I recently made a comment to a colleague that the simple act of measuring something improves performance by at least 10%.  Assume this concept is true and think about it for a moment.  What would it mean to you and your business if you were to capture an additional 10% of business from your current customers or clients?  A compelling proposition, no?

These days we hear a lot of buzz about measurement, analytics, metrics, dashboards, and key performance indicators.  But what does it all mean and, more importantly, what does it mean to you?

"What gets measured, gets managed." This phrase, often attributed to the infamous management guru, Peter Drucker, is often quoted in business circles.  The easiest way to understand it is by invoking its inverse, "If you can't measure it, you can't manage it."

Managing something is a start, but what we're really interested in is results.  For this reason, I prefer a slightly modified, but infinitely more powerful, version of the phrase: "What gets measured gets done." In short, the simple act of identifying a key measure, in and of itself, improves the likelihood of it being accomplished.

In my opinion, this simple concept is, or should be, one of the most fundamental business imperatives for any organization, regardless of its size, whether it is publicly or privately held, for-profit or non-profit.  If utilized properly, there is no downside, other than the resources and time required to track and accumulate the data (which is the reason, we only measure what's important).

Performance enhancement through measurement works because it is simply a function of human nature.

It is a rare company that doesn't measure periodic sales (be it monthly, weekly, or even daily).  Salespeople are rewarded for their efforts with commissions, incentives, success fees, etc.  But, on a more fundamental level, I subscribe to the notion that most employees want to do a good job.  If an employee is assigned responsibility for a clearly-defined measure with attainable goals, they will do their very best to maximize it (and by doing so, maximize performance), even in the absence of tangible incentives.  Achievement, to most, is incentive in and of itself.

Sports provide excellent examples of performance by measurement because, in sports, we measure almost everything.  It wasn't all that long ago, when the NFL began measuring quarterback sacks.  Now, as a defensive lineman lineman in the NFL, one of your primary goals is to lead the league in sacks.  Coincidence?  I think not.  There are countless other examples of measures in sports that have, by virtue of their existence, enhanced performance, from the first four-minute mile, to the speed of a baseball pitcher's fastball.

The universe of measurement goes far beyond the mere tracking of sales, and even in that area, some fairly sophisticated companies could benefit from some improvement.  As a new board member of a provider of social services, I happened to be speaking to a senior member of management one day, who proudly reported that his department brought in 10 new clients that month.  "That's great," I said.  "What was your target for the month?" Silence.  "How many referrals led to the signing of those 10 clients?"  Silence.  "Do we know from which referral sources those clients came?"  Silence.  Fortunately he did know the number of new clients for the past several months because they tracked that measure religiously.  My intention was not to embarrass him, but rather, to determine how evolved the organization was in this area.

Building a culture of performance through measurement is indeed an evolution and various companies and organizations are on different locations on this evolution curve.  If your organization is relatively early along the curve, building this culture into the DNA of your company takes time, patience, and continuous reinforcement from management.  Why? Human nature, again – as with any change, it will initially be met with resistance.  This I promise.

So what are the keys to enhancing performance through measurement?  My framework is as follows:

• Start with a few key measures.  Starting with too many can be confusing and overwhelming.  Keep it simple.  Choose three measures that contribute to desired results.
• Work backward to develop clear, measurable factors that lead to those results.
• Set goals/targets, then track those metrics religiously over time, and compare actual progress to your targets.  For example, you may set an overall goal for the year, then work backwards to set goals for each month.  Over time, you will start to see trends.
• Assign responsibility and accountability for managing and achieving key metrics and targets.  If no one is responsible, it won't happen.  If everyone is responsible, it won't happen, either.
• Measure—->Monitor—->Intervene to improve progress, as necessary.  Then measure, monitor, and intervene again, and so on.

In order to see how the measurement concept works in practice, consider the following example:

You own a staffing company which provides skilled nurses to hospitals, nursing homes, and various medical practices when they are short on staff.  You employ hundreds of nurses. One of the keys to your success is that, in order to compete, you have to employ a minimum number of nurses on a full-time basis so that you can respond when a client needs staffing immediately.  However, if you employ too many nurses, you might incur their salaries even if they are unassigned to a client.  

In this case, you might set a goal to minimize downtime by measuring it along several dimensions: by nurse, by day of the week, by time of day, month, time of year, or by client.  You will begin to recognize patterns.  For example, you may realize that the client who is the most demanding in terms of responsiveness is actually at the bottom of your list in generating revenue.  You might discover that several of your nurses have substantially more downtime than the rest of the group.  Alternatively, you might discover that, during certain times of the year, you need to increase staff to meet demand.  You get the point – the range of potential information is infinite.  Further, it can be managed to achieve results.

You already have the information.  The key is organizing it and using it to make decisions and optimize results.

Tagged as: Business, Key Performance Indicators, Management, Performance indicator, Performance Metrics