Many times, as almost anyone, when we face the challenge of improving the way we measure the performance of our company we tend to think "hard and boring." So usually these tasks are delegated, usually people with great skill in working with spreadsheets, but little business acumen. The result? A bunch of numbers with little meaning for the business. We should think? There are several common mistakes that we made in trying to measure business performance.
measure ourselves against ourselves. First big mistake, usually compare ourselves against our own plans or our own budgets, we are seeing a market in which we exist just us. It is not real. To really know how we're doing is necessary gather information on how you go to the market, industry, business-size, direct competitors. This can be achieved without the need to steal information, often information can be shared, in our case in particular events and organizations such as Lima Valley serve us as a barometer of the market.
Looking back. In addition to comparing against the budget, is almost a given that we compare against the previous year's situation, which leads to a very common trap, improving last year's number does not mean something has been achieved. The measurements you should indicate whether the decisions you're taking will help the company in the coming months. We must find figures that help to create value. A U.S. insurance company admitted that 10% of their patients was responsible for 80% of its costs, patients on diseases that were not discovered in time, immediately encouraged their customers to free exams to rule out these diseases, in the months after such costs were reduced obviously. Also one must see not only what one is doing, or what the competition is doing, must also be able to analyze not doing, for example, a bank should assess the same weight that an agent manages loans and it fails to place a few months later can be verified the status of the client and if they enter into a financial problem, the agent did not give a loan should be repaid. But usually this kind of statistics is ignored.
put all our faith in the numbers . Good or bad any measurement comes to us in numbers. The problem with companies that are guided by the data to produce performance reports is that they often produce poor quality data. For example, if we force an agency to obtain a minimum percentage of survey data quality customer service, usually the head of the agency that employees will "monitor" to clients so that they complete the survey, is unlikely that these surveys produce reliable data. Then there is the problem of selecting the wrong metric, or not knowing how to react to the metrics. Another problem arises in the seeking of economic justifications for all investments, but some, like the ROI of training programs is difficult or impossible to calculate. Play
figures. It is natural to man, when one is coming to visit is likely to clean the house, ordered the office, go to the hairdresser, depending on the situation will take a decision to look better. The same applies to business. In 2002 Clifford Chance law firm command an internal memo encouraging them to be used more hours of senior lawyers instead of juniors to meet the goals. You can not avoid inflating figures you want, even when we have the best company in the world, you will always want to look even better. From the moment a metric set is generated an invitation to those involved to manipulate it. What can be done? Different metrics can be used instead of just one goal. You can use different sources (colleagues, other areas, customers, community) can be divided by horizons, internal, value generation, conservation value, you can use different time frames, all that complexity has a cost but also makes make it more difficult to handle all the digits. Finally, it is now becoming more common not only provide incentives for areas that do not use your entire budget, but also the areas that exceed and can demonstrate that the use of the same will create more value in the future.
Stick to the numbers long. It is true that one can only control what you can measure. However, no measure of performance can move as fast as the movement of the business itself, especially in small businesses. In addition, the figures may represent a situation that is not what we believe. A recent example is the business of financial risk analysis, they evaluated many clients as AAA, a lot of them ended up being bad payers. The analysts maintained their rating, saying that this had been based on the credit records of customers, and only described the general behavior of the customer in normal times. In times of crisis the AAA rating meant nothing.
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This post is based on the article "Five Traps of Performance Measurement of Andrew Likierman extracted from the Harvard Business Review, October 2009.
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