Executives can tell you a lot about financial data . . . and why not they manage by these measures. ROI, expenses, debt-equity ratios, revenue all play crucial roles in the decision-making process of command and control organizations. However, managers saddled with these measures are limiting their ability to improve and innovate.
Financial measures are a type of results measures. They are measures that tell us how we are doing, but not what to do to make them better.
“Focusing on results is like driving your car by looking in the rear view mirror.” – Myron Tribus
Yet, this is the way managers manage. Fish have to swim and birds have to fly.
None of these measures of results will improve an organization. Adding targets to these measures just adds more dysfunctional management behavior that spirals the organization downward. Traditional (command and control) organizations budget and plan around these results measures hoping that they will achieve the targets set forth.
But like scoreboard in a football game it tells us little more than the result. The blocking and tackling is what makes the result possible. And so it is with business and governments that improvement comes from leading measures, not lagging (results) measures.
Many in management believe that they can functionally breakdown results measures by department or unit. KPIs are born with their accompanying target. This, however, is not reflective of measures that matter.
IN working in the systems thinking world, the only measures that I have found that matter are those associated to customer purpose (or what matters to customers). These measures are measures to achieve business improvement and corporate cost reduction. The only way to get these measures is to get knowledge by going to the points of transaction (where customers interact with the organization).
For service these are measures of one-stop capability, end-to-end times from a customer perspective (and not the internal functional ones), failure demand, etc. These measures focus the organization on what drives all the other results measures as they create value in the eyes of the customer.
Knowing what these measures are helps to identify new ways to improve them by experimenting with method. Experimentation with method leads to redesign and innovation.
The difference between measure of results and measures of customer purpose are monumental. We could build a WalMart between them. Keep the results measures, but build the customer measures and soon the results will take care of themselves.
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Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.Share This: