Metrics: How to Improve Key Business Results Part 11
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Figure 5-5. The Answer Key, Quadrant 2, Process Health.
The other component of Return vs. Investment is efficiency, or is the organization doing things the "right way?" This (Figure 5-5) captures a business view that all stakeholders should want to claim. The following, tested components of efficiency remain relevant: Cost: What is the cost-benefit of the way we perform our processes?
Time: Time is akin to speed in the customer view. Many times the same data and sources can be reused for this measure. How much time does it take to perform a task or process?
Resource allocation: How efficiently do we distribute the work? Do we a.s.sign work by type and amount?
Quality: Quality is accuracy from the business point of view. Even if we have redundant systems providing 100 percent uptime, we will need to track that reliability (for each of those systems) so that we can best maintain them.
Many organizations focus too much on cost and forget that their concerns should first be based around whether the organization is doing the right things (effectiveness) and only then if it is doing them the right way (efficiency). Instead, many organizations latch onto any perceived faults in cost and then react without deep or critical thought. This error is compounded by the lack of information about the costs of services and production. This is especially noticeable in the soft industries. Manufacturing industries usually have a good handle on cost data, but soft industries like information technology, software development, or education find it very difficult to price out their products and services. This is logical, since these organizations normally have trouble defining what products and services they produce. Ask a dean of a given college what products and services the organization delivers. Then take a step further and see if the cost of those offerings is doc.u.mented.
Time, especially when it is connected to cost as a delimiter (person/hours), is one of the most abused pieces of information. Managers jump on the metrics bandwagon when they start to believe that they can ask for data that will allow them to manage (not coach or lead) their people without having to actually talk to them or get to know them. Timesheets, time-motion studies, and time allocation worksheets come to be in vogue. In a well-constructed metrics program, you wouldn't get to this level without starting from the all-important root and all of its listed components, which should prevent one from abusing the data. Time shouldn't be used to "control" your workforce. It should be used to do the following: Improve the organization's ability to estimate delivery schedules.
a.s.sist in improving process and procedures.
Round out other data, like cost and quality.
If "quality" is based on the objective measure of defects, how many defects per a thousand instances equals "quality?" Is high quality the goal? Is quality a "yes or no" decision? Quality is best described in terms of defects and rework, and like "time" it can be misused. It is not a simple way for managers to determine who should get a raise or any other human resources issue. If you abuse metrics, quality can become a weapon instead of a tool.
Ensure your metrics are used as a tool for improvement and not a weapon.
Quality, time, resource allocation, and cost are all components of Process Health and define the business view of the Investment the organization's processes and procedures represent. Therefore, these views should only be used to improve the business-not people. Product/Service Health was exclusively from the customers' viewpoint. Process Health is equally exclusive in its focus-and it represents the business view. The customer will most likely never see (and shouldn't have a need to see) these metrics. These are "internal" metrics, as are the next two areas of the fourth tier.
Metrics should be used to improve the overall business, not people.
Figure 5-6. The Answer Key, Quadrant 3, Organizational Health When we look at Organizational Health (Figure 5-6), we look at the organization from the worker's viewpoint. It takes into account the following: Employee satisfaction.
Reward and recognition.
When we ensure that our most valuable a.s.sets are treated as such, we find that the organization improves. I normally suggest organizations address the Answer Key areas from the top down, making the Organizational Health measures third or fourth. This is in part due to political concerns. When you justify the use of metrics, it's much easier to gain support if you first address the organization's health from the customers' point of view. Without customers, there won't be a business to improve. Once you've tackled the customer's view, you will need to ensure that you can afford to keep your workforce.
But in an ideal world, one in which perhaps you are the CEO, I'd argue easily that the first place to start your improvement efforts should be with your greatest a.s.sets, and then with your customers. Sound blasphemous? If you have a healthy workforce, you can work with them to better define your business model, your future, and where you want to improve.
Employee satisfaction is pretty straightforward. The more satisfied your workforce is with their situation, the organization, and the environment, the harder they will work. The more loyal they will be. The stronger your organization will become.
