What's your Planning Horizon?

March 31st. It’s the end of a quarter, or the end of a financial year depending. A time for looking back on objectives achieved and work that still needs to be done. Whether you plan on a monthly, quarterly or annual horizon, it’s a milestone.

The length of your planning horizon is important. To some people a quarter is a lifetime; for them a month is better. Of course it depends on your business and your ambitions. Google sets “impossible bodacious goals” and then achieves them, according to one employee. They set goals for the quarter, not for the year: for Google a year is forever. They want results faster. They pay those who deliver, they get results faster, and the world stands back in awe wondering how they do it.

If you are attempting complex engineering-type changes, then a month’s planning horizon is too short. But as Google are perhaps demonstrating, a year may be too long.

Your planning/review horizon is important – whatever the time period - as is the seriousness with which you review it. Your progress vis a vis your competitors may depend on it.

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.

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?

Lead and Lag Indicators

A new year and a new decade herald a new start. New starts of any kind provide an impetus for resolutions to do better – better at work, better at balancing home and work, better at exercising, the list goes on. But resolution alone is not enough. Most new resolutions never get followed through to completion; most get forgotten after the initial euphoria of setting them has worn off. Unless, of course, you are measuring your progress:

Goal + Resolution + Measurement = Decent Chance of Success.

Even then, you are not home and dry. What you choose to measure will make a big difference to your likely success. Let’s take the simple but knotty problem of losing a few pounds after the Christmas holidays. A simple measurement would be to weigh yourself daily or weekly. It is appropriate to the goal, but in fact could have several outcomes. If you have made suitable changes to your diet and exercise programme you might be motivated as you see your weight gradually decrease. However, if you haven’t made appropriate changes to your lifestyle, you might be demotivated as your weight increases or refuses to budge.

And so it is in business. The team’s New Year push to increase sales may have similar positive or negative results.

The key to understanding whether your goal will be accomplished is to have a number of measures – some of which are lead measures, and some of which are lag measures.

My weight, for example, is a lag measure because it is a result of choices I make during the day. The lead measures are the number of calories I take in through eating and the number I burn through exercise. So in addition to tracking my weight I also track how many times I visit the gym in a week, and how many miles I run in a week and how many meals I start with a fresh salad. All these are lead indicators that promote the habits I need to reach my goal.

Sales volume is also a lag indicator because sales are a result of other activities. Whereas the number of promotions sent out, or appointments set are lead indicators which will lead to increased sales.

Lead indicators help us “back up” through the problem so that instead of becoming demotivated, we work through the issues until we find the appropriate behaviours that will help us achieve our goals.

Systems that help you focus on both lead and lag indicators are useful – you keep your eye on the main target as well as tracking the constituent parts that influence the target.

Beware what you wish for

It is systemically damaging with predictable and harmful side effects. It degrades employee performance and motivates unethical behaviours. It harms interpersonal relationships and corrodes organizational culture.

Are we talking about too much exposure to the Internet? Allowing employees to listen to their iPods all day long? Letting people take too many days sick? Nope, none of those.

We are talking about goals in organisations. The ubiquitous and seemingly benign Key Performance Indicator. Objectives, targets, goals – whatever you call them, we all have them – just some are better managed than others.

Goal setting
Two fascinating papers hit my desk yesterday on the subject of goal setting. Both, in different ways, were saying “beware organisational goals”.

The first by Bazerman et al did not mince its words: “systematically damaging”, “harmful”, “motivates unethical behaviours”. Strong, attention-grabbing stuff.

The second from Bourne and Franco-Santos at Cranfield School of Management was less controversial and more practical. They also looked at HOW to achieve goals and make the point that quality practitioners look at improving processes in order to achieve the required performance improvements.

Both said what we have known for a long time – that goals are often set with too little thought, and without thinking through the possible consequences. Bazerman’s article gives lots of grisly examples of how, under the right management pressure, people will cheat in various ways that would be comical if they weren’t so serious.

Goals are good
In between the doom and gloom of targets, both papers acknowledge the positive side of goal setting. Much research has been done in this area and neither could say that goal setting is a bad thing. It isn’t. It seems to be pretty well universally acknowledged that people like to have something to aim for, and do better when want to be seen to achieve what they set out to do.

The danger comes where goals compete with one another, are ill thought through, and where goals become too narrow, thereby shifting attention away from wider, but still important, issues.

A potential solution
Bourne and Franco-Santos suggest a 10-point checklist for goal setting. Notice how far down the list the task of setting targets is!

1. Review stakeholder expectations
2. Clarify and select strategic objectives
3. Define a success map
4. Prioritise objectives
5. Operational-ise strategic objectives
6. Collect data
7. Analyse data
8. Set targets
9. Design an action plan
10. Discuss and agree an action plan

Creating goals, and managing progress towards them, goes to the very core of business and organisational life. In my experience it normally takes a group of people to “buy into” dubious behaviours that sabotage the good intentions of targets to the degree where organisations can be damaged. In other words, a lot of people need to turn a “blind eye” to let some of the more remarkable stories come to fruition.

Goals that have been properly thought through, and do not set up dilemmas in people’s minds, must be more effective. And this 10-point checklist is both comprehensive and manageable.

References
Ordonez, L.D. , Schweitzer, M.E., Galinsky, A.D., and Bazerman, M.H (2009) – Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting , Harvard Business School

http://hbswk.hbs.edu/item/6114.html

Franco-Santos, M. and Bourne, M. (2008) –The Impact of Performance Targets on Behaviour: A close look at sales force contexts, Cranfield University School of Management

Count what you can manage

Numbers improve creativity

As an avid reader, and a loyal follower of Mariella Frostup’s Book Show, I am fascinated with how authors produce their work.

