All too often, organizations start their metrics journey by asking “what can we measure?”. They then define a long list of KPIs and metrics – many of which will never be used and will have little if any impact on the behavior of the organization. Leaders soon find themselves frustrated and wondering why their teams aren’t embracing the metrics and managing to them. The problem may lie in where the metrics came from.
It is not the KPIs that you define that matter, what matters are the KPIs you use to make decisions. Most companies collect a large volume of data that produce metrics on a wide variety of operational facets. The proliferation of technology and automation into almost every corner of business over the past few decades has made this situation worse, with each piece of hardware and software bringing with it a new set of measures that companies feel compelled to adopt – whether they add any real value or not. Avoiding the metrics tornado requires taking an alternative approach that focuses on metrics quality instead of quantity.
Defining metrics for your organization should always start with a discussion and articulation of what problem you are trying to solve or question you are trying to answer. This is where your (eventual) metrics will translate into actual value for the organization. Value comes from action, not from interesting factoids.
Once you understand the problem, the next step is to determine what information is needed to solve the problem or answer the question. Notice we are talking about information, not metrics (that will come later). The information may be related to operations and performance directly or it may provide context and qualification of why things are happening.
Based on the information you are seeking, you can now look to your operations to figure out where in the organization (business functions, processes and systems) the information comes from. Before you have defined any metrics, you are already identifying who in the organization will be impacted and will potentially need to change because of the thing that is about to be measured.
Now that you understand how the information you need is related to your operations and who is impacted, you are now ready to define metrics and decide what information to capture. Because the metrics are directly traceable to a specific business problem or question, you avoid having your organization expend time and effort capturing a long list of metrics that never get used. Employees are also aware of the context of what is being requested – enabling them to provide feedback and insights on alternative ways of collecting the needed information that are easier to collect, timelier, have higher accuracy and/or fill gaps in related information that should be considered by the decision maker.
Using this purpose driven approach, only the metrics that are important will get measured and by seeing how the metrics lead to business decisions, the organization will naturally focus attention on the thing that the metric is measuring. If the measure is important enough, it will be measured… and if there are fewer un-used measures, more will be managed. Instead of starting your metrics journey asking “what can we measure?”, consider starting with “what problem are we trying to solve?”
To learn more about the role metrics can play in your organization and how to use them as an effective tool for driving behavioral change in your organization, visit https://kepner-tregoe.com/ The Operational Excellence experts at KT have been helping companies solve complex problems and improve operations for over 60 years and can help your company improve your effectiveness through skill-training, process best practices and expert consulting.