Walk into any business and you can get measures.  What measures are being kept is of greater importance.  Typically measures are associated with financials and/or activity . . . and this is where the trouble begins.

Measures of the activity and financial type are inextricably tied to profit and efficiency or so they believe.  This is an assumption that drives dysfunctional behavior as there is a relationship between assumptions and waste.  Whole organizations tie their fortunes to known, but wrong, business practices.  They stand to win if everyone else is making the same mistake and they do the wrong thing, righter.

Activity and financial measures can be defined as lagging measures or results-measures.  They tell us how an organization did after the fact.  I sometimes like to call them “forensic measures” as those organizations that use these measures are already half-dead  (Zombie measures may have been a better analogy).

Managing by lagging measures (financials and activity) may be useful to know the score, but tell us little about what to do.  Add targets and incentives to the recipe and crazy things start to happen.  Managers and workers focus their attention to achieving numbers that sub-optimize and create waste.

Lagging measures are doled out to each functional area as they are given their measure to hit.  They may even be asked to be profit centers when their role is to support.  When a supporting function is asked to be a profit center the value creating parts of the organization take a hit.  Why?  Because now functions compete for resources and are now have to arm-wrestle for resources.

If lagging measures aren’t the answer, what is?  Leading measures, they help us understand what we need to focus our attention on and that is the customer.  When customer measures that are derived from what matters to them are revealed, the lagging measures take care of themselves. 

Why doesn’t everyone use leading measures related to purpose?  Usually this is a condition of functional, top-down thinking that makes lagging measures invisible to executives.  Or more simply put, they just don’t see the dysfunction when they are so far away from where the customer is.  Only when they see it for themselves do they believe and even then some try to rationalize it away.

Many want to have a prescription for what they should measure.  I don’t have one except the measures should be related to purpose or help improve performance.  You may read the post Test of a Good Measure.  But the best way is to go to the work to get knowledge and derive measures from purpose.

All managment wants better performance and better measures.   To get there requires a different approach and to through out the existing assumptions about what makes a good measure.

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Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columist (Quality Digest and IQPC), speaker, and consultant to private and public service industry.