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David Wilsey David Wilsey

David Wilsey is the Chief Operating Officer with the Balanced Scorecard Institute and co-author of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

KPI Development: When to Use Ratios

By: David Wilsey

Nov 30, 2020 372 Views 0 Comments FacebookTwitterLinkedInGoogle Plus

Let’s say you are managing a large organization and your HR director comes to you with bad news. The total number of employees leaving the company has skyrocketed. They show you the chart to the right to indicate that the raw number of employees leaving last year was below 20 and this year it is 50. Should you panic?

The answer is that it depends. What if I told you that this year the company acquired a competitor and that the total number of employees had expanded from just over 500 to over 2200 (see the chart below), and so the turnover percentage (# leaving / total # of employees) had actually decreased slightly (see Turnover ratio). Would that make you panic? Probably not.

 

The point is that raw counts can be misleading if you are not careful about the comparisons you are making relative to the underlying population. You might have seen debates in the news about how political leaders or writers have highlighted raw COVID 19 counts to support an argument when a per capita ratio suggests a different conclusion. It’s not that raw counts aren’t sometimes useful, but it is important to be aware of what you are comparing and how the overall population might impact interpretation. We recommend that any measures that could be misinterpreted be expressed as a ratio. Common examples of ratios include:

  • Percent completion
  • Coverage, fraction of the total possible
  • Error or defect rate
  • Per capita
  • Efficiency = Output / Input
  • Productivity = Output / Cost (or Output / work hour)

Beginners in the KPI space often make the mistake of developing raw count measures where ratios would be more meaningful.

One type of ratio you do NOT see on this list is percent increase. Many of our clients mistakenly think that if they create a ratio comparing the current period with the previous period that they have solved this problem. While a percent increase is technically a ratio, creating a ratio using the 2017 raw count and the 2016 raw count is still just as misleading, as more than 150% increase in turnover from year to year is still unnecessarily alarming. Of course, you could choose to track a percent increase of the ratio, but that would be addressing a different question, one that I will address in an upcoming blog.

To learn more about ratios and other KPI development issues, please see our KPI Professional Certification program.

David Wilsey David Wilsey

David Wilsey is the Chief Operating Officer with the Balanced Scorecard Institute and co-author of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

4 Ways Your KPIs Remind Me of Our New Puppy

By: David Wilsey

Aug 31, 2020 570 Views 0 Comments FacebookTwitterLinkedInGoogle Plus
We welcomed a new puppy named Romeo to our home recently, having finally given in to the kids after about five years of pleading. While we are generally happy with the decision, late last night I stood outside in the rain watching the dog refuse to relieve himself and realized that there are several similarities between a new puppy and the challenges that my KPI clients face.

 

They Lack Discipline

I keep telling myself that it’s not that puppies want to create a big mess, it’s that they just don’t know better. Many organizations develop KPIs that are designed by folks that are new to the KPI world also lack discipline. Without a disciplined development process, organizations tend to brainstorm KPIs that monitor activities or operational elements that aren’t very meaningful. Even when decent measures are selected, implementation requires discipline. I can’t tell you the number of training participants who have told me that they’ve selected measures but haven’t gotten around to tracking anything yet.

They Bite When They Play

My kids love playing with the puppy but complain about his playful nipping. Similarly, measures can play rough at first too as you begin to learn things you didn’t know about your performance. I’ll never forget the KPI champion I worked with that stopped supporting the program soon after he realized that their new performance measure was making him look bad. Just like it takes puppies a few months to learn not to bite, every organization must learn how to manage the fear that is associated with measuring performance. Bad news should be welcomed as it provides focus for the organization.

They Are More Work at the Beginning

With puppies, things can get easier over time provided you invest the time and effort to establish good habits. Performance measures are the same way. Some clients get discouraged by the mountain of work required to develop, define, and implement good measures. It is hard to convince some it does get easier once the measures are in place and you establish an effective reporting routine.

They’re Often Excited About the Wrong Things

Romeo hasn’t met a roll of toilet paper yet that he doesn’t want to devour. KPIs can also cause clients to fixate on inappropriate things if no one has clarified what is important. One recent training delegate told me that they still track and report on network uptime on a regular basis simply because the data was handy. Network uptime was of no great strategic importance for their organization and so the entire effort was a waste of time. KPIs are supposed to be “KEY”, meaning they indicate improvement of an important performance result. Strategic measures tell you if the organization is moving forward or changing to meet the needs of a new world. Operational measures tell you if you if you are delivering quality products and services effectively and efficiently. Most of the clients that tell us they need help with measurement actually need help articulating what they are trying to accomplish.

