Not Hitting Your Numbers? Change Your Metrics

So the big re-org was completed last year, the new strategic objectives are in place and we are dutifully watching our dashboard.

But the company is not tracking. Now what?

Too often the metrics on which companies rely do little to diagnose problems when things go wrong. This happens because we’re never planning to fail when we’re doing the strategic planning – that’s when we’re at our most optimistic.

So failure demands better metrics. Here’s how to develop them:

Monitoring an organization occurs at three levels and requires tactics and metrics for each:

1. Implementation monitoring – did we do what we said we’d do? The metrics associated with implementation monitoring are the most straightforward but least informative; for example, “hold 4 team meetings per year.” If we expect to see improvements in communications we need to know whether we held the meetings we expected to, but that doesn’t mean the meetings achieved anything.

2. Validation monitoring – do our modelling assumptions hold? Strategic planning relies on developing models that predict outcomes. These models might be implicit or explicit. But how much time is spent examining whether assumptions and relationships hold? For example, if our defect rate declines by 20%, will support calls also decline by 20%?

3. Effectiveness monitoring – are we achieving the outcomes we want? This is where we want to get to, but the metrics are the most difficult to develop. In our experience, many just give up and default to simpler metrics that may be only partly correlated with our desired outcome. For example, “customer satisfaction” is the outcome we want, but “support call volume” is what we measure. Teams need to think deeply about customer satisfaction and what it really means.

Designing good metrics is hard. Planning to fail and stratifying monitoring requirements is a good place to start.

Business Transformation is Now a Continuous Process

There was a time when business transformation was a process that occurred once in a professional career. But cut-throat competition and short development cycles are pushing leading businesses into a state of continuous, low-level transformation.

photo credit: fdecomite

All companies react, but handling transformation proactively requires a plan. How can your company stay out in front?

1. Use forward-looking metrics. Analytics are a great business tool, but are you forecasting or hindcasting? Too many metrics depend on extrapolating future trends from past performance. Instead, look for metrics that could be correlated with your future risks and opportunities. These could be internal to your company but they might also be external, including leading economic or social indicators.

2. Embrace uncertainty. Your forecasts will always be wrong, but if the value of key metrics can be expressed probablistically, you can explore the implications of different scenarios and build robust strategies to achieve your desired outcomes. It doesn’t have to be complicated but it needs to be rigorous.

Using these techniques for a few quarters will likely produce a few surprises and will provide the foundation for creating a more resilient and nimble organization.

Why are Your Decisions Misfiring? The Answer is 42

Eric Fernandez, on his blog The Royal Society of Account Planning has posted an excellent visual guide to cognitive biases. He lists 105 in total, including 42 directly related to decision-making. Many of the other biases are relevant to teams and businesses.

My personal favorite? The Texas Sharpshooter Fallacy: adjusting the hypothesis after the data have been collected, making it impossible to evaluate the hypothesis in the first place.

Cognitive Biases – A Visual Study Guide by the Royal Society of Account Planning

Creating an Agile Organization Starts With Decision-making

In today’s fast-changing business environment, organizational agility is of great value to maintaining a competitive advantage.

So say the executives surveyed in a 2009 Economist Intelligence Unit report: “Organisational agility: How business can survive and thrive in turbulent times”, March 2009.

Ninety percent of interviewed executives believe “organizational agility is critical for business success”, and one half of the CEOs and CIOs agreed that “rapid decision-making and execution are not only important, but essential to a company’s competitive standing”.

The report goes on to say that over 80% of these respondents have undertaken one or more change initiatives to improve agility, but 34% of those initiatives failed to deliver the desired benefits.

One of the main obstacles? You guessed it: slow decision-making.

photo credit: Julia Manzerova

What this tells me is that these failed initiatives stumbled out of the gate because they neglected to address the core decision processes within the organization. How can you improve overall competitive agility if your change initiatives are hamstrung by slow decision-making?

