What should we measure?
•    When should we measure it?
•    How do we measure it?

Implemented properly, the detailed balanced scorecard should follow from a process of strategy analysis or mapping, and the link from strategy, value and process to measurement themes and indicators is the key reason why the balanced scorecard has been so successful. The lack of such a framework is a key cause of failed implementations.

Another popular measurement methodology is known as ‘six sigma’. This focuses on measuring and eliminating errors in each stage of a process aiming to get to an error rate of less than one error in 294,000, which gives confidence in the process to a level of six standard deviations i.e. six sigma. The key methodology is essentially one of mapping and improving processes so that waste and error is eliminated, but its strength is that the emphasis is on listening to the ‘voice of the customer’ to identify what they see as ‘critical to quality requirements’.

This again makes the link between what is or should be measured and the value delivered to the customer by your organisation’s processes.

The overall aim of these measurement frameworks is then to ‘cascade’ the measurement strategy throughout all areas and departments of the organisation; to generate Key Performance Indicators (KPIs) and measurable objectives, the measurement and achievement of which will support the execution of the strategy. Ultimately, whichever measurement strategy you eventually opt for, the prime requirement is to build into the strategy a real focus on the customer and your processes, then develop the KPIs that will promote the right activities, and cascade them throughout your organisation.

Your measurement process should then deliver measurable objectives which include the following parameters:
•    direction (that is, increase or decrease)
•    KPI
•    benchmark
•    target
•    timeframe

So for example, a measurable objective might be that the average spend per customer per visit in a particular retail outlet increase from £75 to £100 by December 31 2007.

Business software ‘dashboards’ can also be programmed to show charts, gauges, graphs or traffic lights for the main KPIs that are relevant to each role, allowing for quick and easy interpretation of the performance information. Each area of organisational activity or element in the business initiative could have different KPIs and/or objectives and/or dashboard layout depending on what processes they participate in or manage.

Having answered the four key measurement questions why, what, when and how, we can now summarise the best approach to carrying out measurement at a practical level and to ensuring that it really is the magic arrow in your quiver of management skills:

Taking aim

•    define the vision and strategy, making sure you understand where you are going and how you create value for your customers and other stakeholders
•    develop your processes to make sure they support your vision and strategy and that they deliver the right things to their customers
•    break down your strategy and your processes to identify KPIs which will both communicate and promote ways of working which will help the achievement of your objectives

Shooting the magic arrow

•    identify the measurable objectives (including KPI, baseline, target and timeframe) to support the vision and strategy
•    link the objectives to individual managers’ performance
•    communicate the high level vision, strategy and objectives so people understand the thinking behind the organisation’s goals and measures
•    cascade down to all levels to identify KPIs and objectives appropriate for each process/role, linking to individual performance
•    communicate KPIs and measurable objectives (including baseline, target and timeframe) at all levels
•    measure, report and monitor

Adjusting the magic arrow’s trajectory in flight

•    use the information gathered from your measures to make informed decisions and take appropriate actions to keep you on track to meeting your targets and objectives
•    review performance and measures, including getting feedback from all levels to make sure the measures are still the right ones
•    update measures as appropriate

At first sight, measurement does not seem like the most glamorous and exciting aspect of running your organisation and is therefore often not accorded the thought and attention it absolutely deserves and requires. But as with so many things in business and life generally, appearances can be deceptive. The truth is that it is only measurement that gives you a real understanding of whether your organisation is doing what it should be doing, and whether the people within your organisation are on-target and on-brand in every sense.

Without measuring the impact of any ‘improvements’ we make, it is impossible to know how much things have improved – or even if they have improved at all. The truth is that your magic arrow – measurement – is an incredibly powerful business tool to help you achieve success.
Jerome Long is a consultant at Decision Focus, a professional services consultancy that specialises in rapidly delivering performance improvement through process. Decision Focus was founded in 1995 and has carried out significant projects for a wide range of organisations across the private and public sectors. Email: JLong@DecisionFocus.co.uk www.decisionfocus.co.uk