To learn more about how to overcome these and other measurement challenges, please see our KPI Professional Certification program.

David Wilsey David Wilsey

David Wilsey is the Chief Operating Officer with the Balanced Scorecard Institute and co-author of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

The “Formula” for KPI Success

By: David Wilsey

Jan 31, 2020 579 Views 0 Comments FacebookTwitterLinkedInGoogle Plus

I was facilitating a client performance measure development session recently, and the team was wrestling with measure definition. When I reviewed the customer perspective team’s work I found:

Measure Name: % of Customers Satisfied
Description:
% of Customers Satisfied
Formula:
% of Customers Satisfied

The team was mystified by what the formula should be. The following definitions and examples helped them get back on track. Measure name is a word or short phrase that names the specific measure and is understood by users. The description details what the measurement is about, including its intent, why it matters and what it includes and excludes. Imagine describing the measure to someone on an elevator. A formula is the mathematical equation or rule used to calculate the measurement, and expressed in symbols, essentially a set of instructions for creating the desired metric. To demonstrate, below are a few common measures from various walks of life, with an example of a description and formula.

Name: Customer Satisfaction Survey Score
Description:
Periodic survey of a sampling of customers, who are asked to quantify an “I am satisfied”-type response on a five-point Likert scale.
Formula:
# indicating Agree or Strongly Agree / total # of responses

Name: Fuel Efficiency
Description:
the distance traveled per unit of fuel used. Used in the US, UK, and much of Asia. The higher the value, the more efficient the car is at using fuel.
Formula:
# of miles driven / # of gallons of fuel used (or # of km driven / # of liters used)

Name: Fuel Consumption
Description:
amount of fuel used per unit distance driven, often expressed as liters used per 100 kilometers driven. Used in much of Europe. The lower the value, the more economical a vehicle because it takes less fuel to drive a certain distance.
Formula:
(# liters of fuel used / kilometers driven) *100

Name: Batting Average (baseball)
Description:
Batting average is used to compare the consistency of batters in baseball. It is calculated as the number of hits divided by the official number of at-bats and is expressed as a decimal to three places of accuracy.
Formula:
Total # of hits / total # of at bats, not including walks, sacrifices, or hit by pitches

Name: Steps Description: Tracking the number of steps walked each day is an effective way to ensure that you are getting enough physical activity each day. Countless research has indicated that measurable benchmarks in fitness can help improve health outcomes.
Formula:
Total # of steps walked per day

Name: Graduation Rate
Description: Graduation rates is the percentage of students who graduate from a school within a prescribed time period (which varies between school levels but is typically 150% of the published time for to complete a program). Graduation rates are considered important because it shows how committed schools are to helping students learn all that is required to meet the graduation standard within a reasonable amount of time.
Formula: # of students graduating within a prescribed time period / total # of students in the graduating class

Name: Employee Turnover Rate
Description:
Employee turnover is a measurement of how many employees are leaving a company. High turnover can be costly, as replacing employees is expensive. High voluntary turnover of top performers can also be an indicator of poor management or morale issues.
Formula: # of employees (voluntarily) exiting the job / average actual # of employees (during the same period)

For strategy-minded people more interested in discussing lofty strategy options than grinding through data collection and validity details, data definition can be a challenge. But I’ve found that if you can master these three basic data definition steps, you’ll be a long way towards consensus about exactly what you are counting and why.

For more information about KPI / performance measure development, please visit KPI.org/KPIP.


David Wilsey David Wilsey

David Wilsey is the Chief Operating Officer with the Balanced Scorecard Institute and co-author of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

Why "World Class" Performance Isn’t Measurable

By: David Wilsey

Nov 14, 2017 8664 Views 0 Comments FacebookTwitterLinkedInGoogle Plus
Let’s say our organization needs to buy a fleet of vehicles and we have two procurement teams. We tell team 1 that we want quiet, blue, four-door, fuel-efficient cars. We tell team 2 that we want world-class, high-quality, great-value, high-performing cars. Then we give both teams a few weeks to find their vehicles. Guess which team will be able to produce measurable results?

