Of course all CXOs want progress, but tracking progress in the right areas is what really matters.
Several years go, a call center manager told me that the goal of the call center was to process call volume, and that each call center agent was incented to compete each call within six minutes. This did not mean that an agent solved an issue or created a happy customer for every call—just they processed a certain call volume each month.
Similarly in manufacturing, there are metrics that assess assembly work by the number of pieces processed in a minute or an hour—but this doesn't account for the amount of time that items must be reworked or scrapped.
I once was in charge of marketing for a financial institution, and we were working with the front lines in our branches to help them in their sales and promotion techniques. Tellers were being rewarded for the number of new credit card accounts they opened, but no measures were in place to assess how often, and to what dollar amounts, that customers were using these accounts once they were opened. We initially also failed to measure the number of customers who had a credit card, but never used it.
All of these examples have one thing in common: they use measurable goals to gauge progress, but they don't necessarily return the highest business value.
How can managers do a better job of identifying metrics that really impact the business?
Are your metrics relevant to corporate strategy?
For-profit companies are interested in revenue generation. They also care about customer loyalty and retention because it is easier to get repeat business than to acquire and develop new customers. Companies additionally care about efficiency and reduced costs of operation because both contribute to increased profit margins. All of these are the "lifeblood" of a company, although certainly other initiatives like employee retention, safety and sustainability are important.
If you are a sales manager, it is easy to align with corporate strategy because your mission is to build revenue. But if you are the manager of a back office discipline or a discipline that is perceived as a cost center, you'll need to spend more time identifying metrics that support corporate strategy. For instance, if you are a call center manager, does it matter more how many customers you serve (time per call), or is it more important to measure how many issues you close with customers on the first call? If you are an IT manager, does it matter more how many projects you complete, or how many projects deliver tangible and measurable results to the end business?
During the 1980s, when the Los Angeles Lakers won three successive NBA championships, then-coach Pat Riley explained some of the metrics that he used to gauge player performance. He didn't necessarily look at the number of points that a given player scored. Instead, he used an "effort index" that measured how many times a player went after a rebound, or what the average speed was that a player used during a game. Riley believed that some of these behind-the-scenes factors were the real "difference makers" in building a champion.
It's that way in business, too. It might be that projects utilizing a collaborative scrum approach to new software development end up performing with fewer needs for follow-on enhancements because of higher end user involvement at the beginning of the process. Or that IT resource waste (and expense) goes down because you build into your process a requirement to deallocate virtual processing and storage that goes unused for 30 days or more.
Continually communicate results — then reevaluate and reinvent
There are methodologies for metrics development that help managers to design metrics and then measure against them. However, it is equally important to continually communicate these metrics and the results they are getting. On the manufacturing floor, this could come in the form of a chart that tracks the number of accidents over the past month or six months, hopefully indicating a decline in safety hazards, which improve the bottom line and also contribute to the wellbeing of employees. When employees see these metrics (and the results they are getting) on a daily basis, they can more easily see how what they are doing contributes to the company.
Business objectives are constantly changing. When there are changes, such as the addition of a new line of business, or budget tightening that becomes necessary, you should reevaluate your metrics for relevancy. In the course of doing this, it is important to meet with your superiors, with fellow managers and of course, with your staff. By doing this you get 360-degree feedback, which will help you make the right changes.
Identifying the most effective set of metrics to measure your group's performance isn't easy. But if you constantly monitor, reevaluate and ensure alignment with corporate strategy, the success of your group and your own success as a manager will be greatly enhanced.
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