Metrics: How to Improve Key Business Results Part 10

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Using the Answer Key.

A Shortcut.

This chapter marks the beginning of the practical portion of the book. We've covered a lot of theory and concepts in the first part, which should provide a foundation for doing the actual work.

The Answer Key is a tool for helping ensure you have the right answer to your root question. It works with the majority of organizational improvement questions. It will also give you ideas about other areas you may want to measure. You'll get the most benefit when you use the Answer Key to work on organizational improvement efforts.

What Is the Answer Key?

The Answer Key starts with the defining point of any metric: the need for information, the root question. The Answer Key won't work for every root question, only ones concerning the health of the organization. The health of the organization covers the wide range of questions and needs we usually develop metrics for. Most root questions, especially in a business, revolve around how well the organization is functioning. Most Balanced Scorecards (see the box) and questions about customer satisfaction fit under this umbrella.

The Answer Key is a shortcut for many of the metrics you'll encounter. It includes the metrics I recommend organizations start with when they are seeking to implement a metrics program for the first time.

The Balanced Scorecard and the Dashboard The Balanced Scorecard was introduced in 1987 by Art Schneiderman, a manager at the semiconductor company, a.n.a.log Devices. It has its most well-known proponents in Robert S. Kaplan, a professor at Harvard Business School, and Dr. David P. Norton, a founder and director of the Palladium Group. The basic concept consists of four perspectives: Financial, Customer, Internal Business Processes, and Learning/Growth. By looking at these key areas, leaders.h.i.+p can gain a pulse of the organization through the use of measures and targets.

While I don't agree with the concept of "targets" and I have reservations on the Balanced Scorecard as a whole, it has strengths I have to respect. The Balanced Scorecard has been used successfully by many organizations and continues to be popular.

The "Dashboard" is a later promotion of metrics in a more balanced manner. Created in the spirit of its namesake, it is a dynamic metric tool. Like the Balanced Scorecard, the Dashboard employs multiple measures, but includes a more real-time component built around Key Performance Indicators. There is no shortage of metric processes and tools to choose from. The good news is that what I offer can be applied to any of these popular methods or you can embark on a personal journey where you build your own metrics from scratch.

The Answer Key helps you determine where you need to go with your metrics. It also identifies other questions that may relate to the one you're starting with. It can also help you keep from going in the wrong direction and dispersing your efforts too broadly, with no focus.

The Answer Key is made up of tiers that branch out from left to right. Each tier has more measures and data than the previous tier. The following sections will describe each of these tiers in more detail.

Answer Key: First Tier.

The first tier isn't so much of a tier as it is a starting point. Is your root question an organizational information need? Does your root question deal with information about an organization; specifically, about the health of the organization? If so, your question will probably fall under one of the following two concerns: How well you provide services and products to your customers.

How healthy the future looks for your organization.

Answer Key: Second Tier.

If your root question fits within one of the first two tiers of the Answer Key, this tool will help you focus your efforts and find viable measures without spending inordinate amounts of time hunting for them. But, if your question does not fit into the Answer Key, don't change your question so you can use this shortcut!

Also don't ignore the need for developing the root question first. In other words, don't start with the key. If you do, you'll end up short-circuiting your efforts to develop useful metrics and more importantly, to answer your questions.

Tier two provides a framework for strategic-level root questions. If your root question is at the vision level, the second tier may represent actual metrics. When you find your root question is based on improving the organization, the question is often based on a need to understand "where the organization is" and "where it is going." The Answer Key shows that this need for information flows into two channels, one to show the return (what we get) vs. our investment (what we put in) and the other to a.s.sist in the management of resources. I call these two branches "Return vs. Investment" and "The State of the Union." Figure 5-1 shows this branching.

Figure 5-1. The Answer Key, tiers one and two.

Return vs. Investment.

Return vs. Investment is the first of the two main branches of organizational metrics. It represents the information needed to answer questions concerning how well the organization is functioning and how well it is run. Are we doing the right things? Are we doing the right things the right way? These are key focus areas for improvement and, actually, for survival. If you aren't doing the "right" things, chances are you will soon be out of business or, at the least, out of a job.

If you aren't doing things the right way, you may find that you can continue to function and the business may continue to survive, but any meaningful improvement is highly unlikely. The best you will be able to hope for is to survive, but not thrive.

Root questions around the return may include How well are we providing our key services?

In what ways can we improve our key services?

Questions around the investment may include How much does it cost us to provide our key services?

How well are we managing our resources?

As we delve deeper into the answer key, more specific questions will become apparent. Remember though, the breadth of your root question will determine how far to the left you'll need to go. The farther left on the Answer Key, the more broad or strategic the question.

State of the Union.

Once you are effectively and efficiently running the business, you can turn your attention to how you manage your resources. The most valuable a.s.sets you have should be maintained with loving care. Yes, I'm talking about your workforce. Every boss I've ever had has touted the same mantra: "Our most valuable a.s.sets are our people." Yet it's amazing to me how poorly we take care of those admittedly invaluable a.s.sets.

I observe managers who take their BMWs to their dealers for scheduled maintenance, only use premium gasoline (regardless of the price of gas), and won't park anywhere near another car-yet do absolutely nothing to maintain their workforce. No training plans, no employee satisfaction surveys, not even a suggestion program. They rarely listen to their staff and devalue them by never asking for input. If people are truly our greatest a.s.sets, then we should treat them as such.

This view of the organization is our "State of the Union" address. It tells us how healthy our organization is internally. While Return vs. Investment tells us how healthy the organization is from a customer and business point of view, the State of the Union tells us how healthy the culture is.

