leap-point-blog3

Measure your way to success

Long before being introduced to management gurus like Drucker or Covey, or learning about the obsession with performance indicators and their implications, we always heard advice from our not-so-famous gurus at home. They would often say, “Measure even when you dump it to the river,” which never made sense until now.

 

Many valuable lessons, like those from others, have been lost along the way, and we try to incorporate the same teachings in a newly bottled version.

 

The fad of measuring anything and everything, from what you eat to the number of zeroes in your retirement funds, is based on the concept of measure, align, and perform.

 

I’m a staunch believer in the value of key metrics for driving focus, accountability, and results. When we measure something, such as employee engagement, revenue growth, response time, or customer satisfaction, we gain insights into our progress against plans, changes over time, and comparisons to industry benchmarks. With clear objectives, our teams can align around shared goals and ensure that we prioritize the things that are most important for achieving the desired results.

 

The good news is that when goals are clear, defining and monitoring key performance indicators (KPIs) is an effective way to drive results.

 

Good KPIs are SMART: specific, measurable, attainable, relevant, and time-bound. As humans, we are excellent at adjusting our behavior based on what we’re measured against, sometimes consciously and sometimes unconsciously. By regularly measuring something, we can track our progress towards our objectives and take additional actions if necessary to achieve them.

 

Let’s explore a few examples to understand how KPIs can provide clarity, focus, and accountability. From a personal perspective, what are your top priorities? It could be regular exercise, weight loss, meditation practice, or improving sleep quality. Many of us express these goals, but merely stating them doesn’t make them happen, right?


Let’s take the goal of “losing weight” and turn it into a SMART KPI. First, consider what you’re trying to achieve, why it matters, and how you can influence the outcome. For example, you may want to decrease your weight to enhance daytime alertness, concentration, and overall health. A specific KPI could be “to reduce 3 kilos within 30 days.” You might set a goal of exercising for 30 minutes a day for the next 30 days. Using a device to track your weight during the duration, you could collect daily data and calculate a weekly average. Reviewing the data once a week, you can plan your actions accordingly. If you’re on track or have already achieved your goal, you continue with your current approach. If not, you consider making changes to your exercise routine, food habits, bedtime routine, seeking expert help, or exploring other strategies. You take action and reevaluate your KPI the following week to gauge your progress. Celebrating small victories along the way helps reinforce positive behaviours and builds the required momentum.

 

Similarly, in a business context, KPIs can be instrumental. Top-level goals may include increasing sales revenue, reducing costs, optimizing inventory, improving customer satisfaction, or enhancing employee retention, building a performance-oriented culture.


Let’s take the goal of “increasing sales revenue” as an example. To make it more specific, we need to define what exactly we mean by sales revenue. Is it the total revenue of the copany or a department or a product line, in a particular location or revenue per customer.


What is the target: a 10% increase relative to the previous year, competitors, or the market? How do we measure it, what is the interval to measure , and who is accountable?


Establishing KPIs and setting clear targets is both an art and a science. Rigorous progress reviews are essential so that interventions can be made, assistance can be provided, issues can be diagnosed, new actions can be identified, or adjustments can be made if needed.


However, here’s where the cautionary tale begins. While metrics and measurements are powerful drivers of behaviour, if we’re not careful in how we set and monitor them, the results can be disastrous. Esteemed leaders have expressed their perspectives on this matter:


The dark side of metrics appears when we achieve the target but not the ultimate goal. Measurements can lead to unintended consequences such as focusing on trivial matters, becoming myopic by solely focusing on what’s measured, experiencing analysis paralysis due to overwhelming data, or encouraging unethical behaviours as people try to manipulate the system.


Therefore, it becomes critical to focus on overarching goals and measure what truly matters. Objectives and key results (OKRs) are designed to define success and monitor progress toward that success. Objectives are descriptions of bold, ambitious goals, while key results are quantitative measures that can be definitively answered with a yes or no.


The OKR goal-setting framework, originally attributed to Andrew Grove at Intel in the 1970s, has been adopted by many businesses, including Google, Twitter, and Microsoft.


Returning to our example of “increasing sales revenue,” in OKR language, we might state the objective as: “Increase sales by 10% over the previous year.” We would then establish three to five key results that are critical for achieving this objective. For instance: “Generate 10 crore in sales,” “Achieve 90% customer satisfaction,” and “Acquire 150 new customers.” At the end of the quarter, we would have clarity on whether we achieved each of these key results or not.


Sales revenue, customer satisfaction, and new customer metrics are KPIs that help monitor progress toward the OKRs and identify issues that need attention. KPIs and OKRs work together and complement each


Metrics and measurements play an important role in driving outcomes. What we choose to measure truly matters as it influences incentives, behaviors, and results. We must take care that the measurement doesn’t become an end in and of itself. As leaders, contributors, and individuals, we can derive great value from metrics, but we shouldn’t go overboard – as you know we are a team and you can’t measure emotions or commitment.