Measurement: the ‘magic arrow’ in your quiver of management skills

publication date: May 16, 2008

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author/source: Jerome Long (May 2007)

Measuring business activity properly, which means ensuring an intimate link between the measurements and your overall strategic objectives, is a powerful competitive weapon. JEROME LONG a consultant at Decision Focus, explains why. 

PART I

Any business initiative or organisational activity needs to be measured. Doing so efficiently, effectively and with your overall objectives always in your sights, is as important as any other activity designed to make those objectives come true.

Measurement techniques need to have the flexibility and capacity for continual small adjustments of direction that you might expect from a magic arrow. And, like a magic arrow, they should be able to effect a very significant transformation in whatever you’re aiming for.

The question is: how do you actually get to grips with doing the measuring? There are, logically, four things to think about here. These are:
• Why are we carrying out the measurements?
• What should we measure?
• When should we measure it?
• How do we measure it?

Let’s look at these key questions in this order.

Why are we carrying out the measurements?

To understand something we first have to find a way of measuring it, and it is close to impossible – in fact, it may even be impossible – to manage something you can’t measure. Knowing whether an activity is getting better, staying the same or getting worse is powerful information when considering what actions are appropriate.

In practical terms what this means is that the reason why you are doing the measurement is to get everyone at your organisation aiming in the same direction. Measurement in effect ‘tells’ your people what is important in working towards your goals and gently points them towards achieving those goals. Measurement tends to drive behaviour, and so by carrying out the measurement process properly you can help to create the behaviours your organisation needs for maximum success. The right measurements focus the attention and performance of all the people engaged in the activity on the most important aspects of what they should be doing. Indeed, very often employees may not know, focus on or keep at all times in mind what precisely they should be doing unless their activities are subjected to some form of measurement.

All hands-on experience of implementing measurement in the private or public sector reveals that measurement is an extremely powerful, flexible management resource that can be utilised to focus on those actions that will bring to fruition the organisation’s goals or the objectives of an initiative. Describing measurement as the magic arrow in your quiver of management skills is not a far-fetched analogy: a magic arrow is exactly what measurement should be, converting all the power and potential within your organisation into forward progress directed at hitting the targets that really matter for you.

What should we measure?

Generally, people tend not to do what you expect, but what you inspect. This fact, plus the observation already made that measurement tends to drive behaviour, constitute an unassailable argument that what you need to measure are the efficiency and effectiveness with which the processes that are vital for your organisation’s health, are carried out.

What you decide to measure must derive from your strategy because measurement doesn’t just passively measure progress to date in realising your strategy, it is also a key means of actively getting a powerful handle on your strategy and making sure your strategy gets promoted and implemented.

The way to do this – to link measures to your strategy – is to map and measure your processes. Remember that after all a process is a series of activities that produce a deliverable to meet one or more needs of the process customer and that your strategy will encapsulate your organisation’s unique way of adding value and meeting the needs of your customers. Your processes should therefore be the representation of how your strategy will be implemented, and this is why process measures offer the best way to ensure strategy delivery.

Another way of looking at this is to regard measurement as being a vital tool that gives you access to better information with which to make better decisions.

Ultimately what you should be measuring are therefore the parameters at your organisation that are of vital importance for yielding information on which to base those decisions. Since your strategy is the foundation on which decision-making should be based, and your processes represent that strategy in terms of activities, it means that the right way to get the vital information to make decisions, and therefore make measurement work and be a real success, is to base it on measuring your processes.

In technical terms, there are broadly three things you can measure about a process:
1. The efficiency with which it is delivered
2. The quality of its deliverables against specification
3. How satisfied the ‘customer’ of the process is with what has been delivered

Measurement is usually the more effective the more it furnishes a ‘360 degree’ view of a situation that embraces perspectives from all the parties who are interested in a particular process. The actual identification of the ‘customer’ of the process needs some careful thought. These customers are really parties who have some interest in the process that is being measured. Of course in a very real sense the most important customers of the process are the actual external customers of the organisation whose needs the organisation exists to meet, whether this is for profit or public service. But equally the process customers might also include the staff within the organisation who are internal customers, as well as a range of other interested persons, including any of the organisation’s stakeholders.

When do we measure it?

You should certainly be undertaking measurement regularly to make sure you’re on target and to allow you to act on the information collected. Precisely when you make each of your measurements and report on them will depend on your capacity to absorb the information, how quickly time erodes the value of the information, and how costly it is to measure.

You will need to make crucial decisions about whether you need to measure certain factors in real-time or over a longer time period. Fortunately, excellent computer software is available that can give you a powerful handle on real-time measurements, often using ‘dashboard’ type interfaces that make the measurement especially easy to view and assimilate.

How do we measure it?

In the organisational world, there are numerous proprietary and nonproprietary frameworks for measuring business performance.

One popular framework is known as the ‘balanced scorecard’. This approach to measurement involves focusing on a group of key measurement themes, and the development of performance indicators within them. Usually they focus on:
• customer satisfaction (this includes external and internal customers)
• business processes
• shareholder value
• organisational learning

In Part II, next month, Jerome expands on his theme: taking aim, shooting the magic arrow, and adjusting trajectory in flight