Metrics – Results or Drivers
By Richard Losch on June 14th, 2011
We all know how important metrics are to successful business. The sayings, “What you don’t measure won’t get done”, and even, “If it didn’t get measured, it didn’t happen”, have become proverbs. Monthly reports of detailed financial statements and key performance indicators are common in large and small companies alike. For business people, this is our report card. It is the basis for “ranking” ourselves, both inside and outside our company. With all this emphasis on measurement and metrics, why do so many organizations seem unable to change and improve their businesses, or see issues coming?
Despite the emphasis on measurement and metrics, two things are often missing. The first is that most of the metrics that we track and report, and which get the scrutiny are in fact “results” measures. The revenue we generate is a result of the sales activity, and quality statistics are the results of the production process and activity. These all reflect what has already happened, and are not, in themselves, actionable. In order to make a change in the results, the focus must be on the drivers that lead to the results. “Driver” measurements provide a means of tracking those process and activity components that can be acted on to improve results. By measuring the driver activities, we can also begin to predict what will happen with the results metrics. Using the revenue example again, if you focus on quote activity and close rate and the way these measurements trend, you will be able to impact the revenue. To affect quality and delivery time, the attention should be on the first pass yield for each step of the process. Improvements in first pass yield improve quality, and reduce the overall time required to complete a job.
Secondly, there is often a tendency to look at individual metrics in isolation. Results measurements are easy to put into individual buckets to focus on. To really understand what is happening in the business or function and effect positive change we must look at the interactions between different activities, and the trends for the driver metrics. For example an increase in process cycle time would generally be a bad trend, however if that increased cycle time is combined with an increase of work volume or new work being developed, the increase in cycle time may be temporary, or if volume related, not be negative.
As more and more organizations are adopting dashboards as a useful tool in managing their business, including driver metrics, and integrating related functions on their dashboards will help to optimize results.