Team 1 will have the easier time, as it is clearer what is meant by the criteria provided. Team 2 will struggle because their criteria are too ambiguous. Without further clarifications, “world-class” could be interpreted to mean a hot rod sports car, a luxury sedan, or even a nice SUV. And if the team cannot agree on the specifically desired result, how can it measure success? 

This example demonstrates an important principle of good measure design. Before you can design a measure, you first must agree on what result you are trying to achieve. And not all results are created equal. Results written in abstract language are less measurable and harder to implement than those written in concrete language.

Abstract language refers to concepts or vague ideals. Examples of abstract words or phrases include sustainable, innovative, reliable, leadership, quality, effective, leverage, efficient, resilient, optimized, or responsive. Strategic plans are often littered with this type of language, as we aim to deliver best practices, thought leadership or world-class performance. These “weasel words”, as they are often called, are notoriously hard to measure without first translating into concrete terms. 
Concrete language is sensory-specific, meaning it describes things you can see, hear, smell, taste, or feel. Because they are observable, concrete results are measurable. Team 1 will have no problem determining the percentage of cars procured that meet their specifications. Concrete results are also more memorable and easier to implement. 

So if you are struggling to design measures for your organization, your first step should be to clarify what result you are trying to achieve, in concrete terms.

To learn more about developing concrete results or related measures, please look into one of our KPI training or certification programs or visit kpi.org.
David Wilsey David Wilsey

David Wilsey is the Chief Operating Officer with the Balanced Scorecard Institute and co-author of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

Types of KPIs: The Logic Model and Beyond

By: David Wilsey

Jun 5, 2017 15871 Views 0 Comments FacebookTwitterLinkedInGoogle Plus

As part of the KPI Basics series of content we are developing as part of the launch of the KPI.org website, I thought I would introduce the different types of key performance indicators (KPIs). As I describe in the accompanying video, like to use a framework called the Logic Model to describe the first four types.

The Logic Model is a framework that is helpful for differentiating what we produce from what we can only influence. It is also helpful for separating between elements that are more operational versus those that are more strategic in nature. For every key process, we spend resources like time, money, raw materials and other inputs. Then every process has measurements that could be tied to that particular process. The outputs of my process are what we produce. Ultimately though, I want to create an impact with my work. Outcomes capture that impact.

Let’s look at some examples of these types of measurements in real life. If I am a coffee maker, my Input measurements might focus on the coffee, the water, or my time invested. My Process measures could have anything to do with the process of making coffee, from the efficiency to the procedural consistency. The outputs of my process would be the coffee itself. I could have a variety of measures around the quality of my coffee output. Finally, my outcome measures would be related to things I can only influence, such as if my audience enjoys or buys the coffee. There is certainly more value in measuring impact than there is operations. If my customer enjoys the coffee I am doing something right. But you really do need a mix of both to truly understand performance.

To fully understand all of the elements of strategy execution, I can then add a few other broad categories of measures to my story. Project measures monitor the progress of our improvement initiatives and projects and can be designed to improve operations or strategic impact. These track things like scope, resources, deliverables or project risk. In my coffee example, I might have a new branding campaign to sell my coffee.

Employee measures tell us if employees are performing well or have the right skills and capabilities needed. I might measure my employees’ skills in making coffee, for instance.

Finally, risk measures tell us if there has been an important change in a risk factor that could have a significant impact on our organization. For example, I might have a risk indicator that tells me if global coffee bean availability becomes a problem. 

The information that these different types of measures provide can be used to inform decision making. Using a family of measure like this can broadly inform your entire strategy.

To learn more about Key Performance Indicator development and implementation, please look into one of our KPI training or certification programs or visit kpi.org.

David Wilsey David Wilsey

David Wilsey is the Chief Operating Officer with the Balanced Scorecard Institute and co-author of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

What I Learned About KPIs from My Six-Year-Old

By David Wilsey

May 19, 2016 12759 Views 0 Comments FacebookTwitterLinkedInGoogle Plus
I arrived to pick up my daughter on the last day of art camp just in time for program evaluations. Since we at the Balanced Scorecard Institute (BSI) use evaluation data for course improvement, I was intrigued to watch a room full of six- to nine-year-olds randomly fill in bubbles and then quickly improve their scores when the teacher noted that if any of the scores were less than three they’d have to write an explanation. 

In the car on the way home, I asked my daughter why she rated the beautiful facilities only a 3 out of 5. She said, “well, it didn’t look like a porta-potty. And it didn’t look like a palace.” She also said she scored the snack low because she didn’t like the fish crackers and wished they’d had more pretzels. As I giggled at the thought of some poor City program planner or instructional designer trying to make course redesign decisions based on the data, I reflected on the basic principles that we try to follow that would have helped the city avoid some of the mistakes they had made. 

