Executives can't take their businesses on a successful journey if they don't know the destination -- or how to get there
Smart, driven executives burn to take their companies somewhere new and to greater levels of performance and profits. Their vision and plans sound inspiring and motivating. The problem is, those executives don't always know where they want their company to go or how to get there.
A company must first describe and define its destination.
I've worked with many companies that want to change and grow, but they have only a vague sense of their destination. In this two-part series, I'll show how executives can clarify their mission and goals, then move their companies toward their destination: dramatically improved performance and profitability.
Step one: Figure out where you're going
A company poised for change and performance improvement is alive with debate and discussion. Senior executives, however, might not realize that they may be debating two issues that are best handled in sequence rather than on parallel tracks: what and how.
Leaders are activators and want to discuss how, or the practical steps or actions to accomplish a desired outcome. The conundrum is that launching into action without a clear, mutual, and complete agreement on the outcome practically guarantees failure. A company must first describe and define its destination.
On a recent visit to a respected financial services organization, I learned that the bank was launching a series of initiatives to create "customer centricity." I met with two key executives, one on the product marketing side and one in sales leadership.
The product marketer described customer centricity from the bank's perspective in terms of revised product design and advertising. She wanted the product, service features, and benefits more closely aligned with what the bank perceived the customers' needs to be.
The sales leader saw a different picture, one based more on the customer's perspective. For him, customer centricity emphasized or de-emphasized product focus based on knowledge of what certain customer segments said they needed.
Both of these views are valid, but they lead to different actions and means of measuring success. In other words, these divergent approaches would lead to two very different destinations. The sales leader would say that the bank doesn't need to offer products it knows the customer is unlikely to want, while the marketer would want the bank to offer a full spectrum of products to meet any customer need, even the unlikely ones. Acting on both these conflicting visions would be the strategic equivalent of "ready, fire, aim."
This "destination disconnect" is a symptom of weak cross-organizational communication. The solution is to bring all stakeholders together to get agreement on the destination before doing any additional planning. To achieve success, it's important to have the same target in mind before expending valuable ammunition.
It's important to note that the richer the discussion and the more vivid the description of the destination, the better. A compelling vision inspires participation and effort. Vivid detail also helps prevent misunderstanding and disagreement when the company begins implementing changes.
It's easy to measure success in this phase. You've achieved it when the team clearly understands what the destination is, agrees on it, and can articulate it. Once that happens, no further discussion or clarification is necessary. The successful leader can steer subsequent conversation away from rehashing what to achieve and toward how to achieve it.
Step two: Measure progress toward the destination
Once your team agrees on the destination, you can turn your attention to the important issue of measuring progress. This sounds easy, but it can get complicated quickly. Most organizations are choking on performance data and have little understanding of what data are important (need to know) and what data are merely interesting (nice to know).
Many companies find it relatively easy to add new metrics to scorecards and dashboards, but few are good at weeding out metrics that are no longer relevant. The result is a bloated scorecard with more data points than anyone can possibly manage or absorb.
When setting up metrics, the key factor is the team's mental bandwidth. How many performance metrics can anyone simultaneously support? The answer: Fewer is better. Having fewer metrics creates sharper focus and more considered effort.
Change is constant, and metrics must remain dynamic.
Prioritizing and eliminating performance metrics requires discipline and focus, but the dividends are worth it. Here are some key items to consider.
Start by defining your primary metrics -- or the "vital few" -- and your subordinated metrics, which are tracked but not given the same focus. You should track and manage the vital few daily. Subordinated metrics become useful when a problem occurs on a primary metric and you need deeper analysis. For example, a business that manages to high efficiency levels might consider overall expense control a primary metric. Specific line-item expenses, such as customer refunds or overtime, would be subordinate, and you don't need to focus on them unless there was a performance issue on the primary metric.
Focus on metrics that the work team can influence. A sales team may not have a clear path to control defect rates. A production team may not have a clear path to improve product awareness. When designing a work team's scorecard, ask what behavior change each metric can influence. If the answer is unclear to you, it won't be clear to the work team.
Determine which primary metrics can serve as a proxy for other metrics. A robust customer experience metric, for example, can measure sales effectiveness, fulfillment quality, and problem resolution when combined with appropriate subordinate metrics.
Note the relationships between your primary metrics when building a scorecard. Primary metrics relate to other vital few metrics in three ways: They are independent, reinforcing, or balancing. Let's explore these relationships using primary metrics from a call center:
Independent metrics have no measureable correlation or causality. For example, fixed costs and customer engagement could be important for a call center to measure, but neither has an influence over the other.
Reinforcing metrics, on the other hand, are positively correlated. As one goes up, so does the other. When handle time (or the duration of each call) goes up, for instance, customer engagement also tends to go up because agents may be spending more time addressing customer needs.
Balancing metrics may present a negative correlation. When one goes up, the other goes down. For example, the same increase in handle time that can improve customer engagement could decrease agent efficiency as measured by calls per hour.
Knowing these relationships is important when building a comprehensive scorecard, and you should look for combinations of balancing metrics. In the example above, most companies seek efficient phone center operations but don't want to do so at the cost of customer engagement. By tracking both customer engagement and agent efficiency, the company can find a point of balance between these opposing goals.
Change is constant, and metrics must remain dynamic. As the business manages metrics in a changing environment, it's helpful to stay committed to a lean approach. One way to do this is to agree on a "zero sum" strategy to managing a scorecard: If a team wants to add a new metric, it must also take one away to prevent future bloat.
The journey so far
These two steps, taken sequentially and with care, can set up a company or a team to succeed. As with any journey, the way you start has an impact on how you finish.
In the second part of this series, I'll look at the next steps.