“If you measure wrong things, wrong things will improve”
‘Measurement’ at all stages and in all forms & shapes is extremely important for any organization. Without measurement and more importantly “without correct measurement” we would not know the true outcome of organizational performance. Interestingly, there is an inherent contradiction as far as measurement in corporate environment is concerned. In last two decades lot of research and application has happened in concepts like Organizational Performance Management, Organizational Effectiveness Measurement, Balanced Score Card, Strategic Alignment etc. However, at the same time the base level measures have remained neglected.
It is extremely important that design / redesign of measurement system is done with utmost diligence. The most important thing is to ensure single version of truth across all levels – be it operational, business or enterprise. The challenge with most of the organizations is that consolidation tends to mask the performance data in such a manner that it becomes extremely difficult to identify the problem areas and improvement opportunity. Secondly, it is important to inculcate single-minded focus on operational definitions of the measurements. Most of the organizations tend to think that this issue has been addressed well. But, in reality, it gets delegated to a point where the linkage with strategic thinking is lost and thus more often than not, it gets insulated from bigger picture / objective of measurement. The other important constituent of measurement is aggregation within & outside the operational / business hierarchy. Given the diverse nature of processing that happens between two Operating Units / LOBs / Processes, it becomes difficult to aggregate; thus failing to give a single view of aggregated performance across the organization.
A traditional example to demonstrate this is an organization’s focus to improve quality by way of measuring & reducing defective %. First, a wrong measure has been chosen as it is not a primary metrics but a calculated one (primary metric being ‘defect’ related). Second, in absence of clear operational definition, the defective classifications undergo changes with change in shop’s manager. Thus, defective % continues improving trends, while defect injection remains constant with no let down in customer complaints. The aggregation across different Operating Units / LOBs / Processes can’t be done as it is simply not possible given different product and different definitions around defective.
Despite more and more organizations now adopting Balanced Score Card implementation, very few have answers around building predictability into their measurement system. Given great performance today, can our scorecards indicate if this level of performance is sustainable in near and mid-term future? If not, are performance scores adjusted to reflect the same?
We at ShilpBodh focus on “Doing Right Things Right”. We understand the intricacies and importance of measurement system in driving & communicating business strategy, goals and actual performance. Our consultants have the unique ability to toggle from a very strategic view of enterprise business score card to a very tactical view of metrics definition; thus ensuring that the entire design is seamless, aligned and tightly integrated. We provide creative solutions around performance aggregation challenges in a manner that true performance is not masked / lost at any stage of consolidation and drill down to problem areas is kept simple & intuitive.