The first is to know your customer. Obviously, giving small children a subjective course evaluation standardized for adults was ill advised. Better would have been to ask the students about their experience using their language: did they have fun? Which activities were their favorite? Which did they not like as much? 

Further, the children aren’t really the customer in this scenario. Since it is the parents that are selecting (and paying for) the after-school education for their children, their perspective should have been the focus of the survey. Were they satisfied with the course curriculum? The price? The scheduling? Would they recommend the course to others?

Another important principle is to make sure that your measures provide objective evidence of improvement of a desired performance result. My daughter’s teacher used descriptive scenarios (porta-potty versus palace) to help the young children understand the scoring scale, but those descriptions heavily influenced the results. Plus a child’s focus on pretzels versus crackers misses the mark in terms of the likely desired performance result.

Similarly, it is important not to get fooled by false precision. Between some participants superficially filling in bubbles and others changing their answers because they don’t want to do any extra work, the city is simply not collecting data that is verifiable enough to be meaningful.

These might seem like a silly mistakes, but they are common problems. We have had education clients that wanted to measure the satisfaction of a key stakeholders (politicians and unions) while ignoring their actual customers (parents and students). We see training departments that measure whether their participants enjoyed the class, but never ask if their companies are seeing any application of the learning. And we see companies making important decisions based on trends they are only imagining due to overly precise metrics and poor analysis practices.

Even the evaluations for BSI certification programs require an explanation for an answer of 3 or less. I wonder how many of our students ever gave us a 4 because they didn’t want to write an answer. I have also seen evaluations go south simply because of someone’s individual food tastes.

At least I can take solace in the fact that no one ever compared our facilities to a porta-potty.
David Wilsey David Wilsey

David Wilsey is the Chief Operating Officer with the Balanced Scorecard Institute and co-author of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

How Did I Get an MBA Without Learning This?

By: David Wilsey

Mar 24, 2016 11291 Views 0 Comments FacebookTwitterLinkedInGoogle Plus
Business Woman in classMost MBA programs pride themselves as being the ”practical” degree that will best prepare its students for any number of management roles. And I have to admit that I can point to that degree as a true turning point in my career. But it wasn’t until I became a Balanced Scorecard Professional (BSP) that I learned several principles that I have found to be key to being a good manager and leader.

  1. Help your team articulate a shared vision
    Many managers and leaders think that the key to success is to have a clear vision. But vision that is poorly articulated (or not at all) is just a dream. And simply dictating the vision to employees usually doesn’t work either. Change doesn’t happen because “I said so” or by assigning tasks without any context. Employees engage when they understand what we are trying to accomplish and why. Shared vision and change management happen through dialog, facilitation, and the development of a logical business case.

  2. Connect the dots between what employees are working on and desired outcomes
  3. A good supervisor makes sure that employees are completing their tasks. A good leader makes sure that employees are working on and completing tasks that move the organization toward a shared vision of the future. BSPs have been taught to articulate the difference between mission, vision, and strategy. They know how to organize their energy, measurements, and initiatives around a set of coherent strategic objectives. They know that many people are visual learners and so they use a strategy map to communicate how the dots connect. They know how to align department objectives with high level strategy and communicate to employees where they fit.

  4. Measure results (not just actions)
    Most managers know to measure project milestones as indicators of success, and unfortunately many strategic planners use this basic principle for KPI development. They define a handful of goals (e.g. Improve Brand Awareness), list all of the projects needed to reach those goals (e.g. website redesign), and then measure the completion of those projects as a measure of success (e.g. percentage of website redesign completed). Good leaders measure results. A redesigned website is nice, but I should be much more interested in whether or not it led to improved brand awareness.

  5. Develop strategy before KPIs
    The best KPIs in the world won’t help if they are designed to measure a half-baked strategy. The good news is that you don’t have to be a Steve Jobs-type visionary to develop an intuitive strategy by formally assessing your strategic situation and identifying a path forward using common methods like a SWOT, PESTEL, Customer Value Proposition, Blue Ocean Strategy, and other methods.

There are other such principles, such as how to identify drivers of future performance using Perspectives, how to use strategy to prioritize, how to set and reach reasonable performance targets, and many more. If you can think of any others, please add them in the comments section below.

