Creating, Implementing, and Managing Effective Metrics
Metrics can be a powerful tool for informing and guiding decision making at all levels of an organization. They can, however, be detrimental if not designed and implemented properly. In order for metrics to deliver value rather than distraction, they must be clearly defined, completely understood and broadly communicated, as well as focused on the areas that are most important to the success of an organization. This article provides insight into key activities essential for the development, implementation, and management of effective metrics.
Developing Metrics – An Iterative Process
Developing a set of appropriate, meaningful metrics requires an iterative process focused on the specific needs of the organization. It is very unlikely that any pre-defined metrics, provided by an article or software package, will be the right set for your organization, program, project or process. Culture, industry, maturity, and readiness for quantitative methods of measuring performance must all be factored into the development process. Too much, too fast, and you can’t keep up. Too little, too shallow, and no one will take them seriously. Before any metrics are adopted, you must also have a process to define, develop, and educate the organization.
Sketch key metrics to support the vision, mission, and goals
The main reason pre-packaged metrics are ineffective is the uniqueness of each organization, as defined in their vision, mission, and goals. The more directly you align your metrics to these aspects, the more meaningful they will be. Individuals will then clearly understand how the metrics, measuring the performance of the processes they execute, correlate to and support the overall company’s results and objectives.
In addition to the reality that pre-packaged metrics rarely work, there’s not much chance any person or teamwould have the visibility or understanding required to create the right set for an organization. As such, an iterative process of defining, refining, and revising is valuable. This approach increases the likelihood that your metrics are relevant. It also gets more people involved in the development process, which results in more of your team having buy-in and insight into the meaning of the metrics.
Understand the capabilities of the organization to capture and report performance
As you’re going through the iterative development process, it’s a good idea to conduct reality checks against the capabilities of the organization to capture data, perform calculations, and report against the metrics. The best, most applicable metrics in the world won’t help if you can’t first accurately capture the data required to calculate the performance or if there is no method to report that performance in a timely, meaningful manner. This is usually where Information Technology (IT) can help. IT should be able to assist in identifying systems, functionality, and data elements which may provide what is needed. They may also inform you that the data simply doesn’t exist. In this case, you need another iteration of the development process to retool, redefine, or replace metrics.
Bridge the gap and create IT development plans
If you discover that data is unavailable to support the metrics, don’t discard them. Most IT organizations have regularly scheduled systems updates that may be able to bridge the gap. Make sure you evaluate how critical these metrics are, and work with IT partners to define development plans to include them in future releases. Adding data elements required to capture information on business processes is frequently not as difficult as it might seem. Since most business applications have reporting capabilities, it could be a matter of configuration or turning on some existing functionality.
Furthermore, if you find yourself in need of data now, don’t immediately disregard capturing the data manually. Manual methods certainly aren’t preferred, but may be acceptable and advantageous depending on what you’re trying to capture, how many transactions you estimate to take place in that function, and the duration you expect to perform the collection. Documenting data, such as frequency of activities or process cycle times, may be simple to accomplish and the findings easily actionable. A quickly implemented manual method of collecting data can be a powerful driver in the reprioritization of IT activities, bumping up the automated method on the IT to-do list.
Ensuring management participation and readiness
No matter how well conceived and aligned your metrics are, if management isn’t on board, they’ll be of little value. Management must be involved in the processes of defining and developing the metrics, but at the right time and with the right amount of effort. Managers have different interests in metrics and, therefore, it’s important not to require equal participation across the board. However, all must have buy-in and understand what each metric is supposed to measure at the end of the development process.
Brainstorming with management regarding metrics is rarely effective and can lead down paths of limited benefit. It is most useful to develop an initial set of metrics to then enlist the help of management. Their role should be to align the metrics with the vision, mission, and goals, and, when appropriate, fill in the gaps they identify based on their experience. The team should then take the result of that effort and work with the subject matter experts (SMEs) to develop the detailed definitions of each metric; when enough detail is available, the team should re-engage management to review and ratify these definitions.
