Thursday 25 February 2010

The Death of a Metric

When a new metric is born everyone is hopeful it will have a long and useful life. They want it to get lots of attention and be responsible for improvements in how the organisation operates. Everyone hopes that this metric will be popular and profitable, and be discussed in board meetings and within project teams.

Some metrics do grow up to be shining examples of how performance measurement can transform organisations. They are responsible for positive changes in the way things get done. But not all.

Some metrics die young and never reach their potential. Here are 4 good and bad reasons why are metrics killed off:
  1. The metric encouraged the wrong behaviour. Despite everyone’s best intentions the metric encourages wheel spinning instead of real results. A poorly conceived metric can encourage short term profit at the expense of customer satisfaction, quality or the long term health of the organisation. Too much focus on financial metrics can has this effect. These metrics deserve to die.
  2. The metric gets forgotten. This is frighteningly common. Every new initiative starts out bright eyed and bushy tailed, but then reality sets in. The data takes time to find, or inconsistencies are found. First one month is missed, then another. No one asks about the new metric. Soon everyone has forgotten about it. More good metrics get forgotten and die through lack of attention than people realise, losing enormous potential to improve. These are metrics in search of a champion.
  3. The metric shows poor performance. This is the worst reason to kill off a metric, but one of the most common. Instead of treating the metric as a learning and improvement opportunity, it is treated as a PR disaster and quietly buried. Even though the metric was actually doing exactly what it was supposed to – alert management to an area that needed attention. If you have a metric in this state, consider whether it is a lead or lag indicator, and perhaps supplement it with some lead indicators.
  4. The metric has improved performance and is no longer needed. Successful metrics can outgrow their usefulness. Once the new behaviours have become part of the culture, the metric is no longer serving any good purpose and needs to be replaced with something that will stretch people more. Metrics love to be killed off for this reason – they can die happy.

Metrics, like people, are complex little beasties who need care and attention to flourish. They need champions who are determined to get metrics working well, even if it means a little adjustment as they are growing up, just like people!

Tuesday 23 February 2010

What should I NOT do today?

We seem to live in a business world that is determined to do more and more. Until very recently I’ve been right up there in my eagerness to add things to my To Do list.

Just lately, though, I’ve concluded that my strategy is all wrong. Instead of adding things to my To Do list, I should be taking things off. Not just little things, but big things. Whole great swathes of stuff that takes up my time need to go.

So one by one I have been reducing my commitments, and freeing up my time for project work and planning.

Jim Collins in Good to Great made the point that great leaders start by figuring out what Not to Do, before they decided what Needs to be Done. What markets should NOT be served? What expertise are we NOT going to employ in-house? What services are we NOT going to offer? Of course there are more things that we don’t do than we actually do, but the point is well made.

Of course what I should not do today is not the same as what I could not do today. I could leave a whole bunch of stuff until tomorrow, but what should be done today, is still better being done and not put off.

Making good choices about what not to do is the greatest time saver ever, but more importantly it frees up brain power for the stuff we really want to excel at.

Monday 22 February 2010

Asking the right questions

So often in life we search for solutions. We look for the answers to our problems, both in business and our private lives. Yet so often it isn’t the right answer that is eluding us, but the right question.

I’ve recently finished reading The Snowball by Alice Schroeder, the biography of Warren Buffett. Readers from nearby planets should know that Warren Buffett is one of earth’s richest men, and an astonishingly successful investor. She paints a vivid picture of his approach to investing. Rather than ask “Should I buy this stock at this price?” Buffett asks “What is this stock worth?” The difference may appear subtle, but the effect is dramatic.

The first question assumes the stock price is reasonable, and the decision hinges around whether you believe it will rise in value or the company will maintain its dividends. The second question is more arrogant: it attacks the very heart of the system. By going back to first principles Buffett ignores the market, and comes to his own independent conclusions as to the value of what is on sale.

It is clearly a successful approach because Buffett’s net worth has more zero’s on the end than this blog has space for.

Putting in a new software system also prompts questions. I see many companies approach the decision by asking “Should we install this software in our business? What benefits will we get by using it?”

Whereas perhaps the question could be better phrased as “What do we need to achieve in our business, and how are we going to get there?” The answer might or might not include software, but the process of figuring out what the objective is, and what the best steps are to achieve it, will produce a better result than concentrating on the functionality of any or even several software packages.

Peter Drucker famously asked “If you weren’t already in the business [you are already in], would you enter it today?”