Along with their satisfaction, you must be concerned with developing their skills and their knowledge base. Professional development measures tell you how well you're doing in this area. Do you have training plans for each worker? What is the level of skill development for each worker? The stronger your workforce, the more you'll be able to do. It should be a criminal offense to first eliminate training whenever funding cuts come down. The only way to do more with less is to increase the capacity of our workforce to produce more and produce better. The best way to improve productivity is to improve the worker's skill set.
The work environment measures are normally captured through subjective tools-like surveys. But there are plenty of objective measures available. Square footage for works.p.a.ce. Air quality. Lighting. Ergonomics. There are many ways to measure the quality of the physical work environment. There is also the cultural work environment. Is the organization a pleasant place to work? Is it a high stress environment (and if it is, does it need to be)? Again, you can find both subjective (ask the workers) and objective measures. Do workers take a lot of vacation and sick time? Is turnover high?
The final component of Organizational Health is reward and recognition. The simple questions may not require data collection. Do you have a formal reward or recognition program? Is it effective? Does it do what you want it to? How do you reward your workers? How do you recognize their accomplishments? Do you only recognize their work-related achievements? And on a more subtle note, do you inadvertently combine recognition and reward, such that recognition only occurs when there is a reward involved?
The bottom line on Organizational Health is an extremely easy one-do you treat your most valuable a.s.set like they are your most valued a.s.set?
Figure 5-7. The Answer Key, Quadrant 4, Future Health The last area of the Answer Key is Future Health (Figure 5-7). It covers the following: Project/Program status Strategic planning: How well the organization is implementing the strategic plan Goal attainment: How well the organization is reaching its goals Priority setting: How well priorities are being set, and being met This area a.s.sumes that you are working on continuous improvement for the organization. Future Health is not listed last because it isn't as important as the others. It's last in the list because most organizations are not ready for attempting metrics in this area. Most organizations need to get the first three areas of the fourth tier under control before they start to look at large-scale improvement efforts.
Many organizations bypa.s.s this guidance and jump to measures to show how well they are working to improve processes. They jump on the continuous process improvement wagon. I don't put much faith in such behaviors since these organizations drop these same efforts as soon as funding becomes tight.
The reason you undertake an improvement effort is more important than if you succeed at it. The only way you can truly succeed is to do the right things for the right reasons.
Measures around the organization's Future Health are mostly predictive, and this makes them "s.e.xy" to leaders.h.i.+p. But more important than predicting the future is encouraging and rewarding true process improvement.
Program and project status measures provide insights for leaders.h.i.+p into how these efforts are helping improve the organization. You should expect that progress in process improvement is or will be reflected in the measures captured in the other three areas. If you do a good job on continuous process improvement, the customer view should improve. The business view should also see gains, and the workforce should also benefit. If these three areas aren't improved by your efforts, you aren't improving the organization.
Strategic planning, goal attainment, and priority setting are all important things to focus on-but in themselves they are meaningless. If these are not part of a bigger effort to improve the organization, you are just spinning your wheels. These efforts are tough because they require true (and sometimes reckless) commitment to succeeding. You have to want to change. Many organizations pay lip service to this area and don't really see the effort through to the end-and when we're talking about "continuous" process improvement-there really isn't an end.
Answer Key: The Fifth Tier and Beyond.
The fifth tier would introduce specific measures for each of the "information" within each of the viewpoints presented. While your root question could conceivably be here, it is unlikely. If you find your question starts here, you probably don't have a need for a metric. Instead, you probably only need a measure.
The elements you're most likely to find here are measures. For example, extending from the top branch of Usage in the fourth tier you may find the following branching out into a fifth tier: Unique customers by month, by type Number of purchases, by type Number of repeat customers It is unnecessary to list possible measures for each of the fourth tier's elements. It won't make any sense to try to list each of what would be in tier six or seven-lower-level measures or data. In the examples for Usage, we might see data points as follows: Number of customers.
Names of each customer.
Products listed by type.
Dates and times of each purchase.
How to Use the Answer Key: Identify Types of Measures.
