Friday, May 5, 2017

Taking a Holistic Approach to Measure Up the Performance of Digital Organization

Every measure selected should be part of a link of cause-and-effect relationships, and ultimately affect the growth and long-term perspectives of the organization.

The effects of an increasingly digitalized world are now reaching into every corner of businesses and every aspect of organizations. Digital transformation is not a one-time project or a stand-alone initiative; it is a continuous journey to adapt to the new normal of the business world. Metrics are part of transparent visual management allowing pulling. So, how to measure up the performance of the digital organization?

A holistic approach is important to measure up the performance of digital organization: Strategy management and performance management need to go hand-in-hand. The strategy stems from long-term goals and results in annual objectives aligned to the strategy. The holistic performance management approach means to well align the strategic level of measure with operational level metrics. The whole issue is to have a starting point and the performance metrics that come first at a strategic level are doing the job. The ultimate goal is to implement business strategy effectively through well defining the right set of measures at both strategic and tactical level. They serve as headings to of chapters of measures that will be defined at tactical and operational levels. The "one size fits all solution" is incorrect. Or the silo-based approach to assume the organizational performance is just the sum of pieces is incorrect as well. The holistic approach is fundamental to “keep the end”  in mind, to ensure that the performance of the entire business is superior to the sum of pieces (functional performance). The holistic approach from top down is excellent. By doing so leaders may stay away from micromanagement and burn-out, make sure the tactical level of measures has to be in alignment with the business goals to be of value, complemented by a cascade of smaller objectives and measurements that make sure strategic business goals on track as well.

A performance measurement system is a necessary foundation for continuous improvement: Without measurements, it can be hard to tell whether attempted improvements make the situation better or worse. Metrics can help you get some objective perspectives on what you are trying to manage, but they need to be crafted and interpreted well. Another reason to use metrics is to help stakeholders understand what is going on. All stakeholders may not be in a position to talk to team members so the right metrics can be helpful to track the business progress in an improvement initiative. The right metric is requested in the right context, clarify the big why of the performance measurement is requested, and discover whether there is a better or easier way to gather metric that achieves the business goals. Otherwise, the performance measurement can easily go wrong.

Define “S.M.A.R.T” goals:  Businesses need to avoid vanity metrics and really focus on key metrics that correlate to better business outcomes. S.M.A.R.T goals are more as a guide based on meeting the five criteria-specific, measurable, attainable, relevant and timely. Managing performance and improving business achievement means setting metrics, fixing plans, understanding results, and making decisions to ensure the strategic goals are on the right track to get implemented, and communicated effectively at the different level of the business. Annual objectives start with the executives choosing a few key initiatives, understanding their interdependency, and driving them down the line. Coming up with one to three major aims/goals that everyone understands and agrees upon is key. The “SMART” framework is helpful, but be cautious of setting goals which are really valid. First, measure the right things; and then measure them effectively. S.M.A.R.T goals work better as a post evaluation tool.

Taking a systematic approach to measurement can avoid blind-spots in performance: Having the right performance indicators is very important. But acting on what those indicators are telling you is vital to sustaining and improving results. It's fair to say any organization that didn't have a systematic approach to measurement and analysis at both the strategic level and operational level has a giant blind spot that is impairing their performance. If you take a systematic approach, put the 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 perform the improvements, continue to measure the results and make adjustments in the improvement plan, the business will most definitely be improved. It's also important to be able to follow at least a few performance metrics very closely. By that, you should measure, follow up and take actions periodically, and then you have some others metrics that are followed more infrequently.
Performance measurement pitfalls: There are many great things about metrics. Metrics provide feedback. Metrics are part of transparent visual management allowing pulling. However, there are many performance measurement pitfalls as well. For example, there are people extremely obsessed by metrics who end up creating a huge and sophisticated set of meaningless metrics and that some managers perhaps put a lot of energy on getting better indicators, just because they want beautiful numbers to report and not because they're genuinely interested in helping their teams to improve. There is a lot of metrics abuse and false assumptions of the metrics as well. 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 us from seeing the truth. One of such symptoms is that often you can see problems in using metrics when people aren't clear about what information they want to collect and how they intend to use the information to support decisions. This can lead to people trying to measure everything they can think of and display the information in every way possible, with no apparent reason for any of it. Some measurement turns to be for its own sake, get lost in interpreting the holistic business stories.
We can only manage what we measure. Define how you will measure success in meeting the business purpose and vision. Ensure that these measures are quantitative, and implement whatever mechanisms you need to be able to gather the data.  It is not the measurement that is important; it is what you do with the data obtained from the measurement. Every measure selected should be part of a link of cause-and-effect relationships, and ultimately affect the growth and long-term perspectives of the organization.


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