It’s a tough question that requires some hard thought. And is likely to provide some valuable insights into your business, your competitors, and the direction the market is heading. It encourages independent thought, not a follow-the-leader mentality. I think that’s a useful skill in life and in business.

Thursday 18 February 2010

K&H: Metrics to make accountants happy

Key performance indicators have a dramatic effect on one professional services firm

Kirkpatrick and Hope was, until 2003, a very traditional sort of accountancy firm. They could do your accounts or handle your tax affairs as well as the next accountants. Which is a problem for many professional services firms – how do you differentiate yourself from your competitors and resist pressure on pricing? In this case it took a ruptured Achilles tendon and extended leave from the office to give time for strategic planning. Kirkpatrick and Hope was reborn as K & H with a new identity, a new affiliation to the AVN network, and a new enthusiasm for the future.

In 2005 a group of partners led a management buy-out after the last founding partner decided to sell. They had new ideas and a new vision. After years of lacklustre results, low morale and disagreements, they had a new strategy and a new way of doing business.

Andrew Gray, Chairman of K&H, explained to me how they implemented their new strategy.

“Our mission is to improve the lives of small business owners. Many entrepreneurs work incredibly hard for their customers and don’t have time to step back and consider their own business. Important issues such as pricing, marketing, or increasing profitability don’t get much of a look in. Whilst accountancy is still the heart of our service, we take every opportunity to encourage owners to think about their results, and how they can improve their businesses.

The culture change within our own firm has been dramatic. Advising on planning, profitability, pricing, and business development are now a core part of our service, not an add-on. And internally we had to learn to walk the talk, which meant putting in place new processes and performance metrics to measure how we are doing.”

When I asked Andrew what was the single most important measure, he smiled.

“That has to be our happiness score - when you have a team that works well together, so much else falls into place. Every month we ask everyone to complete a 360 degree feedback form, and score their happiness at work on a scale from 0 to 10. We have seen a dramatic shift from the early days, when the average was around 5. Now we consistently score a happier 8 or 8.5. We are not romantics though – it is still work and there will always be some parts of everyone’s workday which isn’t particularly enjoyable. We don’t aim to protect people from that. We frequently challenge people to push outside of what they might feel comfortable with. But as a management team we are now agreed on values, we have clear objectives, and consistently measure our performance using key performance indicators. It really does have a big impact on people’s happiness at work, and their performance. It has made more of a difference to our overall business performance than I would have guessed.

It hasn’t been plain sailing, of course, and I’ve learnt that you can’t change people. If they don’t agree with your values and direction, then it’s best just to part company. That’s a lesson I wish I had learnt a lot earlier.

On the plus side, however, our “one page plan” has really helped focus everyone on what is important. We use it to report results each month and whilst it wasn’t easy agreeing what to measure, it has played a major part in turning things around. I couldn’t imagine running the business without it now. Whereas before we would focus 100% on financial measures, now more than 50% of our metrics are non-financial: staff happiness, lead generation, and what type of services our clients buy from us, etc.

We have seen the difference that good metrics make to the business, and are now prepared to invest in new systems to cut down on the time we spend collating them.”

I asked Andrew if he thought other businesses make good use of metrics.

“I think people often measure some aspects very well, but are blind to other areas. Many people don’t have the time to think about what results they really want, and how to get there. Some people are specialists in their own business, but don’t know where to start in putting a measurement system together.”

So to finish, I asked Andrew what his advice to business owners would be on performance metrics.

“Start small – just choose one or two measures and report on them consistently. Don’t be too ambitious in changing things.” He smiled again. “Which is funny really, because we dived in and introduced more than 20 measures all at the same time!”

Andrew Gray, Chairman of K&H,heads up a team of 19 happy accountants, tax advisors and business advisors all of whom are passionate about helping ambitious business owners/managers create a better future for both business and for their families.

Wednesday 17 February 2010

Are you focusing on what's important?

We all have things we say are important to us, but somehow we don't get around to working on. We say they matter and we really are going to get around to doing something about them someday. Somehow too many other things get in the way. Weeks, months, and years can go by and we don’t make any progress.

If we are not careful we become one of those people who blame circumstances, pressures with work, or feeling uncomfortable about making the effort when our dreams don’t come true.