If you are unsure about what a balanced scorecard or a Balanced Scorecard Professional is, please visit our website. 
David Wilsey David Wilsey

David Wilsey is the Chief Operating Officer with the Balanced Scorecard Institute and co-author of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

The Ultimate KPI Cheat Sheet

By: David Wilsey

Jun 9, 2015 20005 Views 0 Comments FacebookTwitterLinkedInGoogle Plus
We’ve received a lot of interest in our new KPI Certification Program. In fact, one woman said she couldn’t wait until the first scheduled program offering. She also wanted to know if we had a handy list of the most important principles – she wanted a cheat sheet! So in the interest in tiding her (and others) over, below I have compiled a few of the most important KPI tips and tricks. There are many more of course, so if you think I’ve missed anything, please add them in the comments section below.

Strategy comes first!
A training student told me his organization is struggling to implement measures for brand equity, customer engagement, and a few others because they believed the measures didn’t really apply to their company. I asked him why they were implementing those measures if they didn’t seem to apply, and he said they had found them in a book. They had no strategy or goals of any sort, and yet somehow thought they had a measurement problem.  

KPIs found in a book of measures don’t necessarily mean anything in relation to your strategy.  If you don’t have a strategy and/or can’t articulate what you are trying to accomplish, it is too early for KPIs.

KPI Development is a Process
I am embarrassed to admit that the first time I facilitated the development of performance measures with a client, I stood in front of a blank flip chart and asked them to brainstorm potential measures. It was my first consulting engagement as a junior associate and the project lead had stepped out to take an emergency phone call. Even though I had a basic understanding of what good KPIs looked like, I couldn’t help the client come up with anything other than project milestones (“complete the web redesign by August”), improvement initiatives (“we need to redesign the CRM Process”), or vague ideals (“customer loyalty”). What I didn’t understand at the time is that you need to use a deliberate process for developing KPIs, based on the intended results within your strategy. And like any other process, KPI development requires continuous improvement discipline and focus to get better.

Articulate Intended Results Using Concrete, Sensory-Specific Language
Strategy teams have a habit of writing strategy in vague, abstract ideals. As you pivot from strategy to measurement, it is critical that you articulate what this strategy actually looks like using concrete language that you could see, hear, taste, touch or smell. A vaguely written strategic objective like Improve the Customer Experience might get translated into checkout is fast, or facilities are safe and clean. Improve Association Member Engagement might get translated into a result of members volunteer for extracurricular activities. I’ve seen strategy teams shift from 100% agreement on vague ideals to diametric opposition on potential intended results, indicating that their consensus around strategy was actually an illusion.  Use simple language a fifth-grader could understand to describe the result you are seeking. If you spend your time honing this intended result, the most useful performance measures almost jumps out at you.

It’s not about the Dashboard!
Dashboard software is great when it is used to support a well-designed strategic management system. Unfortunately, many people are more interested in buying a flashy new tool than they are in understanding how they are performing (a topic I’ve talked about before). KPIs are not about a dashboard. KPIs are about articulating what you are trying to accomplish and then monitoring your progress towards those goals. A dashboard is the supporting tool and too much emphasis on technology misses and often distracts us from the point.

It’s not about the KPIs!
Speaking of people missing the point, we have many clients who think this process begins and ends with the KPIs themselves. Unfortunately, some of these folks are simply trying to meet a reporting requirement or prepare for a single important meeting. This type of approach completely misses the power of KPI development, which is that KPIs provide evidence to inform strategic decisions and enable continuous improvement.

For more about how to improve KPI development in your organization, see our KPI Professional Certification Program or The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

David Wilsey David Wilsey

David Wilsey is the Chief Operating Officer with the Balanced Scorecard Institute and co-author of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

4 Reasons Business Intelligence Systems are Like an (Unused) Gym Membership

By: David Wilsey

May 23, 2014 16966 Views 0 Comments FacebookTwitterLinkedInGoogle Plus
My business intelligence (BI) and analytics software salesman friend said something interesting to me the other day over lunch. He said, “I don't sell software, I sell gym memberships. When someone joins a gym they are not really buying the membership. They are buying the dream of improved health and a better physique. Their intention is to work out every day and fulfill that dream, despite the fact that few people ever actually follow up. Selling BI software is the same way. I'm not selling the software; I’m selling the dream of improved insight and competitive advantage.”

