As I wrote in the last segment, I have a number of pet peeves under this heading.
- Goofy labels for routine things
- So many metrics that no one pays attention.
- Objectives or priorities that are supposed to be measurable but aren’t.
- Goals that are actually steps in an project plan.
- Metrics without financial transparency.
The subject of Part 1 was about financial transparency. Your work force needs to understand the financials of the business because the metrics create a line of sight from their work to the financials. This line of sight is critical to identifying good metrics for individual teams to assess their work. Knowing that line of sight is why labels, priorities and the “right” metrics are important.
Goofy labels are a distraction. They don’t make the work “fun”. The goal for all communication is clarity and conciseness. And some precision helps as well. If you have to tell a story to explain what a label means, change the label.
Too many metrics are also distracting. Whatever your industry and business, you will have loads of stats to monitor. It is absolutely true that an organization needs to “measure what matters”, as stated by many business books. The problem is that not every metric that you track will help your team move the lever that moves the metrics that determine every organization’s success: net profit and cash flow.
Finding the metrics that matter most – the levers that move the result on the financial statements – usually doesn’t take that much time to identify. There just aren’t that many that drive net profit and cash flow directly. Those two or three metrics – AND NO MORE – are the starting point for levers/metrics in the departments or divisions around the organization.
If you are an executive in a larger organization, you are likely to say that it just isn’t possible. In a large company, it may be more challenging, but it isn’t impossible. It is vital that you focus in on the core metrics or your hundreds or even thousands of employees will not have a clear sense of what success looks like. Net profit and two other metrics are all you need.
Consider that Paul O’Neill transformed ALCO by focusing on safety. Wall Street analysts thought he had lost his mind; the stock price was dropping, so obviously his focus should have been on shoring that up. His focus on safety ushered in a transformation that benefitted the workers and shareholders, far better than the current executives in the company have been doing since his departure after more or less abandoning his successful structures[2].
Once you have the core metrics for the organization, now your teams have what they need to begin identifying their levers to move those metrics. Which brings me to #3 and #4.
Objectives need to be measurable. Objectives and goals are not tasks in a project plan; they are the foundation on which a project plan is built. The project plan is replete with the many actions that will move the levers that are measurable, as identified in the objective. A metric is not whether you accomplished a particular task or set of tasks. We all have important tasks that need to be done to keep our organizations running smoothly. The question is: Are we doing the work that keeps our organization in business?
Every department or division in a company needs to know what their line of sight metrics are to net profitability and the core metrics of success.
Someone reading this might think that the workers become “widgets” and “order takers” with all this focus on levers and metrics. The exact opposite is true, BECAUSE you started with financial transparency and a stake in the outcome. You can’t hide bad decisions when you have financial transparency. People are more engaged when they are given both information and the accountability to help serve customers and improve the profitability of their company, even if they are only stakeholders and not shareholders in the company.
