Posted on December 7th, 2011 View CommentsYou may have heard the old adage, what’s measured, tends to improve. Research, observation, and common sense all support this idea. Measuring becomes a fundamental tool to manage results. Desired results, much like the destination on a road trip, are usually known. However, the milestones chosen to measure progress towards the endpoint often become a distraction, leading one off course.Knowing you have to pass through Washington to get to New York doesn’t mean you define success by driving towards Washington. If that’s all you measure, you’ll eventually get turned around, and stuck circling the city, rather than heading further north.The lesson here is to spend time developing True North Indicators – measurements that help align your progress with your target destination – and make sure you keep heading north until you have arrived.First, we’ll explore a brief history of measurement science, to understand why measuring is important. Second, we’ll look at measuring wrongly; and finally, outline a few key principals for choosing the right measurements.
Measurement science in the modern era really grew roots in the early 20th century, in a manufacturing experiment. Though the factory in question had measured the number of widgets per hour produced for a while, they thought increasing lighting on the assembly floor might increase output. They set up observers at each step on the assembly line, and observed the impact. Needless to say, production increased. However, in the early 1900′s lighting was expensive, so they began lowering the light level to find the optimum balance. Strangely, production stayed just as high – even when lighting was reduced to pre-experiment levels. Further research and experimentation led to the what is now known as the Hawthorn Effect – what’s measured, improves. Lighting wasn’t the change that increased output – measuring was.
Measurement science made many advances in the last hundred years, particularly in productivity environments. However, measuring the wrong things created many problems along the way. Greg Howell, former Executive Director of the Lean Construction Institute shares his experience from the early days of measuring productivity in construction management:
Once upon a time around 1978, I was asked to help the management team on a large industrial project figure out why reports from the work sampling initiative were showing both improved “wrench time” and reduced productivity. It just seemed unlikely that people could spend more time working and get less done. So I carried my TimeLapse cameras to the site, climbed the structure and filmed operations. I saw strange things going on there. Every time a worker went to the toilet, a piece of pipe or lumber was left leaning against the outhouse and carried away when leaving. And I saw a crew moving heavy lumber from one location to another. Working in pairs, they picked up several pieces and carried them from one pile to the next. And then they carried one back…. Handling materials gained more credit than walking empty-handed; So they always carried materials. The statistics showed walking empty handed was dropping while the amount of time spent handling material was going up. Are we surprised? The old saw, “What gets measured gets done.” is true.
Which brings us to where we started – figuring out what to measure in order to produce the results desired. How do we assure we’re actually heading to the Big Apple, and not circling Washington on the Capitol Beltway over and over again?
If you run a business, measuring financial indicators is certainly important. But like the example earlier, profit numbers can be fluffed up (for a while, at least) when measured inside a vacuum. Any internal metric can be managed and manipulated by a creative business manager, especially if he has a bonus tied to his number. Therefore, choosing the right numbers to track becomes critical.
- First, brainstorm with your leadership group what your goals are, if you don’t already know. Make sure you can create consensus on where you want to go (or, at least where the first stop should be).
- Second, for each metric currently in place, try to identify a counter-metric. What is the “cost” of increasing profit? Eliminating 50% of your support staff might save a buck for a while – increasing profits – but ultimately will increase the frustration of those needing your services. Measure both profits AND customer satisfaction, so profit growth can occur, but not at the expense of something just as critical.
- Finally, test each metric and try to break them before deploying. Poll those who’ll be using the system, and those who won’t. Ask them candidly how they’d game the numbers, until you hone in on a set of metrics that matter, and point you closer to true north.
Measuring ensures success. The measurement science of customer loyalty and behavior drives long term growth, committed customers, and a strong inward flow of referrals. Measuring client satisfaction, the real source of success as a professional service organization, is just as critical to track as your income statement and balance sheet. You look at your financial reports every month, and carefully track progress over time – but when was the last time you looked at metrics from your clients’ perspective – how well you’re doing for them?
If you’d like help developing a strategy for what to measure, our team is here and able to help you find True north for your firm and your clients.