What strikes me about authors’ working habits is how often numbers occur in answer to interviewer’s questions about how they produce their books. Writing is a creative process – yet authors appear to be methodical and systematic.

In his book ‘On Writing’, Stephen King says that he writes 10 pages a day without fail, even on holidays. I wonder whether my idea of a holiday is the same as Mr King's, but his disclosure is nonetheless impressive.

Here are some comments made by the Book Show guests about how they work:

“I can really focus and just get on with writing my 1,000 words. Then I get to spend the rest of the day playing with the babies…” Jenny Colgan (best selling chick-lit author, mother, and blogger extraordinaire)

“I always start the day by going into my office at about nine o’clock. This is where I work on my four books a year. When I’m writing a book, I write about 3,000 to 4,000 words a day; I don’t really have to think about what’s going to happen in the books: it just seems to come from my subconscious mind. I write for two to three hours and then I come out of the ‘trance’, as it were.” Alexander McCall Smith author of The No 1 Ladies Detective Agency

“My working day starts at about 2.30pm and continues on through to half past six or seven o’clock, when I stop because I’m knackered.” William Boyd – prize winning author and film writer

“I’ve got these files here and then I’ve got my marvellous patterned notebooks. I’m absolutely devoted to them. I must have about 200 by now, ‘cause I do about 20 for each subject.” Lady Antonia Fraser – historical biographer

J G Ballard, who wrote the cult novel ‘Crash’ was reported in The Times as saying:

“I try to write about 1,000 words a day in longhand and then edit it very carefully later before I type if out. I have been known to stop in the middle of a sentence sometimes when I've reached my limit. But self-discipline is enormously important; you can't rely on inspiration or a novel would take ten years.”

Performance management in action

This is Performance Management in action. The numbers – whether the hours they work, the number of words or pages they write, or the research notebooks filled – are part of the creative process.

Of course the numbers themselves don’t make the stories more gripping or their characters more life-like. They don’t compensate for poor grammar, or improve their spelling. But they do allow the authors to improve all of these things by the regular, systematic, and consistent application of their creative energies.

The numbers enable these authors to manage their creativity. They are conscious of when is the best time of day to write. They understand their own personal balance between targeting a number of words, and keeping up the quality of what they write. They set their own targets with words, pages and books –authors’ equivalent of a KPI.

Best selling lessons for business

All the authors I’ve quoted are best-selling authors. By literary and commercial standards they are successful. Their scorecards are filled with the number of words they write each day, the number of hours they work, how they edit, their research notebooks, and how they get started when faced with a blank sheet of paper. The book sales then follow.

In contrast, business people often start with the sales figures. “This year we are targeting sales of the XYZ product to be 1,000 units a month …” Business scorecards are filled with sales revenue and profit targets. Whilst these figures absolutely have their place, they are not the figures that business managers are actually able to manage. What we can manage is the efficiency with which we produce our products or services. We can decrease defects, or increase features. We can improve distribution or marketing communications, etc.

Metrics for creative types

The concept of applying “cold, hard numbers” to creative processes such as man management or writing isn’t intuitive. Metrics appear too stark, too simple and don’t convey the ambiguities of day to day business or the plot of a novel.

In reality they convey a great deal. The writer knows that a day that produced 1,000 words is moving them closer to their finished book – even if they eventually have to re-write every word.

Equally, successful managers think carefully about the key metrics in their business, and then ensure they are monitored and improved regularly. Because of course that’s the whole point. By creating targets and measuring the key parts of the process we are able to improve on what we do: improve the process, and the deliverables. Clever people, authors.

Chief Performance Officer

President-elect Barack Obama has announced that he will have a Chief Performance Officer on his team. Nancy Killefer from McKinsey & Co, a former assistant Treasury secretary, is charged with making the government more efficient, effective and transparent. Oh, and trimming the projected $1.2 trillion deficit.

The appointment is interesting. Killefer has specialised in strategies to improve organizational effectiveness for public sector organisations. Whilst she certainly has excellent financial credentials this is an acknowledgement that this is more than just a financial problem. It is one of efficiency, performance, and accountability.

It will be interesting to see what a management consultancy approach to this problem looks like. Will the real work needed to get accountability as well as accurate metrics be done? We all know that setting targets is one thing, but getting the behaviours right behind the targets is quite another. Measuring performance against the targets is equally challenging.

How Key Performance Indicators (KPIs) are calculated, how cheat-proof, and how well accepted they are, will all make a difference to how well new initiatives work. But well designed KPIs can significantly lift performance and are well worth the effort.

There are real difficulties in getting accuracy and meaningfulness into figures and financials for the United States. It is a big job. There will be lots to learn from how she tackles it and the many successes this focus will generate.

I’m sure we will be seeing a lot more Chief Performance Officers before too long. The US government is not the only organisation going through its budgets line by line but still wanting to make sure it delivers on its promise to customers.

All things measurable

Does the world need another blog? Not exactly; but it’s got one anyway.

Welcome to Getting to Excellent!

Getting to Excellent will be thoughts, rants and ramblings about the world of performance management, business intelligence, key performance indicators, scorecards, dashboards, metrics, and all things measurable as well as a few things that won’t be measured.

I’m a Microsoft Certified Professional, a systems analyst and obsessive about how numbers help us to do better. I’m a Toastmaster, a yogini, and stubbornly dreadful at French. I’m also fortunate enough to have worked with and for some of the world’s most capable companies.

And for what it’s worth I passionately believe that performance does matter: both good and bad performance. I believe we all have a deep seated desire to do well in our chosen fields and that understanding how to do better is important. Important for individuals, teams, businesses, and public sector organisations.

So I’m going to write about it. Here. In Getting to Excellent. The world’s new blog. That it didn’t necessarily want. But got anyway.