The question of how you know whether you’re measuring the right things is something many executive teams occasionally ponder. Rightly so, corporate measures play an integral role in driving behaviors and accountability within an organization. The opportunity cost of having strategy-neutral measures is huge.
There is no quick and dirty solution to whipping up a new scorecard in 2 weeks if your strategy management practices are lacking. The answer starts with clarifying your commitment to a specific value discipline, and then building a concise strategy map. Working backward from the strategy map, create a series of measurement objectives that will guide your selection of measures. My opinion is that if your strategy map describes what is most critical to your success, this is also where the focus of your measurement should be. Selecting measures outside the clarity of this context creates a situation where you’re guessing (intuition) and risking having a number of general business measures that aren’t strategy-specific. I consider anything outside of the context of the map to be strategy-neutral, hence a distraction. If you run into a conflict where something seems to missing from your scorecard, that’s just an opportunity to test whether something is missing from your map or not.
And now this takes us to the next step: your measurement objectives describe the outcomes you want the measures to create, however you still need to test and select the measures that will speak to each objective. So, build a list of criteria for what you see as an effective mix of measures. It’s ultimately not a guarantee you’ll select the right measures, but it’s a good check-point.
Maybe something like:
– Anticipated to drive behaviors that support the strategy and desired customer experience
– Timeliness / can be acquired at a useful frequency
– Is meaningfully connected to our strategy
– Accurate conclusions can be drawn from the results
– Is easily actionable
– The results are material to our success (doesn’t act as a distraction from more important issues) – the performance of which will have an impact that our customers care about
– Plays an appropriate part in an effective blend of leading and lagging indicators
– Represents a performance gap â€“ targets change year-over-year
– Creates appropriate accountability
– Easily audited: Isn’t subjective and the result of which can’t be â€œplayed with
– Is reasonably easy to get, isn’t prohibitively expensive
– Is intuitive enough for people to know how it applies to the business, easily understood
– Is repeatable and consistent
– Allows peer comparisons (where meaningful)
Having a framework such as objective > measure > target builds in the context of why the measure was initially selected (objective), so that the logic behind how the scorecard was constructed is apparent. In this way, before someone can suggest a change to the scorecard, they need to demonstrate that:
1) The strategy map has changed
2) Or that one of the measures is driving the wrong behaviors
3) Or that one of the measures isn’t speaking to the objective
4) Or that the overall mix of measures doesn’t line up with the criteria (mix of leading, lagging etc)
â€¦And this will help you manage your scorecard in a controlled and logical way.