On Measuring the Real Stuff
Thinking about this further, it came to me that the high performing sports teams and businesses in the world don’t necessarily look at the scores to see how they are going (and by this, I mean that the scores are considered, but it is the valuable inputs that result in the scores that are more vital).
For example, at a recent football game, I was invited to sit in the Coaches Box. The information the coaches were interested in related more to the particular areas of performance that were important in achieving the goals of the team – the effectiveness of kicking, turn-overs, inside 50’s (it was Australian Rules footy) and, especially, the “1%-ers”. These things are the efforts that the team made to help the team get to the outcome they wanted. And the things the coaches were most eager to see and make a “song and dance” about? The 1%-ers that members of the team did that didn’t have a metric but helped things along and served as examples to and for the rest of the team. These were the things that had a lot of impact. By highlighting them and praising loudly, they encouraged the behaviour they wanted to see.
If the focus had been only on the scoreboard, that wouldn’t have told them anything about how the score was achieved. And it is the high-value/high pay-off activities that create the score.
We often see in businesses that people focus so much on the outcome (profit especially) they lose sight of what actually created the profit. Asking themselves the most powerful question about the profit or metric of choice (you know, the one starting with “Why”) gives a lot more valuable and actionable information than just looking at the result.
Understanding the activities that did or didn’t get you to where you have got is important – focusing on those that get the results you want is critical as you can encourage and repeat those that work and refine/stop those that don’t. This analysis process isn’t purely about numbers – it’s about the effort that went in to achieving those numbers.
For many years, I have adopted the view that reviewing a set of financials is like driving your car using the rear vision mirror – it will tell you where you have been, but won’t inform you much on where you are going. This is the reason why our firm encourages people to plan forward and anticipate. Look at what is coming up and adapt to the changes in the economy, market, competitive landscape etc (there are heaps of things that can be considered).
Don’t get me wrong, you need some understanding of the numbers, however my argument is that they should not be the sole focus of attention. Where you do have the total numbers focus, you lose sight of the bigger game. The measuring and assessment process should be on the Key Performance Indicators (or, as Ron Baker likes to say “Key Predictive Indicators”) that impact the outcomes. Just like the football team which highlighted the 1%-ers.
Going back to my hackneyed argument – why-fore the timesheet? It only measures inputs and doesn’t have a damned thing to do with outcomes or results. Are you measuring things in your business that have little or no impact on the results your business achieves?
There is a statement often (inaccurately) ascribed to Peter Drucker – “What you can measure you can manage”. His views were actually different to this and are nicely summarised here. But, does the fact that you can measure something make it worth measuring? Does the information you obtain from the measurement actually add to your analysis or decision making? Unfortunately, I often find that “better” measurements don’t lead to better outcomes.
It has been argued that one of the most important factors in “good” management is sound judgement. How do you measure that?
Judgement is a skill that is built up over years – to try and measure it, we would need to ascribe a value to the “inputs” and then value the “outputs”. How exactly? What exactly is the return on investment when we cannot realistically “value” the investment?
The judgement the football players showed the other week in the way they carried out the 1%-ers, the focus on the activities that mattered to the outcome rather than the score, helped highlight that the measurement game is a little subjective (!) and requires less quantification in some respects. It appears to me that qualitative is far better than quantitative on the things that really matter in whatever you do. I will take effective over efficient any day of the week, but effective is a bit more difficult to measure/quantify.
So, at the end of the day, after the rain had passed, with the sun setting and the wind cutting through me, the Coaches Box was pretty happy. They had been effective in delivering the things that actually mattered to them playing the opposition. They had done more 1%-ers than the other team. And they won – by about 70 points.
I think the only time the score was mentioned was late in the final quarter – the coaches wanted the the team to get in excess of 100 points – not that they told the players that – it would have taken their focus off where it needed to be.