The Answer Key can be used to identify measures you can use to answer your root question. If you have done your homework and defined the root question and developed your abstract design, you are now ready for the next step-identifying possible measures to fill out the metric.
The Answer Key can help with this phase of the process. Take your root question and metric design and determine where you are on the Answer Key. If your question deals with the value of the organization, then you're on the top tier, Return vs. Investment. If your question is in the realm of managing organizational resources, you're on the lower tier, State of the Union.
We used some examples of root questions earlier. One was based on the distribution of work. This would fit under the fourth tier, Process HealthResource Allocation. Using this tool, we not only can identify the type of measures we'll need, but we understand the area of focus of our question. Moving to the left from Resource Allocation, we can see that our question is dealing with the business view (investment). If our question is a root question, we can use the Five Whys. And now we can also ask if our concerns are bigger than just Resource Allocation (measure centered). Are our concerns actually around Process Health? Are we missing the measures around cost, time, and quality?
If your root question is answered by just one of the measures in the fourth tier, chances are you don't have the root question. You definitely don't have a metric.
Another example we used was, "What is the value of our web/teleconferencing service?" This also falls under Return vs. Investment and could fit under the (Customer view) Product/Service HealthUsage or Customer Satisfaction. But, it also can fit under the (Business view) Process Health, especially since it is full of cost-benefit measures. Often, your metric may dictate the need for measures from more than one category. Logically they usually come from the same larger area-Return vs. Investment or State of the Union. So, many times if you have a metric for effectiveness, you may also be measuring things useful for efficiency. I find this to be particularly true with time. Consider time to resolve an issue vs. time to accomplish a task. If the task is problem resolution, the measures are the same.
Using the Answer Key allows us to do a quick and easy quality check on the measures we've identified. For example, if the metric is a Worker view (based on the root question), and you find some of the measures you identified are from the Customer view (like delivery measures), then either those measures are wrong for the metric, or, possibly your metric is not the right one for answering the question. As a general rule, I find that the measures are usually misplaced, rather than that the metric is incorrect.
One more example. We also covered, "How responsive is the help desk?" This could be time in the efficiency category (time to respond) and it can also be represented by effectiveness measures-specifically delivery. When we look at speed and availability under delivery (another measure is accuracy) we can see how measures of both would go into telling the story of how responsive the help desk is to customer needs. The use of Time to Respond/Time to Resolve would use some of the same data points, although that "view" of the data would not be useful for answering our particular question.
Since this chapter introduces the practic.u.m portion of the book, let's do a practical exercise. Upcoming is a list of possible root questions based on Bernard Marr's excellent book on performance measures, The Intelligent Company (Wiley, 2010). Marr offers that there are two types of root questions: Key Performance Questions (KPQ) and Key a.n.a.lytic Questions (KAQ). He uses this distinction to differentiate between doing the "right things" (KAQ) and doing it the "right way" (KPQ).
As you have read, I translate these into "effectiveness" and "efficiency" respectively. While Marr gives a list of questions for each type, the reasoning for their delineation is not explained, and they don't match mine. Marr's examples actually span all four viewpoints I offer in the Answer Key, not just customer and business views. Interestingly, more than one of his questions shows up in both categories in his own book.
I hope using his questions as a basis allows you to not only practice cla.s.sifying them against the Answer Key, but to also see that you don't have to believe what is offered (by any author, including myself)-you should try it out for yourself.
Review each question in Table 5-1, and using the viewpoint, determine where the question fits on the Answer Key by placing an X in the corresponding column Hopefully you found that there were examples that fit in each of the categories. You may also find that you marked more than one column for a question (yes, this is allowed). If we remember that it depends on the viewpoint, this is easy to understand.
One question that could fit into more than one category was the final one, "How well are we building new competencies?" This could be a business viewpoint, if we want to know how well our training program is working. If we look at it from the worker's viewpoint-concerned with the training of our workers-it could be an Organizational Health question. If we look at it from the point of view of leaders.h.i.+p wanting to know if we will be ready to deal with future requirements, it could fit Future Health. When you are dealing with your questions, you'll know (or ask) whose viewpoint is intended.
