In my ‘Metrics Should be Everywhere Part 1’ post I started a discussion about metrics and discussed how they can be used for competitive advantage at the employee level in terms and measures they understand. In this article I want to discuss how those bottom-up metrics align with your top-down strategies. The top-down strategies are the main driver for business focus. They are the critical roadmap needed to drive performance and ensure everyone within your company is marching to the same beat.
When using metrics, it is important this alignment to the top-down strategy occurs because without it, managers, supervisors and employees will focus on tasks versus business drivers. Let me explain. Tasks are those activities an individual or manager may feel are important to their own area within their sphere of influence. That may be true, but tasks don’t help the organization drive value unless they are aligned with the business strategy. People by nature want to succeed, help the business and make their own jobs easier. Unless they have clear direction about what they can work on to drive true business value, they will work on those things that they feel add value to their own area. That focus may not align to the strategy as resolving a specific task-related problem or activity may not be critical to helping accomplish the business strategy. Some people call those things busy-work.
So how do you help resolve this problem? It is not always easy. You must set the tone from the top. You must challenge the strategic projects of each manager and you must set your critical metrics in a fashion that fosters a continuous improvement mentality across your entire company. There are several key components to this strategy.
First, you have to have a business strategy. It should be in the form of a strategic plan and referenced, reviewed and updated on a continuous basis. World-class companies use the strategic plan as a living document, updating it as needed, at least quarterly. Most companies update it annually and use it as the basis for their annual plan. That strategic plan is the basis for the top-down strategy, while the annual plan is the basis for the bottom-up metrics.
The second step in using metrics to competitive advantage is to understand the root causes of problems. Many companies don’t tie root cause analysis to tracking their key performance metrics effectively. By carefully analyzing causal factors and prioritizing strategies around solving the largest root-cause problems first, you can focus your (usually limited) resources on eliminating those problems before focusing on lesser issues. Many companies try to resolve whatever problems they find as they find them and thus may concentrate on relatively easy problems and symptoms without ever tackling the big hairy root-cause issues that will take time and resources to fix but will have the largest payoff. Prioritization is a key step to effective process improvement.
Use metrics for effective review and meeting management. Most companies hold weekly staff, production and various other meetings meant to keep the company information flowing and coordinated. For many, it is a focus on today’s issue of the day, (firefighting coordination). But it should also include a discussion of longer-term priorities and the progress toward those longer-term goals.
The bottom-up metrics at each level (metrics will roll up to each higher level) and resulting meetings need to focus on performance. Are the top three root-cause hurdles to goal attainment being worked on? Are there sufficient action plans in place to address the largest issues? As a result of those actions, are the trends moving in the desired direction? Is the person assigned to that action plan making progress? Is there an agreed time line? If presented and used effectively, weekly staff meetings will be much more productive and significantly shorter when the meeting focus is on those KPI trends going in the wrong direction and why related action plans may not be effective or addressed within the agreed schedule. Of course I don’t mean to imply these weekly meetings do not also focus on today’s short -term issues and goals because they do. However, the larger discussion around longer-term actions can be significantly shortened and focused.
In order for a continuous improvement mentality to be effective throughout the organization, the tone from the top must be ever present. Unless you and your senior staff follow up (and through) on a continuous basis, using fact-based metrics to help guide your organization’s strategies probably won’t be effective. Continuously questioning progress, results and trends need to be a normal occurrence. Reviewing metrics at low levels (with that particular level’s employees) reinforces the perception of how important those employees’ ideas and participation are to the organization. Stimulating their desire to contribute and succeed will be enhanced.
Sharing your strategic perspective through employee meetings on a recurring basis (quarterly?) helps reinforce the focus on the importance of metrics in business. Sharing the metrics that you use to drive and monitor that performance is an important element of organization-wide meetings. Keep in mind not all of the metrics you share should be financial. In fact, most of the non-financial metrics may be more important than or just as important as the normal financial metrics you are used to. Productivity, customer and quality metrics all contribute to the financial results of your business. However, you should focus more on non-financial metrics the deeper you go into your organization, mainly because those employees are significantly further away from dollar denominated metrics.
At the end of the day, metrics are a powerful way to help guide the actions you need in order to accomplish your strategies. When used effectively they will help your team focus on what is important to your organization’s success; at all levels.