Use metrics in the management structure
It is absolutely essential for adopting and embracing metrics to understand they should be focused on measuring the performance of a process – not the performance of individuals. When it appears as though an individual is underperforming, what it really means, in many times, is that that person either doesn’t have the right tools, or has been inadequately assigned to or trained for the task. Either way, it is a shortcoming of management that the process is underperforming. It is management’s responsibility to enable individuals to successfully perform the duties with which they are charged, and to appropriately align resources to processes, including human resources. While this thinking is gaining ground in management practices, it still must be continually reinforced both up and down the chain of command.
Once agreement has been reached related to the purpose of the selected metrics, they must be incorporated into the management structure in such way that they are one of the key components in the decision making process. They are “one” of the key components because experience and qualitative insight into performance are every bit as or, in many cases, even more valuable to the management of a process than quantitative metrics. Metrics provide hard data, but environmental factors may frequently cause blips in process performance. Experience and insight will provide explanation for these anomalies and will prevent reactive responses, thus keeping the organization from making poor decisions. As such, any review of performance that includes metrics should include a dialog about the causes of any variances (high or low) from the desired outcomes, as well as rationalization of potential changes to address the situation. For example, longer than usual Hold times at a call center during the summer are not unusual because more representatives are on vacation. Metrics may report the increase in Hold times, while experience and insight will provide the explanation.
A key factor in driving usage is carefully connecting performance discussions back to specific metrics. If you’re reviewing the performance or addressing issues, make sure to include in the conversation the specific metrics responsible for monitoring them. If there are no metrics associated with the topic, ask yourself if this is worthy of scrutiny; if it is, assess why there are no metrics associated with it since a well-executed process of defining and developing these indicators should ensure the measurement of key performance areas. If no metrics exist, the conversation has likely wandered off on a tangent. However, it is important to acknowledge that changes in the business and/or business environment may drive the need for new metrics, in which case it might be the time to reconsider the set being applied.
Enforcing accountability and ongoing metric management
Since the only constant in the Universe is change, you can bet you’ll need to make changes in your set of metrics and targets along the way. However, you need to ensure the existing metrics are being used appropriately before making any changes. Changes should be scrutinized and rationalized, and everyone needs to be in agreement before they are implemented. Changing a metric because it’s inconvenient, or “ugly”, isn’t a good reason for the change. If it was identified and included through the development process, it must be important and there should be a good reason if you decide to change or omit it. To make changes without sound justification will undermine the entire metrics program; so hold people accountable for the ownership of the existing metrics and to building a good case for change.
Adjust targets appropriately
When designing and implementing new metrics, we sometimes determine targets that end up being unrealistic (too high or too low). We’re sometimes making an educated guess at where we believe a target should be. Experience, information from outside sources (e.g. articles, consultants, books), or just plain estimates don’t always consider the unique characteristics and culture of your organization. There’s nothing wrong with changing a target, as long as it’s supported by a sound case and is ratified by whatever governing body that uses the results of the metrics to make decisions.
Retire outdated metrics
The best case scenario for any metric is when the process it was originally intended to measure becomes so consistent that the metric is no longer needed. When that happens, rejoice – then replace it. There’s always something else to improve, so don’t hesitate to drop metrics that consistently meet the expectations. That’s valuable real estate! Go back through your development process and define a new indicator. Or if you’ve been tracking suggested metrics that you didn’t have room for in the scorecard, reconsider their value and priority and get them in place.
Quantitative measurement of business performance provides management with vital information for monitoring the health of the business, and focusing resources on the areas of greatest value. Financial metrics, for example, are well established and, to a great extent, dictated by regulatory bodies world-wide. Beyond those required measures, it’s up to each company, each management team to define the right metrics for their business. Organizations, programs, and projects can all benefit from well-conceived, well implemented metrics.
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