Strategy to Win Element 9 - Critical Measures

 

Successful Leaders Make Many Calculations

Welcome to Element Nine in "Strategy to Win," where we delve into the importance of critical metrics in achieving success. In this session, we will explore the significance of these metrics and how they guide your path to victory. As renowned author Sun Tzu once said, successful generals make numerous calculations, while failing generals make only a few. Today, we will engage in several calculations that will shape your journey toward success.

 

Guiding Calculations for Success

The Strategy to Win framework serves as a valuable tool for identifying the areas and methods to make calculated decisions that contribute to your success. By completing tactical initiatives, you gain a clear understanding of what winning entails when each initiative is successfully accomplished. During this process, it is crucial to select critical metrics associated with each initiative. These metrics provide a tangible perspective of what winning looks like, allowing you to assess your progress on a weekly or monthly basis.

 

The Role of Critical Metrics

As most managers and executives are not directly responsible for executing initiatives themselves, these critical metrics play a vital role in informing their progress. By keeping a close eye on the metrics, you can determine if you are on target or off target. These metrics become invaluable in ensuring alignment across the entire executive team and relevant directors and managers. By sharing these metrics, effective communication and alignment can be achieved, leading to collective success.

 

The Importance of Specific Metrics

When selecting metrics, it is crucial to avoid generalizations and focus on specific measurements. As Thomas S. Monson once stated, "When we deal in generalities, we shall never succeed. When we deal in specifics, we shall rarely fail." The act of measuring performance itself leads to improvement. By reporting and tracking performance, the rate of progress accelerates. However, it is essential to strike a balance, as being too specific can also lead to rewarding the wrong things. Finding the right level of specificity ensures that efforts are channeled in the correct direction.

 

Purpose of Defining Metrics

Metrics serve a specific purpose in the strategic planning process. They define what winning means within the time frame of your strategic plan. In Element Two, we discussed how market research enables a comparison of your company's performance against competitors, ultimately shaping your understanding of winning within your industry. In Element Seven, tactical initiatives provided a roadmap to winning when these initiatives are achieved. As a business leader, you possess a set of initiatives designed to fulfill your strategic priorities. By conducting research, you gain insights into your current position and the gap you need to bridge.

 

Navigating the Reality of Execution

While plans often depict a linear path, execution rarely follows a straight line. Challenges, setbacks, and detours are all part of the process. Initiative owners must consider the achievability of their tactical initiatives. Breaking down initiatives into shorter, intermediate goals allows for incremental progress and the celebration of wins along the way. Athletes understand this concept well, as they break their objectives into smaller milestones, providing motivation and encouragement as they achieve each one.

 

Too Little Reporting Too Late

One common issue with metrics is that they are often reported too late to have an immediate impact or effect change in the near term. By nature, metrics look backward, hindering the ability to respond swiftly. Running a business solely based on rear-facing metrics is akin to driving a car using only the rearview mirror—an exercise doomed to fail. Monthly financial statements, typically received several days after the month ends, offer a retrospective view that may not be specific enough to gauge the progress of tactical initiatives.

 

Embracing Real-Time Dashboards

To overcome the limitations of rear-facing metrics, it is crucial to incorporate daily or weekly dashboards that provide real-time visibility. In Element Seven, we emphasized the importance of determining one or two metrics associated with tactical initiatives that can be reported frequently. These daily or weekly metrics become the foundation of a dashboard that offers immediate insights into the progress of your initiatives. By compiling and analyzing these metrics, you can quickly assess if you are on track or off track. As a business leader, it is vital to have this information more frequently than the standard monthly financial statements, as it enables proactive decision-making and timely course corrections.

 

The Value of Real-Time Metrics

Maintaining a close-to-real-time understanding of your metrics is paramount to success. It prevents you from "flying blind" and allows you to make informed decisions based on accurate and up-to-date data. Neglecting to track metrics in real-time can lead to significant consequences, such as falling short of goals or losing touch with the overall performance of your business. It is not uncommon for CEOs to face repercussions or even lose their positions due to a lack of metric awareness. Therefore, staying on top of your metrics is the key ingredient for achieving success.

 

Leveraging Real-Time Metrics for Effective Management

With a daily or weekly dashboard, you gain valuable reports that focus on your objectives for the current or upcoming week. These reports provide insights into the achievements of the previous week, challenges encountered, and strategies to overcome them. Instead of solely discussing assignments completed since the last meeting, you now have the opportunity to discuss real-time progress and make data-driven decisions. Athletes understand the significance of tracking metrics in real-time, as it allows them to celebrate incremental wins and make necessary adjustments promptly.

 

Measuring Performance Metrics for Success

A good example of real-time measures is the technology of health or fitness trackers. The use of wearable devices such as Fitbit, Garmin, or other smartwatches that monitor steps taken, calories burned, and even food intake in real-time has been shown to improve individuals' fitness behavior. It is crucial to track these metrics as closely in real-time as possible. 

 

Creating User-Friendly Dashboards

To effectively track and analyze these metrics, it is essential to have well-designed dashboards. These dashboards can be customized to display weekly or daily information in a user-friendly graphical format. Whether it's a visually appealing graph or a simple spreadsheet, the key is to have a starting point and gradually enhance the dashboard as needed. Merely tracking metrics monthly is insufficient. Regular monitoring and analysis, at least weekly, are necessary for optimal results.