If you have something that matters to you, there are some really simple steps that will ensure help make it a reality:
  1. Be clear about what you want to achieve. Write it down, talk to other people, iron out the inconsistencies in your goal. Work on it until you understand it so well, are so familiar with its implications and in the process have made it an important part of your life.
  2. Set targets, deadlines and other quantifiable goals. Setting a target number or a deadline forces us to think about how realistic our objectives are. Will customers really pay that much? Can I really get everything done by that date? Is the volume sufficient to meet our objectives or do we need to do more? Too often we think things will fall into place closer to the time, but in face all we have done is avoided the difficult thinking.
  3. Plan how you are going to do it. Once you know what, and how much, and by when you can then start figuring out how. Planning takes time and isn’t particularly easy, but without a plan you won’t know what to do. Or worse still, you will do the wrong things. Having a written plan, will make sure that the big, pivotal things get included.
  4. Track your progress. Include measurable milestones in your plan, and then track your progress day by day, week by week, month by month so you know whether you are on track. This simple act, which is a result of the 3 steps above, will make sure things happen when they should, or get brought back on track if they slip.
  5. Review. Sometimes things go well, sometimes not so well, but there is always something to learn and changes that should be made in order to achieve what you want.

I’m not saying these steps don’t take time, because they do. I’m not saying they aren’t intellectually challenging, because sometimes they are. But I am saying that they will make sure the things that are important to you actually happen.

At work they are called KPIs, or key performance indicators: the crucial things that must happen in order to keep business plans moving forward. The concept is universal: at home, school, social groups or pressure groups. It takes some effort, but delivers results.

So what are you waiting for?

Tuesday 16 February 2010

6 rocketing benefits from business recipes

Do you love to cook? Do you have a recipe book? It’s much easier and quicker to make delicious food when you have a recipe. Ingredients don’t get missed out, and if you get interrupted, you simply go back to the recipe to see where you are in the process. If you are in a real hurry, you can whizz through the steps knowing the final result will be just as good as if you spent hours on it.

Can you imagine the haphazard results you would get if you tried to cook from memory?

Businesses also need good processes, or recipes, for all the same reasons. A process is just that, a standard “recipe” that enables things to be done in the same way every time. Standardising as much as possible means:
  1. The task can be reliably estimated for time and resource
  2. The results will be the same (or very similar) each time
  3. Work will get done faster once the process is established
  4. Mistakes (big and small) are less likely
  5. You can make changes, and measure the impact
  6. Customer confidence will increase as they come to trust your consistent quality
A process may be as simple as a checklist, or as complex as a manual describing how to do something. I saw a wonderful example of a NASA checklist complete with their wicked sense of humour. Quite instructive!

Creating good processes and checklists isn’t rocket science, but it seems rocket scientists wouldn’t go moon-walking without one.

Friday 12 February 2010

So, tell me what you want

So tell me what you want, what you really really want?

Have you figured it out yet? What you really really want? Or are you still looking? Do you think you have it, then you realise it wasn’t what you wanted at all?

Figuring out goals is one of the most challenging, yet most important things we can do, because if we don’t know what we want, the chances of getting it are not high.

As a pilot once had to explain to his passengers:
“I have good news and bad news. The bad news is that we are
lost. The good news is that we have a tailwind behind us, so we are making great time in getting there!”

Isn’t it just the truth that we spend so much of our lives in the same way? Directionless, but working our behinds off to get there.

But just imagine if you won the lottery tomorrow. You would have enough money to live comfortably and not worry about your day to day needs. What would you do? How would you spend your time? What passions would you pursue? What dreams would you chase? What purpose would excite you enough to bounce out of bed every morning? Most of us earn more than a million pounds during our working lives, some very much more than that. So in truth, it isn’t really money that is stopping us - it is clarity of purpose.

Knowing what you really really want, has to be the first step in attempting to get it.

Thursday 11 February 2010

Twitter: not as daft as it sounds

Many years ago when I was in advertising we worked for a young American computer company that was just launching in the UK. They were called Dell Computers. Most of us had never even seen a computer before, let alone used one. We all had a new PC delivered so we could try it out. It seems strange now, but we hadn’t a clue what to do with the things!

We did, however, solemnly recommend to this company that they should change the name for the UK launch. As if talking to Martians, we told them about the UK TV programme “Only Fools and Horses” and Del Boy. They thanked us for our recommendation and politely said that they would launch under the name Dell anyway. It was, they quietly pointed out, the name of their founder.

We hadn’t met Michael Dell, only seen pictures of this slightly geeky looking youngster. And of course we didn’t have a crystal ball to see into the future. That geeky looking youngster has now given such mighty names as IBM, HP, Compaq and others a good run for their motherboards, and come out ahead. I blush to think how unwise we must have sounded to them.

We did, however, play an important part in them getting established, and I am proud of that.

