Are you ready to measure – One fundamental business activity determines the success of any business strategy – the activity of measurement. After all, in the all too frequently quoted words of Peter Drucker, ‘if we can’t measure it, we can’t manage it.’
In fact, to take this truism further, unless we can measure an objective over time, with benchmark or comparator data, and clear parameters of acceptable performance, we really cannot hope to know whether we are achieving our strategic goals at all.
But for us to see the true value of strategic management, it’s important to know that measurement isn’t as simple as selecting data and creating charts and graphs. And yet, a lot of businesses are still doing this – perhaps because there is a feeling of reassurance for managers when they can see lots of numbers (especially those alluring financials!)
But where data is being collected without a strategic driver, it serves little strategic purpose. At best it exceeds ‘gut feel’ in value. At worst it simply wastes time and resources, and can even mask business issues – or suggest things are going in the right direction, where they may not be at all.
Ready to Measure
As committed business strategists, we know that a KPI is a very specific type of measure that is:
- Quantifiable
- Used to gauge the performance of a strategic objective, and,
- Time-bound.
A business strategy can only be deemed to be successful if it is measured. And what’s more, there is very little point in capturing metrics, unless they are intrinsically linked to strategic objectives. Otherwise, we are simply gathering data without any real purpose. Or to fulfil a specific operational purpose at a local level, for example.
Note that in the case of KPIs we are, of course, talking about business or organisation-wide objectives. Not personal objectives – but the same principle applies.
Hold up!
Business managers, whatever their industry, tend to jump onto the measurement bandwagon too quickly and without being ready to measure. Why? Because it’s easy to measure things in today’s business environment. Systems, software, automation and AI make it easy for us to generate rich data at the click of a button. In fact, many of us feel as though we are drowning in vast volumes of business data. And some may suspect that ‘decoy numbers’ are being used to divert attention away from real issues!
Data can be alluring. If we measure certain things for long enough we can also find trends. And – in theory – use these trends to help improve business decision making. But this assumption stems from a long-seated business obsession with financial measures. These can easily be evaluated out of context – and without the necessarily linked strategic objectives.
The allure of financial measures
Financial measures such as revenue and profit are easy to measure and the top-line results are easy to interpret. Well, at a high level anyway. If profit is going up, then surely that’s a good thing?
Well, actually that isn’t always the case. In fact, it’s a simplistic assumption and ignores the true business strategy. After all, if a strategic objective is to grow the business rapidly, then it might be completely acceptable for the business to experience financial loss for a period of time, as ar result of investing more heavily in the processes of expansion. As we can see, the measure here must be intrinsically linked to its underpinning objective. Only then will it make sense and be contextually meaningful.
Diving into complexity
This is more startlingly true as we move to move complex business measures. For example, we might measure the number of customer visits. Again, without an objective to provide the meaning and context for this measure, the data we collect is completely meaningless. But the attraction of complex measures is undeniable. It’s sometimes easy to hide behind complex dashboards of intricate, overly-complex measures that appear to tell a story – but not a true one, or indeed one that even really matters to our overall direction.
Remember – businesses will always need to provide certain metrics and information sources to a series of stakeholders. These might be performance metrics for a customer or partner, or quality metrics for regulators, for example. But these are operational metrics and not necessarily our key performance indicators that drive the success of our strategy.
Think, strategically
In short, Peter Drucker was certainly correct when he said that you can’t manage that which you can’t measure because data provide evidence of results. Or lack thereof!
But successful strategic management requires more than simply picking a series of measures and running with them. For success, our measures need to intrinsically link to our KPIs and evidence their attainment.
If you believe your KPIs aren’t actually ‘key’ at all, then you may be measuring the wrong things. If so, take a deep breath and go back to your strategic objectives and check to see if you are ready to measure. Pick just a few key measures to track. It can be frustrating to repeat work – but if you get it right, you will greatly increase your chances of success!
The Academy provides some great resources on this topic, specifically the eBook: How to Develop Meaningful KPIs.
