As a CEO or business leader, have you ever looked at the measures your organization collects and reports on at the executive level and wondered why your team never seems to have the “right” conversations? You want to have deep, forward thinking strategy-focused discussions but that just never seems to happen as a product of business performance reviews and the subsequent discussion sessions. And while you could be experiencing this outcome because, as a team, you just aren’t asking the right questions, it’s more likely that you are trying to use the wrong information for the wrong purpose. More specifically, you could be trying to use operational measures and performance results to enable your strategic conversations.
While I can’t give you a list of metrics that could be classified as “operational measures”, I can tell you that they are usually measures that help you answer the important operational question: “Are our operations and business activities in control?” Candidate operational metrics include the root cause measures for your balanced scorecard indicators, process and/or project performance measures, and other hourly, daily, or weekly measures that give you direct information about the performance of your business operations. Often operational measures are only available at the business unit, department, team, or functional levels. This makes sense because operational metrics are generally used to manage short-term financial and/or the operational performance of a machine or process. Good operational measures usually give you very specific performance data that often has diagnostic capabilities. That is, when results are off they give you a pretty good idea of where the problem is and what change needs to be made to improve performance quickly.
Basically, operational measures are a critical tool business leaders need to answer THE primary operational question: “Are we doing things right?” Most importantly, these types of measures provide the information business leaders need to adjust operational performance when needed to get back on track quickly and efficiently.
However, for all the power operational metrics have when used properly, they are hopelessly inadequate when it comes to enabling effective strategy management and strategy-focused discussions.
When most CEO’s and executives want to have strategic conversations, they are really saying that they want to answer such questions as: “Are we executing our strategy well? (and, if not, what are our key strategic issues?)”, “Are we making progress/Are we moving closer to our desired business goals and objectives?”, and “Is our strategy the right strategy to get us where we want to/need to go?” As you can imagine, it takes a special kind of measure to provide the kind of information needed to address these questions.
Answering big questions like these requires big, inclusive metrics. That is, measures that can take a big picture look at the multiple concepts often covered by each strategic objective in an organization’s strategic plan. This can be quite a challenge at times and a critical success factor in enabling strategic conversations is finding a metric that is both specific in what it is looking at (i.e. it is relevant to the strategic objective in question based on the definition of that strategic objective) but broad enough to get at as many of the elements included under any given strategic objective as possible. Strategic objectives such as "Create a Culture of Innovation"; "Provide each Customer with a Unique, Customized Experience"; and "Expand Markets and New Revenue Opportunities in New and Profitable Ways" need a different kind of metric – one that can capture the essence of the strategic objective by combining and rolling up the performance of as many relevant business elements and work activities as possible. Because we are asking strategic metrics to take an expansive view they can’t really be diagnostic – the best they can do is provide us with an indication of whether things are moving in the right direction. Because these indicators aren’t diagnostic, when performance results are below expectations, we tend to turn to the related operational metrics to help us figure out where the critical problems are.
Here’s the thing: The best indicators aren’t just the sum of a few related business activities and work processes – they actually capture the synergistic results achieved when contributing processes (and projects) are working together in an aligned, integrated way. In really strong indicators, the results they measure aren’t just a sum of their parts, they are a multiple that includes the interaction between their parts. As a result of this characteristic alone, a set of great indicators gives business leaders critical insights into the overall performance of their business strategy and allows them to answer the important strategic question: “Are we doing the right things right?”
The difference between strategic indicators and operational metrics is an important one to be aware of. It explains why adding more and more operational metrics to the list of measures an executive team is trying to leverage to enable strategic conversations just doesn’t work.
It’s all because a collection of operational metrics assembled under a strategic objective just doesn’t capture the intangible information (and insights) provided by a carefully selected strategic indicator.
So, if you and your team are finding that your current metrics just aren’t giving you the information you need to have the strategic conversations you want, it’s time to take stock of the type of measures you are bringing to the table. If you are trying to use operational metrics for strategy execution/strategy progress reviews and discussions you must stop now. Identifying and collecting more operational metrics will not make the situation better – in fact, it will make things worse because you will divert precious organizational resources into activities that won’t give you the information (and results) you want. However, don’t throw the baby out with the bath water – just use your operational metrics for the right purpose: to help ensure that your business operations are under control and that your organization is doing things right.
The better solution for achieving your goal of enabling strategic conversations is to channel organizational efforts into identifying and then collecting a focused set of indicators that align with the strategic objectives associated with your strategic plan.