Tuesday, December 26, 2017

CIOs as “Chief Improvement Officer”: How to Avoid Three Measurement Pitfalls

Don’t just play the number game, but connect the contextual dots and focus on the overall business objectives.

A performance measurement system is a necessary foundation for continuous improvement. It defines how you will measure success in meeting the business purpose and vision. Metrics help stakeholders understand what is going on. Without measurements, it can be hard to tell whether attempted improvements make the situation better or worse. There are both promises and perils about metrics. Metrics provide feedback and metrics are part of transparent visual management allowing pulling. But there are also pitfalls need to be avoided in order to improve business performance and make continuous improvement.

Measure the right things badly: It is important to track the right metrics and know what to do with them to see the performance improvement. Performance metrics should well directly link to the ultimate business goals they want to achieve at the strategic level. For example, if the business strategy is an early adopter and rewards innovation, and then the metrics have to accommodate service outcomes that may have a higher level of support for that goal. The digital organization needs to expand the capacity by improving business effectiveness, operation efficiency, setting KPIs to resolve problems, increase in the number of problems successfully resolved, optimize business process, and improve the organization’s scalability and changeability. However, even you have a well-defined set of measurement, it doesn't guarantee you could measure them right. One of the biggest problems with metrics, in general, is that, once you have them, people will try to game them. Metrics shouldn’t motivate a team to game the data, otherwise, they can filter and even distort qualitative evidence and prevent the management from seeing the truth, or distract the business from reaching the long-term business goals. Measuring the right thing badly will mislead the management for decision-making or decelerate business performance improvement. Thus, ensure that the measures are both qualitative and quantitative, and implement whatever mechanisms you need to be able to gather the data. Take a systematic approach, put the cohesive effort into taking the correct measurements, collecting the data obtained, analyzing it, evaluating it, determining what needs to be improved, determining what the actions are to improve it, assigning actions to performance improvements, continue to measure the results and make adjustments in continuous growth.

Measure the wrong things, either well or badly: Wrong selections of key performance setting could get the devastating effect on the business. The most dangerous part is when performance system is connected with motivation system on an operational level, but disconnected from the strategy management. It’s like that the business wheel keeps spinning without going anywhere, just waste time and resource. The whole issue of measuring the right things is to have a starting point and the performance metrics that come first at a strategic level are doing the job. They serve as headings to of chapters of measures that will be defined at tactical and operational levels. Therefore, to avoid the pitfall of measuring the wrong things, the people in the organization need to know and understand why the data are being collected and analyzed, as well as what decisions will be made based on the data. Performance metrics are numbers in context, results are related to your strategic goals. The fewer the better, but they have to be credible and relevant also in the eyes of the stakeholders. It’s important to measure performance that could tell the full story and ensure the business as a whole is superior to the sum of pieces.


Neglect to measure something important: The performance measures should cover all areas that contribute to the business success. There are two levels of performance measurement. At the strategic level, organizations concern about the long-term business result, business competency, customer satisfaction and employee engagement; at the operational level, the business needs to take care of quarterly financial result, employees’ weekly report, customers’ purchasing transaction, etc. Historically, performance measurement systems for most businesses have been financing driven. However, in many business situations, financial indicators only cover part of the story. Neglect to measure something important will create blind spots for business management to make effective decisions or drive changes with speed. The performance measure setting should focus on achieving the ultimate goals of the organization as a whole, not just the individual or the team’s performance. There are always two sides of measurement. The measures to motivate teams to achieve more and the measures to distract management from the ultimate business goals. Hence, don’t just play the number game, but connect the contextual dots and focus on the overall business objectives.

Well defining the right set of metrics will never be an easy job, but always keep in mind of the "simplicity" principles, and do not confuse the means with the end. It takes multifaceted approaches from multidimensional perspectives, to avoid those pitfalls, ensure measuring the right things in the right way, and make sure that the business as a whole is superior to the sum of pieces.

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