Start from solid ground. Optimize how your organization makes decisions first, so that when you’re faced with uncertain, risky opportunities or threats you’ve got a dependable process to get you through a team decision quickly.

Here’s the full report:

Economist Intelligence Unit report: “Organisational agility”

From Extraordinary to Ordinary

Twenty-five years ago, most fast-growing and successful new businesses had one thing in common: a unique, proprietary product that separated them from their closest competitors. Today, the landscape is very different. All great ideas, both products and services, are ruthlessly copied – and astonishingly quickly.

photo credit: Andrew Currie

The reason is that barriers that used to keep new competitors from entering a market have now almost disappeared. Businesses are created overnight, their reach is global, and contract manufacturing and outsourcing has turned everything – everything into a commodity.

What now separates the successful companies from the rest? Clear goals, a strong strategy, and superior execution. In other words, extraordinary companies selling ordinary products.

Economist Report - Creating an efficient decision-making culture

A report just out from the Economist, titled The Intelligent Enterprise – Creating A Culture Of Speedy And Efficient Decision-Making confirms our belief that most organizations still have much room to improve upon their decision-making processes.

As competitive pressures increase, decision-making is a process worth investing in to maintain an edge in your market.

Two interesting excerpts:

• Survey respondents indicated that accurate and timely decision-making ranked on a par with superior executive leadership and innovation as vital ways of creating competitive advantage.
• Biggest obstacles to successful decision-making? – 26% said inadequate training or quantitative expertise among executives and support staff

Here are two info graphics contained in the report:

Here is the report in full:

The intelligent Enterprise – Creating A Culture Of Speedy And Efficient Decision-Making

Are You a Maverick or a Maven?

From wiktionary.org:

Maverick:
One who does not abide by rules.
Etymology: from the surname of Texas lawyer Samuel Maverick, who refused to brand his cattle.

Maven:
A self-styled expert in a given field.
Etymology: from Yiddish מבֿין (meyvn) from Hebrew מֵבִין (mevín, “one who understands, connoisseur, expert”).

Everyone loves a maverick, but mavens get it done.

Visual Thinking - How it works

As a company that visually and mathematically models concepts and decisions, we’re always looking for new and better ways to communicate visually. Visual thinking, and data visualization are ancient yet still-evolving fields of practice, especially in the business world where drab pie charts and data tables are the norm. There are some exciting new approaches being pioneered by a few leaders out there. We’ll try and share some of those with you as we discover them ourselves.

This is from a company we’ve known about for a while, but we just found this presentation from them on visual thinking, which we think is quite good.

Standpoint Decision's 5 Business Performance Resolutions

We’ve got our own goals for this New Year lined up and ready to go, but we thought it might be nice to offer up five to you that get the ball rolling for 2010.

Here they are, Standpoint’s five resolutions for improving your business performance:

1.) Improve customer loyalty through deeper analysis of data we collect, and by linking the results to decisions affecting them.

2.) Maximize the value of our sales teams by formalizing their knowledge and skills in our decision-making.

3.) Improve support for our decisions by systematically linking stakeholder input to our decision-making process.

4.) Make implementation teams stronger through shared understanding of, and commitment to, our decision-making process.

5.) Continuously improve performance, by tracking and linking the outcomes of our decisions in 2010, so we can learn from them in 2011.

Wishing you and your business the best of success in 2010,

Matt & Steve

Why High-caliber Decisions Are Like Building a House

Making high-caliber decisions is a lot like building a house. Here are five reasons why:

1.)  Both need to meet a standard.
2.)  They will come under 3rd party inspection.
3.)  They both require teams who understand what they’re doing.
4.)  Once complete they will support many people.
5.)  Both provide opportunities to learn, so we can do a better job next time.

When building a house, all of these dependencies lead back to one place.

The blueprint.

photo credit: Giles Douglas

High-caliber decisions require a blueprint as well. Without one, we could be left with a cracked foundation, an unhappy client, and no idea how we got there.