The Waste That is Historical Measurement

Ron Baker of Verasage recently posted about The Seven Moral Hazards of Measurement in which he posits that measuring effective performance cannot be done properly when you look at historical results.  A simple argument in reality where you can understand that last week’s race results are no really valuable predictor of what’s going to happen this week (apologies to all the punters out there).

Ron and the people at Verasage advocate the use of Key Predicitive Indicators in developing the performance and results of teams and businesses.  We have to agree.  We’ve been using them in our business and have been introducing them to a range of our customers – looking at what they are doing NOW that is going to have an impact in the future – a positive impact in the future.

There are a range of things you can look at as Key Predictive Indicators – they will vary depending on the business and the people, the industry and the jurisdiction in which they operate.  One of the core KPI’s that we focus on with a range of our customers is the “funnel” – what work are you actively chasing, what are you doing to identify, target and define your “perfect” customer and how are you going with that progress?  Questions are asked about the effectiveness of the strategies and activities being adopted – those that are working are tweaked and those that aren’t working are abandoned. 

This process therefore concentrates on activites that are driving the business, not dealing with efficiency issues that we experienced three months ago.  Sure, we do look at these as part of our reporting, but for planning and development, efficiency doesn’t cut it nearly as well as effectiveness.

The trouble with effectiveness is that it gets very difficult to measure – the measurement process is, at best, subjective.  With efficiency, we can get a precise (ish), accurate (ish) result which, whilst it may make us feel more comfortable in that we know exactly how we got the result, it doesn’t necessarily add to the results the business is trying to achieve. 

As Ron Baker says – he’d rather be approximately right than precisely wrong.

So when you’re looking at your business and working out how to improve its performance, have a think about what you are doing now that will impact results in the future and then design and implement some method by which those activities are undertaken.  This will keep your “funnel” full and actually deliver a result.  Finding out that your phone bill was $250 higher than budget last quarter isn’t nearly as effective in building your business or your profits.  Mind you, you know exactly how much over budget it was!

To grow your business, focus on the future and implement some effectiveness measures (like Key Predictive Indicators) rather than focussing on historical measures.  I’m with Ron and Verasage – I’d rather be approximately right.

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