Another name that I originally thought didn’t sound too sensible at first is Twitter. I was introduced to it by a good friend and showed the same wisdom by looking at her as if she were insane.

This pointless, alien tool has now become an extremely useful part of my business life in keeping up to date with performance measurement thinking. I’ve linked up with like-minded individuals (if there is such a thing) and wouldn’t be without it. I believe Barak Obama found it a rather useful tool on his journey to the White House. I follow my local MP and Councillors on Twitter and Eurostar got roundly criticised by not making good enough use of it during their snow-trains crisis.

So the point of this ramble? I’ll be keeping more of an open mind in future, as I tend to look a bit of a twit when it comes to future-gazing.

Wednesday 10 February 2010

You get what you focus on

Undeniable in its simplicity and logic, you can’t argue with the necessity of focusing on a goal in order to achieve it. When you look at how many of our days are spent, however, it isn’t always clear what our key objectives are. So much time, so little accomplished.

One simple way of keeping focus is to track progress towards your objective. A relatively simple objective, like running a marathon, can be tracked in a spreadsheet by logging the number of miles run each day. This has two benefits:

  1. It enables you to clearly see how often you have gone out running (or not), and how much further you are able to run as you get fitter. Work objectives are no different. One delicious book I have talks about mental strength training – building up stamina with achieving goals. Wonderful!
  2. Tracking progress keeps you focused on what needs to be done. By coming back to your measurement system each day, several times a day, every week or whatever, you keep your mind tuned to what needs to be done to attain the goal. Or put more plainly - you don't forget what you should be doing!
More complex organisation or departmental goals need more complex systems to track and report on progress, but the principles are exactly the same - with exactly the same need to remind people what needs to be done!

Another idea is to have a checklist for your activity, whether it is preparing for running (warm up, take water, etc) or sending out a mailing (check envelope stocks, proof-read letter, etc) so that each time you come to the activity you maintain a consistently high and improving standard.

Most of us care deeply about personal and business goals - these simple steps make all the difference in achieving them.

Monday 8 February 2010

Book review: The Snowball

An unhurried weekend provided enough time to finish the weighty tome that is Alice Schroeder’s biography of Warren Buffett: The Snowball. Despite its 800+ pages it was illuminating and interesting throughout. Schroeder paints a picture of an unusually sharp mind, with an ice-cold analytical approach to business, which was singularly focused on business and money-making from an early age. Yet Buffett the man is illustrated with all his human emotions and vulnerabilities, particularly when it comes to his late wife Susie. The human drama behind the deals was at times heart-breaking; no amount of money can insulate us from pain and suffering. Yet much in the book was amusing and at times hilarious, particularly describing the young Buffett.

Buffett is a man who is more than generous with his desire to teach and inform, yet one that few could emulate. Despite having followed his teacher, Benjamin Graham, Buffett admits that very few should attempt to invest their money in the way he has. For the majority he recommends a low-cost tracker fund. Oddly enough, the same advice about investing that I concluded after my six month long MBA finance course.

If you are interested in investing, business, or the life of one of the world’s richest and most thoughtful men, I'd recommend it highly. It has changed my attitudes to quite a few different types of businesses. You can't ask more than that, can you?

Thursday 4 February 2010

What’s your time worth?

It’s a funny old question, what is your time worth? Do you know the monetary value of your time? Do you believe the figure and use it in your day to day thinking? Some do, but not too many.

In some ways valuing your time as if it were money is spot on. But at the same time it implies we are spending a small fortune as we relax watching TV, or take an hour or two to go to the gym. Yet both activities are needed unless we intend burning out early in pursuit of the holy grail of time management.

Whatever you think your time might be worth; very few think it is worthless.

Time is the basic building block on which we create value for each other and the companies we work for. Relatively few people, however, measure their time in the same way that they measure money. Yet as Jim Rohn pointed out “Time is more valuable than money. You can get more money, but cannot get more time.”

One of the reasons we don’t measure what we do with our time is that it is difficult. If someone came up with some software we could set running in the background that measured how we spent each minute we would find it quite illuminating – shocking even.

And what abut the time we spend thinking about problems – in the shower or driving to and from work. Half-time, if you like: half-thinking, half-driving, half-working and half-listening to the radio. Your maths teacher wouldn't like the arithmetic, but it’s pretty much how the brain works.

I routinely spend days recording my time in fine detail. It is always instructive. But it always takes some effort to do, and as I get more tired I find it more difficult to measure my time on tasks accurately.

