Is your measurement system working?

If you are involved in strategic planning then you’ll know that effective measurement is a true cornerstone of success. After all, as we’ve said many times before if you can’t measure it, how can you manage it?

The one thing we often forget as part of our strategic planning process is the need to measure the measurement system itself. If your measurement system is working then it will be generating the right KPIs. If it isn’t, your hard efforts may be going to waste at the most crucial stage.

This isn’t always a popular message to give to new strategists. After all, strategic planning itself can seem fairly daunting – and the idea of measuring the measurement system starts to feel a little mind-bending! But the good news is, it’s needn’t be complex, and it also isn’t something you need to do too often. If you’ve selected a solid set of business measures, and are tracking KPIs as part of your process, you probably have a pretty robust system in place.

Your annual review

But a rigorous approach to business strategy management demands that we measure the system itself at least once a year, perhaps as part of a broader annual strategy review. Let’s take a closer look.

Is your approach to performance measurement working?

Stacey Barr suggests asking several questions to assess your measurement approach:

1. How mature is your approach?

If you’re using a process such as a Balanced Scorecard, you can have confidence that the model – and your business measures – work. But each business will use its own approach, and it helps to benchmark the approach using something called a measurement maturity model. This needs to have been developed by true performance measurement experts, however – be mindful of who you approach as Google will automatically show you ads for KPI app sales, rather than true benchmark diagnostics.

2. Are your people engaged with it?

Measurement isn’t exactly an exciting concept for most people, and it’s definitely a challenge to get your workforce to engage enthusiastically with performance measurement as an ongoing activity. Your approach needs to keep this in mind. As part of your evaluation into the effectiveness of your performance management system and the engagement that your people feel with it, gather feedback. What do they think about the measures that are being generated by your KPI approach? You could consider creating a gallery, where staff are asked a few key questions about whether they understand and agree with the KPIs in place – and how confident they feel in them.

3. Did you spend enough time on it?

It takes time to create great KPIs and there are plenty of business distractions and urgent activities that require our attention. We can end up going round in endless circles trying to get a set of KPIs agreed – and often those end up being the KPIs that are quick and easy to come up with, rather than meaningful. So work out how long it takes you to move from the point of deciding you need performance measures, to when those measures begin to be used for the first time.

4. Did you put the effort in?

Time elapsed isn’t the sole measure of quality – we also need to know how much effort, or ‘active time’ was invested in the performance management approach. Track the time that your people are spending on these key tasks, such as deciding which results will become KPIs, designing the right measures, gathering data, creating scorecards and dashboards and presenting them at review meetings.

5. Did they result in a mental shift?

Great performance measurement creates a positive mindset shift. This can be a qualitative measure – and in fact, a description of the mindset shifts that your people feel when they think about the purpose of a KPI, are great to capture. Ask questions that stimulate reflection on each stage of the KPI development and use this to assess how your people are feeling. Consider too asking people to define the single biggest change that resulted from the journey as a quick acid test of effectiveness. Is your measurement system working?

6. What’s the ROI?

Much of the performance measurement assessment process is theoretical. But ROI measurement brings in the hard data – evidencing whether the KPI approach is creating genuine performance improvements. If so, the value that the KPIs will generate for the organisation will exceed the cost of the measurement activity itself. Where possible, try to assign a monetary figure to quantify the improvements generated by the KPI, against the time and expense of generating the KPI itself.

Is the KPI meaningful?

This is perhaps the key question. If a KPI isn’t meaningful, then it isn’t ‘key’ – it’s just a business measure. A true KPI is, by its very nature, fundamental to the measurement of the business strategy.

Each business will select its own criteria, but these are likely to be:

Can the result of the KPI be acted upon?
Do people talk about the KPI actively – is it important to them?
Will a positive increment of the KPI result in a benefit for the organisation/customer/stakeholder?
How long has the KPI been in place, has its value been questioned in the past?
If I removed the KPI, would the organisation be able to function/improve?