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08/16/2011

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Sandy Richardson

Hi Bill - I loved your post! The additional points you make are very important considerations that all organizations would do well to keep in mind. Glad my post gave you a jumping off point. Sandy

Bill Horst

Sandy , great points . I often say the same thing. i am also a big believer in the benefits of transparency over complexity. I expanded on your blog post in my blog http://costingblog.wvco.com/ . Please check it out.

Sandy Richardson

Glad you found it interesting and helpful! Sandy

M.eddurzi

Thanks a lot for this article .......... its great

Sandy Richardson

Your comment raises another interesting point. While we don't want to be drowning in measures, the idea that you can measure business performance with one metric is a flawed one. Particularly if it is a financial metric. The answer is to create a small SET of indicators that are highly focused on the key objectives of the thing you are measuring. For example, in the case of publishing companies where innovation is critical for ongoing success, they will need measures of innovation as well as indicators of financial health included in their measure set.

Our objectives in business are rarely one dimensional - the challenge is to create a tight measure set that will help you keep an eye on how your organization is doing in progressing forward to realize those objectives. Sandy

Pranabusiness

Great article!

Interestingly enough there was just an article in the Wall Street Journal today about the Author Tim Ferris. He's the guy that wrote the Four Hour Work Week. Apparently, Amazon's new publishing business just enticed him away from his current publisher, Crown.

The publishing industry, as you may know, is in quite a state of rebirth. Big publishers are scampering to try to figure out new business models and innovative ways to deliver content to readers other than through books. This type of rebirth requires radical shifts from old ways of doing things to new ways. Innovation and new product development is critical.

I've worked quite a bit in the publishing space over the years and most of the big ones primarily measure performance by EBITA or operating profit. Many senior managers and executives are judged by this metric and bonuses are often linked to it.

The problem here is that an over-emphasis on EBITA encourages managers to focus on minimizing risk to the point where innovation is either slow to happen or never happens. Innovation requires risk. It requires change. And, it requires the freedom to take chances on new business models and revenue streams.

This is a classic case of measuring what's "easy" or what's always been measured versus measuring what will drive the required behaviors to compete.


Sandy Richardson

I couldn't agree more - if the measures you select do not drive and provide feedback on action, they are not the right measures. Thanks, Sandy

Jcousineau

Great points, Sandy. My two bits: what you measure should also be performance-inducing. The very best metrics, IMO, are ones that (in addition to being specific, simple, sensitive to change, and timely) enable people on the front lines of execution to see, quickly, the impacts they're having on the end-game. Such metrics, like you say, aren't easy to come by. They are, however, game-changers.

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