Measuring Success

Tue, Dec 9, 2008

Strategy and Execution

As we wrote in the article ‘Importance of Measurement,’ without a measurement system, a company has limited ability to manage performance, thereby risking success. But following the wrong measurements will probably lead to failure as well. So, how does a company go about putting in the right measures for its business? Outlined below are some suggestions.

Measure outcome, not activity

This is one of the most common mistakes. Managers focus on activities (i.e. develop a new strategy for the wholesale business) instead of the outcome (i.e. increase net profits by 20%). The objective of ‘develop a new strategy’ is vague and hard to measure. How do you know when you are done? How do you know it was done well? Outcome objectives describe what you will accomplish. The objective should either specify the goal you want to achieve, or, be predictive of your goal.

A good outcome objective makes clear:

* what is being measured
* how it is being measured
* why it is being measured
* what the timeframe is

Clear and Specific Goals

Results need to be measured so success can be evaluated. A better goal would define quantity and add an element of time. For example, the goal could be stated as “earn $100k in revenue from new clients within 4 months.” It is clear to all parties involved what is expected.

Focus on relevant measurements that tie to the company’s overall goals

If a company is deploying the Balanced Scorecard, there are four areas that support the overall strategy of the company. So where one person’s measures may focus on revenue growth (Financial), another may focus on innovation (Internal Processes). Ultimately, all areas support the company’s vision but employees will be focused on the area that is most relevant to them. As importantly, they won’t be derailed by measurements that have no relevance to them.

One other benefit of a measurement system that has not been discussed is the process of employee reviews. If goals are set and clear and specific measures are put in place, the notion of a painful review process becomes a thing of the past. Performance is based on clear, objective data. Too many times, employees feel that review sessions are political resulting in frustration and a decrease in job performance.

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