Measure What Matters: 10 Guidelines to Help

Highly respected management guru Peter Drucker counseled, “What gets measured gets managed and improved.” This speaks to the importance of carefully measuring only what really matters. We need to set and measure performance metrics that drive the results that are most important to our teams and the broader organization. Done well, our relevant performance measures can help improve the performance of our teams, inspire our team members, provide a common focus, and allow us to track progress.

The end result we are pursuing is to select the right measures and set the right targets. Here are 10 guidelines that can help.

1) Tie Performance Measures to Organization Objectives (a.k.a. Goals). Ideally, there are a few very important objectives that our teams are focused on supporting. An important concept is that sometimes “less is more.” If we have too many measures people get distracted, confused, and the most important measures can lose some focus. The key objectives define WHAT is to be achieved. Good objectives are significant, concrete, action oriented, and ideally inspirational. Strategies and the associated Performance Measures benchmark monitor HOW we get to the objective.

2) Address Stakeholder Needs. As objectives and performance measures are being developed, consider the Right Questions approach, which focuses on the critical few things by which to judge our performance results. Put ourselves in the shoes of our key stakeholders (investors, customers, employees) and ask what is important to them?

We should develop “balanced” measures of success. Effective teams add value to all important stakeholders and avoid a singular focus (e.g., being low cost) to the detriment of other important outcomes (e.g., high quality).  Following are potential types of measures to consider. For each measure that gets used, we should have a target to compare actual results against:

1. Productivity (a measure of Goods/Services produced divided by Resources Used)
2. Quality (e.g., reliability, accuracy, mistake free, meets requirements, etc.)
3. Volume (how much is being produced?)
4. Timeliness (are work products completed when needed?)
5. Service (are customers satisfied with the service they receive?)
6. Compliance (are postal regulations, Sarbanes-Oxley, HIPPA, and other regulations being met?)
7. Cost (e.g., measure overall costs and/or cost per unit)
8. Safety (e.g., lost work days; OSHA recordables)
9. Environmental (e.g., incidents)

 3) Solicit Participation From Team Members. Leadership expert Warren Bennis counseled, “Good leaders make people feel that they’re at the very heart of things, not at the periphery. Everyone feels that he or she makes a difference to the success of the organization. When that happens people feel centered and that gives their work meaning.” We should involve our team members as much as we reasonably can. By doing so we gain buy-in and will end up with a better quality result. I also like this quote from Steve Jobs: “We don’t hire smart people to tell them what to do. We hire smart people so they can tell us what to do.”

 4) Have Some Stretch in the Measure Targets. Research has shown that it is important for targets to have some stretch, but at the same time be realistic. Specifically, research by Harvard University and the University of Michigan found that the degree of motivation and effort rises until the expectancy of success reaches 50%, then begins to fall. The key to maximize motivation, effort, and performance is to have targets that are neither too easy or considered too hard (unrealistic) to attain.

5) Avoid the Activity Trap. Peter Drucker warned against what he called the “activity trap” which is focused on activity versus being focused on the end outputs. Drucker said, “Stressing output is the key to increasing productivity, while looking to increase activity can result in just the opposite.”

 6) Seek Measurable Data. Quality guru W. Edwards Deming famously quipped, “In God we trust; all others must bring data.” As we define our relevant and important measures, it’s advantageous to find ways to objectively measure our results whenever possible. Keep in mind the Albert Einstein quote, “Not everything that can be counted counts, and not everything that counts can be counted.” There are times when a subjective assessment (e.g., evaluate on a scale of 1 to 5) can make sense.

7) Promote Transparency. We want to broadly share our targeted performance measures and our actual results with team members and others. Assuming our team members had input and buy-in to the measures, by broadly communicating we promote accountability. We also have the potential to build a performance-minded culture where the concept of “success breeds success” thrives. Daniel Pink, author of Drive, spoke to this when he wrote: “The single greatest motivator is ‘making progress in one’s work.’ The days that people make progress are the days they feel most motivated and engaged.”

There are many different methods for sharing the actual results of our measures versus the targets. For example, we can prepare hardcopy reports to distribute; display hardcopy posters or post on a bulletin board; electronic reports; digital dashboard or displays; or any other means that resonates with our teams. We can also communicate numbers and/or graphics, and consider color coding results as red, yellow, and green. Whatever methods we choose, making time to discuss as a team is also essential to promote accountability and stimulate motivation and engagement.

 8) Stay Flexible. Reality, as we know, is that the “life happens” in both our personal lives and in our business lives and worlds. When unexpected things happen (like a once-in-a-century global pandemic), we need to be flexible in both our objectives and our related performance measures.

 9) Periodically Evaluate and Analyze. Keeping our performance measures relevant is essential to maximize our value-add to the organization and our key stakeholders. One tactic to maintain relevance is to periodically take time to evaluate how well the performance measures are contributing to the success of our teams and the broader organization. We should also periodically evaluate the reasonableness of the targets, and our actual results against the targets. Since circumstances sometimes change, so should our measures and targets.  

 10) Integrate Into a “Continuous Performance Management” System. John Doerr has written an excellent book called, Measure What Matters. I recommend the book for anybody that wants to go deeper on this topic of objectives and performance measures. One interesting approach that John describes is continuous performance management. The main concept is that instead of only relying on annual performance reviews as has been customary, we should practice continuous performance management. The heart of this approach involves using CFRs:

• Conversations: authentic, richly textured exchanges between managers and employees, aimed at driving performance.
• Feedback: bidirectional feedback between managers and employees, and between peers, to evaluate performance progress and guide future improvement.
• Recognition: expressions of appreciation to deserving individuals for contributions of all sizes.

Here is a closing quote from author Pearl Zhu, which summarizes the ideal performance measure: “Every measure selected should be part of a link of cause-and-effect relationships, and ultimately affect the growth and long-term perspectives of the organization.” Let’s measure what matters and reap the rewards to our teams and organization.