 

Key Performance Indicators (KPIs) for Tactical Initiatives

To measure progress and ensure the achievement of tactical initiatives, it is advisable to focus on a limited set of key performance indicators (KPIs). It is recommended not to exceed more than ten KPIs associated with each tactical initiative. These KPIs serve as leading indicators, providing valuable insights into the overall success of the initiatives. Examples of KPIs could include weekly sales figures, sales in new territories, on-time deliveries, throughput measurements, or quality metrics. Each KPI should be specific to the tactical initiative and provide meaningful insights.

 

Addressing Variance and Getting Back on Track

It is essential to acknowledge that deviations from the planned trajectory are common for most initiatives. However, with a weekly dashboard in place, it becomes easier to identify when a tactical initiative is off track. In such cases, the initiative owner should promptly take counteractions to mitigate the variance and realign with the intended goals. Analyzing the root causes of the deviation and discussing appropriate corrective measures are crucial. Regular weekly meetings between the initiative owner and business leaders can facilitate these conversations and ensure timely course corrections. These meetings can be conducted efficiently as stand-up meetings, keeping them concise and focused.

 

Commitment Level and Embracing Setbacks

To foster a culture of success, it is important to set activity goals and commitment levels slightly higher than the minimum requirement. By operating at a higher level, small failures or setbacks can still be within the acceptable range for achieving the tactical initiatives. This approach allows room for learning from mistakes and adapting strategies without constantly being in crisis mode. It is important to emphasize that the committed level of effort and the leading indicators are set higher to ensure success, but raising the bar should only be done when there are additional resources or a genuine need for increased performance.

 

Furthermore, celebrating wins and acknowledging achievements is crucial for maintaining motivation and fostering a winning culture within the organization. Rather than constantly moving the goalpost, it is more effective to reward and recognize the accomplishments of individuals or teams. This positive reinforcement creates a sense of pride and encourages continued success.

 

Measuring the Right Things

It is imperative to measure the right metrics that truly reflect the progress and outcomes of the tactical initiatives. The focus should be on meaningful indicators that provide actionable insights. For example, if the aim is to improve sales in a specific market, tracking the number of sales calls made to new customers becomes a crucial metric. Similarly, for manufacturing process improvement, metrics such as throughput, returns and rejects, and on-time delivery are relevant. By selecting the most important metrics and aligning them with the desired outcomes, leaders can effectively measure and evaluate progress.

 

The Significance of Financial Targets

One of the primary indicators that you might not be measuring the right things is when your financial targets are not progressing. If your actions and efforts are not yielding the desired effects on your financial goals, you are likely measuring the wrong metrics. It is essential to review and reassess your measurement criteria to align with your intended outcomes.

 

The Role of Process-Related Metrics

Weekly dashboard metrics often focus on process-related indicators. While it is crucial to track these metrics as executives, they should not overshadow the ultimate outcomes. Merely hitting the defined metrics without achieving the desired results indicates a misalignment between what is being measured and what truly matters. It is important to go back and evaluate the metrics being tracked to ensure they align with the desired outcomes.

 

Incentivizing the Right Behavior

What you choose to measure becomes an incentive for the people involved. It is vital to exercise caution to avoid incentivizing the wrong behavior inadvertently. Individuals tend to act in a way that benefits them, and they often focus on what they are being measured on. A real-life example highlights the potential consequences of measuring the wrong thing. In this case, a company measured the number of phone calls made, leading an employee to hang up and call the same person multiple times instead of resolving the matter in one call. This illustrates the importance of rewarding the right things to drive productive behavior.

 

Beware of Unintended Consequences

In the pursuit of specific metrics, companies may inadvertently create situations that undermine other critical aspects. Measuring throughput can lead to a deterioration in quality while focusing on quality might result in a slowdown in throughput. Similarly, prioritizing on-time delivery may lead to partial orders being shipped to meet deadlines. It is essential to carefully consider and anticipate the unintended consequences that may arise from the metrics chosen and evaluate their impact on overall performance.

 

Thinking Ahead: Incentivized Behaviors

When deciding on which metrics to measure, it is crucial to consider the behaviors that those metrics are likely to incentivize. Diligent thought should be given to the potential outcomes and actions that may be driven by the metrics selected. By proactively assessing the incentivized behaviors, business executives can make more informed decisions and avoid unintended consequences.

 

The Importance of Frequent Measurement and Communication

Measuring the right things is critical to achieving desired outcomes. Regular monitoring and discussing metrics is essential for effective management. Weekly dashboard metrics enable business executives to stay informed about progress and address any issues promptly. Creating a culture of continuous measurement and communication helps ensure that everyone is aligned and working towards the same goals.

 

Building Your Weekly Dashboard

As business executives, it is crucial to create a weekly dashboard that encompasses the critical metrics. Involving the executive team and initiative owners in the metric selection process ensures that everyone has input and a stake in the measurements. This collaborative approach enhances the likelihood of capturing the right behaviors and incentivizing the desired outcomes.

 

By measuring the right things, fostering effective communication, and continuously evaluating the chosen metrics, business executives can drive positive results and create a culture of success within their organization. The process of measuring and evaluating metrics should be an ongoing practice that adapts to the changing needs and goals of the business.

 

Measuring the right things is crucial for business success. By aligning metrics with desired outcomes, evaluating unintended consequences, and incentivizing the right behavior, business executives can drive positive results. Regular monitoring and communication through weekly dashboard metrics enable informed decision-making and prompt action. With a focus on measuring the right things and executing effectively, businesses can achieve their goals and thrive in a competitive landscape.