Balancing the art and the science of metric analysis
There’s an art and a science to the management and analysis of measures. Some people seem most happy converting the mass of numbers into composite scores and overall indicators, while others seem to have no formula to their approach whatsoever. I believe the secret to this whole conundrum is to realize that there’s a trap in both extremes.
On one side of the coin, there’s using the scorecard to justify past and current performance and for the purpose of visibility. Further down this road, there’s taking the data and converting it into composite scores which can be used to determine variable comp pools and overall corporate performance categorization. This can be extremely useful as a tool, provided that the focus doesn’t boil down to your organization avoiding any depth of analysis as to what the data means. What factors are acting on the organization, internally and externally, both positive and negative that are supporting or resisting your ability to be successful?
It is entirely possible that your corporate performance in a specific measure could look stable, while the environmental factors have reversed. In the case where the external environment is supporting you and the internal is a challenge, and the factors completely reverse… you may not see a change in figures while a new risk could be growing unmitigated. Subject matter experts within the organization need to be engaged to analyze and share the environmental factors and potential impacts of the changing business environment on an ongoing basis.
The opposite trap is that not enough math is introduced to the overall system which limits the ability to integrate the results of your performance into other systems such as variable comp or performance management. There is a time and a place for analysis and summary. If your organization is having trouble getting into a good discussion of depth at your strategy review meetings, keep your math behind the scenes.
Finally, keep your corporate scorecard outcome based, with a focus on transformational measures. Measurement creates focus, which creates action.