The unspoken implication was that few people ever get significant benefit from their software system, a conclusion I have also observed over my years in strategic performance management.

There are many common reasons that your strategic performance management software system might be getting less use than the gym membership you bought last January.  Below are the top 4 that I’ve seen as well as some tips for avoiding them.  

Reason 1: You bought into the hype but not the skills
I overheard a CEO recently saying that he needed to buy into the big data craze.  It was clear that this person had no idea what big data or predictive analytics meant, but he definitely needed to buy some.  Many people seem to think if they just buy some software, within weeks a “number cruncher” will magically come down from a mountain with answers to all of their problems. That is like thinking that if I buy a shovel, a garden will magically appear in my back yard. Performance management and statistical analysis skills are critical to creating value in this field.
 
Reason 2: You keep the results a secret
The first question some people ask when considering a performance system is, “how do I keep everyone out of my data?”  Security around private customer, employee, or some financial information is an absolute must, but a surprising amount of strategic organizational performance information can be shared with leaders and managers.  Leaders need information to make decisions and limiting access can communicate that strategy management is something to be left to only a select few.  Analyzing data is only the first step.  The dialog around why the results occurred and what should happen next are just as critical.
 
Reason 3: You only use out-of-the-box performance report design
The standard templates provided by the software companies are almost always designed to make the software sell well, as opposed to informing YOUR strategic decision making. Good performance reports communicate three things clearly: 1) How is OUR organization currently performing, 2) Why are WE getting the results that we are getting?  And 3) What are WE doing to improve our results?

Reason 4: You count and report on everything that can be counted.
Just because the vendor promises that this tool can handle the volume doesn’t mean that this is a good idea. Strategic performance management is about focusing on the most critical things first. I would recommend selecting a handful of critical performance gaps and focus your data collection, analysis, and improvement efforts on those.  Teach everyone in your organization how to do this effectively before you expand to other areas.

There are many more common mistakes, but these four are top of mind for me.  Please share other mistakes you’ve seen in the comments section below.

For more about how to improve your performance analysis, see the Performance Analysis chapter of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.
David Wilsey David Wilsey

David Wilsey is the Chief Operating Officer with the Balanced Scorecard Institute and co-author of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

"Fight" of the Bumblebee

By: David Wilsey

Feb 14, 2014 19188 Views 0 Comments FacebookTwitterLinkedInGoogle Plus
Have you heard the common legend that scientists have proven that bumblebees, in terms  of aerodynamics, can’t fly?  This is a myth that came about because about eighty years ago an aerodynamicist made this statement based on an assumption that the bees’ wings were a smooth plane.  It was reported by the media before the aerodynamicist actually looked at the wing under a microscope and found that the assumption was incorrect.  While the scientist and the media issued retractions, the legend lives on.

Unfortunately, in the management world, decisions are made every day based on “legends” rather than on real evidence. At a manufacturing company I once worked for, it was a well-known “fact” that it was more profitable to discount prices to increase volume in a particular market.  Even after a team of business managers proved discounting was a money loser, certain sales managers continued to rigorously advocate for the discount strategy for years.  I like to refer to any ongoing argument like this as the "Fight" of the Bumblebee.  This fight is the most difficult when the bumblebee argument is emotionally compelling (they’re not supposed to be able to fly!) and the truth is difficult to convey (bumblebees’ wings encounter dynamic stall in every oscillation cycle, whatever that means). Everyone loves a discount and can see pallets of product going out the door.  Not everyone understands some of the indirect nuances that contribute to profit.

Winning the fight of the bumblebee is dependent on making sure that you are interpreting, visualizing, and reporting performance information in a meaningful way.  People have to be trained to appreciate the difference between gut instinct and data-driven decision making.  Once they see analysis done well a couple of times, they will start asking for it.

The key to interpreting a measurement is comparison. And the trick is to display the information in a way that effectively answers the question, Compared to what?  Visualizing performance over time identifies trends that show data direction and development and provide context for the underlying story relative to strategy. The simplest and most effective way I’ve seen for consistently visualizing data is with a Smart Chart (or XmR chart), a tool showing the natural variation in performance data.

Once you have a better idea of how to interpret your data, reporting the information in a way that is meaningful is important.  Reports should always be structured around strategy, so that people have the right context to understand what the data is about.  Reports should answer basic questions you need to know, such as what is our current level of performance?, why are we getting that result?, and what are we going to do next?

For more about how to interpret, visualize and report performance, see The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.
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