Measuring The Right Things, The Right Way

Much attention has been focused on how to measure the performance of different parts of the business. Understanding the difference between metrics used in performance measurement is key to gaining true insight into both past, current and future performance.

There are three elements we must ensure are valide:

1. We are measuring the right performance - that which drives performance to a key strategic objective
2. We are using the right measure - often the wrong metrics are used, giving unreliable results
3. Valid data is readily attainable - we may identify the right key result area and metric to use, but are unable to access data.

This would be like using the best business intelligence analytics tool with invalid data and expect to get a valid, usable outcome.

Lag Indicators

Many business activities are measured by lag indicators – taken at the end of a process and only useful to tell us what has happened. This has no value in changing an unfavourable outcome.

If the business uses lead indicators at various stages of the process – then the business has the opportunity to make adjustments along the way thereby increasing the degree to which the objective of the process is achieved.

Financial performance indicators are lag indicators.

Lead Indicators

Process oriented indiviuals are more likely to use lead indicators and gain a better result, than those who are results focused and use lag indicators. This is why business intelligence capability embedded throughout a process, often with the ability to make automatic decisions focused on improving the final outcome is so valuable, and certainly more so that standard business reporting which only deals in end of process outcomes.

These principles apply to any part of a business, and to individuals. If we were only to focus on the end result of our lives, we would miss all the opportunities to change our style of working and living to create a more successful and happier lifetime along the way.

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