You Get What You Measure

by Jean Houston Shore, CSP, CPA, MBA
Copyright 2007

"Employees can't help but focus their behaviors on the measures we promote."

This is a busy time of year for those of you in charge of your company's "numbers." Almost every day a Fortune 500 Company releases its "annual earnings report," and stock analysts frantically update their "buy/hold/sell" recommendations. Since I spent the early part of my career in accounting and finance, I have great respect for the information that accounting brings us. But with the data overload produced by our financial measuring systems, how can we be sure that we're measuring what is really important?

WHY USE MEASURES?

All businesses have some system of measurements. Measuring systems provide information about how viable our business is, how well a new product is doing, or how productive a region of the sales force has been. We make strategic decisions based on data from our measuring systems. Properly publicized measures are powerful motivational forces; employees generally focus their behaviors on the measures we promote. To rewrite the old adage, "You get what you measure."

Usually we monitor things that can be measured financially - how many dollars of sales we booked, how much the factory spent on raw materials. It is usually easy to set up financial measures no matter what your industry. Soon you are inundated with data! The astute business leader continually analyzes the system itself, asking "Are we measuring the things that are vital to our business or are we measuring what is easy to measure?"

Let's say that we want to measure the productivity of our customer support personnel. An obvious and easy-to-gather productivity measure would be number of calls completed per shift or number of customers served per hour. So we begin to gather the data and analyze it. We even post it in the break room so all of our agents know their productivity scores. The agents want to "look good" on the charts so they begin to move through their calls faster. Some even become short tempered with customers, hurrying them off the phone lines rather than maintaining high levels of rapport and friendliness. Some agents also neglect their cross-selling or up-selling duties or forego the opportunity to help the customer learn how to fully use the product's functions. The result is a high "productivity" score but a steep decline in customer satisfaction. Remember that you get what you measure!

DO A MEASURES CHECKUP

Here's how you can perform a measures checkup on your business or department. First, make a list of the major functions your area performs. This should be a high-level description; a sales job function list would include such things as identifying prospects, communicating information about company products, and completing purchase agreements. Second, define who your major constituents are for each major function. That is, who benefits when you perform this function well and is hurt when you do not perform it well? In our sales example, the constituents list would include your sales manager, the customer, the accounting department, and the after-sales service department. Third, determine what measures you currently have in place to track your progress in pleasing your constituents. If time allows, speak to a sample of your constituents in each area and ask them what is important. Fourth, work with a group of your peers to brainstorm a balanced list of potential measures. The list should include each of your major functions and each of your major constituents. Finally, examine your current systems and procedures to determine how to implement your new balanced scorecard of measures. I suggest that you start tracking just one or two things and expand from there, making sure that all constituents are represented when the measures project is finished.

Implementing a comprehensive and motivating system of performance measures takes time and there will be fits and starts along the way. To practice effective leadership in today's volatile climate, you must closely monitor your business progress. With a balanced scorecard approach to business measures, you and your management team will always know whether your cup is half empty or half full!