Besides the workforce, we also need to focus on the potential for our future. We can determine this by looking at how we are managing our growth toward maturity. Do we have good strategic plans for our future? Are we working toward our goals?

Root questions you may encounter in this area include the following: How strong is the culture of recognition in our organization?

How strong is the loyalty of our workforce?

How well are our professional-development efforts working?

What is the expected future of our organization?

How do we stack up against our compet.i.tion?

How well are we achieving our strategic goals?

The further to the right you move on the Answer Key, the more specific and tactical your root questions will become.

Answer Key: Third Tier.

Figure 5-2 shows the next level of the Answer Key, in which we extend the branches to include Product/Service Health (effectiveness), Process Health (efficiency), Organizational Health (employee maintenance), and Future Health (projects and strategic planning).

Figure 5-2. The Answer Key, tiers one, two, and three Most root questions boil down to wanting to know answers based on one of the views of the organization represented in the third tier. The t.i.tles-Product/Service Health, Process Health, Organizational Health, and Future Health-help us to understand the relations.h.i.+p of each branch to the other. They also help us understand where our metric fits. Along with the t.i.tles, we find an accompanying viewpoint to further a.s.sist in reading the Answer Key. These viewpoints show that each of the t.i.tles can be looked at from the perspective of Customers, the Business, the Workers, and finally Management.

Let's figure out where your root question best fits.

Does your root question deal with how well you provide a service or product? Does it ask if you are doing the right things? Does it ask if the things you are doing satisfy the needs or desires of your customers? Is your root question one the customer would ask? If your question matches any of these, it fits into the Product/Service Health category.

Does your root question touch on how well you perform the processes necessary to deliver the services or products? How efficient you are? How long it takes or how much it costs for you to perform the tasks in the process? Is your question one a frontline manager would ask? If your question can be found in any of these, you are probably looking at a Process Health root question.

If your root question concerns human resources, the staff, or something a compa.s.sionate leader would ask, your question may belong in the Organizational Health branch. Root questions here ask about the morale of the workforce, loyalty, and retention rates for employees, among other things. How well do you treat your staff? Is your organization among the top 100 places to work in your industry?

The final area of the third tier represents root questions that are concerned with the Future Health of the organization. Is the organization suffering from organizational immaturity? How useful are the strategic plans, mission statement, and vision of the organization? How well is research and development progressing? This view is primarily one of top leaders.h.i.+p-if your leaders.h.i.+p and the organization are ready to look ahead.

How would you use the Answer Key to develop your metrics?

The information needed to define the Return vs. Investment is made up of the well-trod paths of "effectiveness" and "efficiency." Effectiveness is the organization's health from the customer's point of view. How well is the organization delivering on its promises? Is the organization doing the right things? This is not only important for the development of viable metrics, but for understanding and growing the culture of the organization. Some organizations may not even know who its customers are. And if the customer base has been well defined, gathering the customer's view of the components of effectiveness is not seen as important.

Sometimes organizations are forced to ask customers what they think of the company's effectiveness. Surveys are built, focus groups are formed, and the questions are asked.

Do you use our products or services?

Are you satisfied with the delivery of our products and services?

How satisfied are you with our organization?

While these questions help define viable measures, they also give focus for your own growth. Does the organization have a clearly-defined and doc.u.mented list of customers? Does the organization know what its products and services are? Is the organization in the business of satisfying the customer? How does the organization "serve" the customer? These are more than guidelines for gathering data points. The Answer Key helps form a picture for an organization seeking to achieve continuous improvement.

While these four sections can describe the metrics themselves (if you have a higher-level root question), chances are your root question is at this level and your metrics won't start until the fourth tier.

Answer Key: Fourth Tier.

Now we'll look at the level most organizations start and finish with. When your root question starts here, you have tactical, low-level questions. This is to be expected when an organization is first starting to use metrics. The root questions you'll encounter will be very specific and may only address a small area. You may have a root question about delivery that asks, "How well are we responding to customers requests for updates?" for example.

You may have root questions around specific Process Health issues, like the amount of time it takes to produce a widget, the quality of your output, or the cost for a specific service. Where your root question falls in the Answer Key changes the character of each tier. Figure 5-3 introduces the fourth tier.

Figure 5-3. The Answer Key, tiers one through four If your root question comes out of the fourth tier, everything to the left is context for the question. As your organization matures, you'll move your questions to the left, asking questions from a more strategic position. If your root question were in tier two, then tier three would represent the metrics you could use and tier four would represent information. The measures and data would be defined for each information set-and could become a fifth and sixth tier if necessary.

The Answer Key not only keeps you focused and helps you determine what area you're interested in; it also provides some standard metrics, information, and measures, depending on where your root question falls.

Product/Service Health (effectiveness).

Figure 5-4. The Answer Key, Quadrant 1, Product/Service Health The following are the main components of Product/Service Health (Figure 5-4): Delivery: How well are you delivering your products and/or services?

Usage: Are your products and/or services being used?

Customer satisfaction: What do your customers think of your products and/or services?

Each component can be broken down into smaller bits-making it more palatable. Delivery is a good example for this as it is a higher-level concept. I tend to break delivery into the following parts: Availability: Is the service/product available when the customer wants it?

Speed: How long does it take to deliver the service/product?

Accuracy: Do we deliver what we say we will or are there errors involved?

The driving force behind Product/Service Health is the customer. We don't care who is "responsible" for the issue. We don't care if you have any control over the situation or condition. All we're trying to see is how the customer views our products and services. This simplistic way of looking at your organization is valuable because it makes it easy to focus on what is most important.

Process Health (efficiency).

Metrics: How to Improve Key Business Results Part 10

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