Is your organisation too busy counting to know what’s going on?
Senior Managers can sometimes find themselves swamped with reports, dashboards and tables containing a myriad of details about hundreds of KPIs. Yet they are none the wiser for all the hard work put into producing them.
The staff preparing these reports typically wait with bated breath for screeds of follow-up questions about the detail and wonder why managers are so obsessed with it. To them, I would say that you have only provided your senior managers with detail; therefore, you have set the agenda to be about that. Should the discussion move to be more strategic then not only are you not supporting, but you are also in the way!
If you are one of these senior managers, the answer is simple. You have too many KPIs that tell you nothing useful and lead you down rabbit holes of unnecessary detail as you struggle to keep up, let alone act on the results. Sound about right?
Don’t get me wrong. You absolutely need measures, reports, dashboards and other analytics to be competitive. But they must be well designed to initiate action when it is warranted.
I contend that you can simplify this very easily following a straightforward methodology. You will need clear heads not flummoxed by detail, probably restricted in the most part to senior managers. I would recommend an external resource to ask the ‘dumb’ questions. If you have staff responsible for marketing and customer engagement then you need a session with them too.
You just need to get started using the following steps which make up the acronym REDAMAD -
Rank the most important products/services to your organisation. These will usually be the most profitable ones but don’t have to be.
Expectations. Review the expectations of your target customers for each product/service. They usually boil down to variants of speed, quality or cost.
Decide a maximum of three measures for each product/service related directly to the customer’s expectations. Ideally, there should only be one as in a competitive environment you cannot be all things to all people for very long. e.g. you will have to sacrifice some quality if you compete in a price-driven market or you may sacrifice some speed if you compete in a quality market, and so on.
Derive the customer’s ideal solution. TYou can call it what you like,, but we’ll call it the gold standard for now. Then determine the customers minimum viable solution (the point at which they would swap to a competitor). Let’s call this the bronze standard.
If you have difficulty with this, place yourself in your costomers shoes for a moment, what would a successful result be to them. You can of course, commission some market surveying to help with this if you feel you need it.
Determine a target range of points between the gold and bronze standard where you feel comfortable. If you have trouble with this, consider if you knew ahead of time that you are trending toward the gold or bronze standard, at which level would you want to take action?
The reason you need a range is there is a top point at which a product/service becomes uneconomic to provide or is overservicing your customer’s needs. Obviously there is also a bottom point where your competitors can start picking off your customers! If you are within the range you are optimising your efforts.
Over time you will most likely want to adjust your target range. A good approach is to make the target range an achievable stretch for poorly performing products/services at least initially. Keep updating over time until the return on the effort to make any notable gain is no longer worthwhile.
Assign your analytics team the tasks to develop reporting/dashboarding for each measure based on this. They need to demonstrate target range and actual results over time as a bare minimum.
Monitor the results at an appropriate frequency. A rough guide to the frequency is the volume and volatility of the transactions. You will need to develop your own feel for this over time. The fewer transactions and less volatility, the less frequent monitoring is necessary and vice versa.
Congratulations, you can now manage proactively!
Action: Respond to the measurement when the results are trending out of the range. This is your most critical action and where you need the best information. You should ask your process management team to help you decide what action to take. For example, you could commission a project to improve the process, innovate the product/service, retire the product/service or target a different market, etc.
A well-managed process management team will have some process improvement ideas already waiting in the wings.
Targets also need to be regularly reviewed to make sure they stay appropriate. For example, a target that has not changed for two years is either perfection, not important enough to report or is too easy!
Discontinue. Be ruthless, target any measure/report/dashboard that doesn’t help. They are not unharmful and passive; they cost you in distraction from making the critical decisions and lead to analysis paralysis.
Of course, there will be constraints on what you can remove. Typically once someone produces an infographic that has some insight, shareholders, government ministers etc. fall in love with them and they become politically difficult to remove. This is hard to change, and all I can do is wish you all the best!
In reality, you may not be in a position to determine if a particular measure is helpful without some assistance from staff. Some metrics may be useful for operational decision making, others may help manage vendor relationships, while some staff will be reluctant to give up the measures that they have believed to be vitally important for many years.
There will be standard internal reports from IT, Finance and HR departments which would be foolhardy to dismiss at the swipe of a pen. Nevertheless, there will undoubtedly be custom reports that have been superseded or are no longer useful. These should be discontinued if they fail to measure up.
If you find this difficult to achieve without creating further unintended consequences, mark them as ‘sunset’ reports with a removal date and challenge staff to prove their worth at an operational level before they get removed (not strategic level, that’s your call).
A great questions for staff to ask themselves is“Is there such a thing as a good or bad result from this measure? What action would I take if we got a great result? An awful result?”. If there is no action, it probably has limited value.
Some examples of practical measures
Speed. Where target customers are concerned with the speed of delivery — measure the speed! E.g. average time from placing the order to receiving the service/product.
Quality. Where target customers are concerned with quality — measure the quality! It could be something like how many returns, verified complaints or refunds issued. This needs to be reported as a rate, so something like returns per thousand orders etc.
Price. Where target customers are concerned with price, then monitor competitor pricing compared to your own. Cost per unit can also be used to determine how much scope you have to change prices but is not helpful for this purpose if you cannot change your price.
Also, remember this,
It’s OK for the ideal measurement to not be ideal the first time you use it.
Your organisation probably doesn’t report like this at the moment so it is quite likely to have some missing data points. Don’t waiver from your ideal measure. The best you can get for now is fine, but keep working to improve it. It is as acceptable, if not critical, to improve measures as it is to improve processes!