As software developers we have to log the time we spend on project work. There are many other professional services companies who do the same – consultants, accountants, and solicitors all have to know how long they spend on each client’s work. Certainly our time records provide valuable insights into how long things actually take, rather than how long we would like them to take.

So measuring time can be a valuable addition in the armoury to improve performance. Either occasionally to gain insights into how you work, or systematically so you can see where everyone’s time goes.

Measuring time certainly poses some big challenges, but equally could reveal some big performance lessons. And it can be a great help in figuring out why something or someone isn't performing as they should.

Wednesday 3 February 2010

What would you wish for?

I was asked a really interesting question yesterday. “What might small businesses measure if time was no object and metrics could be produced instantaneously?”

An earlier posting Why performance measurement is worth the bother talked about how business metrics are not freebies. They take time and effort to determine, collect and analyse. But that effort pays back handsomely; both in the performance feedback they provide and the focus they put on particular aspects of a business. So it strikes me that the question is not dissimilar to
“What sort of business plan would small businesses like if it took no time to put it together?” The answers will be as varied as the businesses.

The effort required to think through a strategy, articulate it as a business plan, and then communicate it to those who need to know, is actually of more value as having the business plan. And so it is with metrics.

All plans and strategies are different. And the measures required to keep businesses on track are as varied as the plans. Measures are a reflection of strategy, not just what is available or easy to measure.

I suppose the hidden question within the question was “How do you encourage small businesses to use metrics to grow and improve quality?” I know from my own experience that many small businesses pay close attention to the financials, but not much more. Yet the number of large businesses that have sophisticated performance measurement systems suggests there is a high correlation between success and the use of metrics.

So what is stopping smaller businesses? Is it time as the questioner was suggesting? Is it lack of knowledge of what and how to measure? Or is it just plain lack of energy with everything else that has to be done? It’s an interesting question.

Having said all that I think there are some measures that many businesses would like, if they were not so time consuming to gather and I’ll post my thoughts shortly. In the meantime, what would you wish for if time and effort was no object?

Tuesday 2 February 2010

Jump up and down metrics

Many businesses use metrics or KPIs to measure their performance. Metrics are vital if you want to understand your current performance levels, and where you need to improve. And most business leaders want to improve. They want their people to perform well, be happy in their work, and contribute great ideas to strengthen their companies.

So why are metrics considered boring? Why do we not jump up and down in excitement at the possibilities that metrics show us?

The answer is that metrics are often imposed rather than figured out together.

When metrics are worked out in the spirit of learning they become a tool to help improvement, a way to figure out what works and what doesn’t, and a way for everyone to get involved in improving whatever it is you are trying to improve.

Metrics that are figured out together have more chance of being the right metrics for the job: teams are great at plugging the gaps in others’ thinking, and creating lively debate that highlights the good or bad in any idea.

So if you want your metrics to get everyone jumping up and down with excitement at the possibility of it all, make your metrics inclusive and focused on learning.

Interested in consultancy on action-centred performance measurement? Or automating performance measures for your business? Send me an e-mail to see if we can help.

Monday 1 February 2010

The secret of success

I’m a voracious reader, and am currently enjoying The Snowball by Alice Schroeder. It’s densely packed 800+ pages recount the life of Warren Buffet, the second richest man in the world and a billionaire many times over. I have just reached the part where he meets Bill Gates, the richest man in the world, and they surprise themselves by getting along so well.

In one very telling line, Gates’ father asks the pair what they would attribute their success to. Both answer simply: “focus”.

As advice it has been echoed many times by many people, but coming from arguably the two most successful men of our time it is worth noting. Despite having a strong link with Microsoft I know relatively little about the life of Bill Gates, apart from what I read in Malcolm Gladwell’s insightful and entertaining book Outliers. Buffett, however, is portrayed in some detail by Schoeder, and he clearly has the ability to focus intensely for long periods of time.

Of course, the simple statement “focus” leaves out as much as it includes. Buffett is famous for his razor sharp mind and making dispassionate decisions only after careful analysis. However, both Gates and Buffett started early in their lives on their chosen paths and have never wavered in the pursuit of their goals – they both have the ability to focus for the long term.

Focusing on the task in hand can be done, with a little effort, by young or old, rich or poor, educated or uneducated. You don’t need training or a book to teach you how to do it. It’s very simple, really. But it does need determination and a willingness to forgo other things. Buffett has a computer in his office, but it’s not on his desk. When flying he buries himself in reading, rather than chatting to his travel companions. To Buffett these may seem obviously good uses of time, but they make blunt lessons for the rest of us.