So, now, if you are like me, you're looking for the "book" answers to the exercise above. In Table 5-2, I give you my answers-with the caveat that there are no "right" answers.
The idea is to use the Answer Key to determine whether your measures are doing what they are supposed to do-that they are aligned and comprehensive. Remember that aligned means that they help answer the root question (if you find that the measures you're using don't align on the Answer Key, then they don't answer the same root question); and comprehensive means that together, you have confidence that they will answer the question (there are no missing data points).
The Answer Key can help you check the quality of your work and ensure that you're on the right track. And if or when you get stumped and you don't know which direction to go, it can help you get on track.
Most metrics you design, if they fall on the Answer Key, will most likely start at the third tier and belong to one of the following four viewpoints: The customers' viewpoint (effectiveness) The business's viewpoint (efficiency) The workers' viewpoint The leaders.h.i.+p's viewpoint As you move from left to right on the Answer Key, you move from the strategic to the tactical. Another way to look at this is that you move from the root question toward data.
Regardless of where your metric (or root question) falls, you'll have to move to the right to find the measures and data you need to answer the question. At the fourth tier we found the following: Return vs. Investment Product/Service Health-Customer View Process Health-Business View State of the Union Organizational Health-Employee View Future Health-Leaders.h.i.+p View The fourth tier is the most frequently used by my clients. It is far enough left that root questions starting here are worthy of metrics to answer, and far enough right that they are easy for most organizations to comprehend their use in improving the organization.
In the fifth (and any consecutive) tier, we find mostly information and measures. If we find our root question residing here, the question is probably very tactical and may not require a full-blown metric to answer. Remembering the Metric Development Plan, you should flesh out the metric by identifying not only the information and measures, but also doc.u.ment the individual data points needed.
The reason the Answer Key leads off the practical part of the book is that it is a great shortcut tool for you to implement metrics. It helps you put your root question into a context of organizational health. If you are forced to work without a root question, it can be used to ensure you are not trying to blend together incongruous measures, as well as help you to work toward a driving need.
Working from the left, moving right, you go from the high-level to the tactical. It will help you identify possible information and measures you can use to answer your root question.
Working from right to left, you can work from specific measures (or even data) back toward a driving need. Working in this direction will also help you to ensure that your metrics are logically grouped and organized. You normally don't want information from different areas (product/service, process, organizational, or future health) mixed together into one metric, as they would rarely answer any question, unless it is at the highest or left-most levels of the Answer Key.
Remember that the Answer Key, while a useful shortcut, is still only a tool for helping you develop your metrics. It's not the whole answer and it doesn't relieve you of the need to follow the model for developing metrics.
Start with Effectiveness.
The first chief information officer I worked for used to say, "do the right thing." Besides the philosophical and religious interpretations of this directive, there are also the leader's simple day-to-day behavioral expectations of her workforce. Effectiveness metrics will allow you to determine if you are "doing the right things."
I am doing more than suggest that you start with effectiveness. In Chapter 5, I introduced the Answer Key. I discussed the components of effectiveness metrics, the first quadrant of tier three, Product and Service Health. I'm recommending that you not only start here, but that you remain in this area of the Answer Key until your organization has matured to a point of readiness for dealing with the other quadrants.
As described in my first book on overcoming organizational immaturity, an organization may be simply incapable of dealing with a full-blown metrics program. Using metrics is an advanced behavior.
Let's look at the reasons I propose you should start (and remain) in the effectiveness quadrant for the foreseeable future. The reasons can be discussed one quadrant at a time, starting with quadrant 4, Future Health.
Let's look at the Answer Key again in Figure 6-1.
Figure 6-1. The Answer Key.
The fourth quadrant of tier three (Figure 6-2) covers Future Health or the organization's health from the view point of leaders.h.i.+p. Before you start working on a metrics program covering the Future Health area, it would be best if your organization were ready for it.
Metrics: How to Improve Key Business Results Part 11
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