OperationalMetricsimages2ONS2ED4

 

“If we don’t measure what we’re doing, we’ll never know the outcome of our actions.”
– Michael Stanleigh

It’s pretty much a standard practice to apply measurement in quality management. For example, we apply measurement of quality work processes in order to support management information needs. However, management also requires performance metrics in several non-traditional disciplines. These include:

  • Leadership
  • Innovation
  • Project Management

Measuring Leadership Performance

What is Leadership?

Let’s start by clarifying “What is leadership? Leadership is a process where an individual influences a group of individuals to achieve common goal. Jim Rohn, an American author said: “A good objective of leadership is to help those who are doing poorly to do well and to help those who are doing well to do even better.”

These definitions identify a requirement to measure current employee performance against their improved performance, as developed through the efforts of leadership.  This can include coaching, training and so on.

Peter Drucker said:  “Effective Leadership is not about making speeches or being liked: Leadership is about results, not attributes.” Essentially, leadership is about achieving goals, missions & objectives and is measured in terms of results.

“Successful leadership is something that happens organically when a leader focuses on the true impact of their actions.”
– Glenn Llopis

Leadership Metrics

Some of the metrics that leadership can use to measure the “true impact” of their actions include:

  • What is the productivity numbers compared to last year?
  • Are employees making fewer or more mistakes?
  • How many errors are corrected in a timely manner?
  • Are sales numbers up, steady or even during an economic downturn?
  • Are numerous customer service complaints getting to the leadership level or are they being resolved at lower levels?

Creating a Leadership Index

Another opportunity to measure leadership is by creating a leadership index. This will measure leadership performance. It evaluates leader skills, behaviours and attitudes. It raises the question, “Do leaders demonstrate, through their behaviour and actions, support for the organizational values?” For example; if one of an organization’s values is “integrity,” the value statement might read:

We are committed to honesty and doing the right thing. We say what we will do, do what we say, and acknowledge when we are wrong or have made a mistake.”

The Behavioural Statements for this value will include: “Integrity”… the demonstrated ability to:

  • Acknowledge mistakes/admit when wrong
  • Promote humbleness and humility
  • Live and lead by example
  • Always tell truth and have courage to tell it like it is
  • Do the right thing rather than being right
  • Display the highest ethical standards
  • Promote equal opportunity for all

The leadership index will include the above behavioural statements.  It will use a 360-degree process to ask the leadership, their peers and employees the extent to which they demonstrate, through their actions, support for the value.

Another leadership metric is “Business Value.”  To establish the measurement ask:

  • What does it mean to the business to invest in this customer value?
  • How is this measured?
  • How can we identify the net outcome of this value?
  • How can we determine and validate the net outcome?
  • How can we calculate how improvement and innovations add to business value?

Measuring Project Management Performance

Why Measure Project Management Performance?

Measuring project management performance is a critical area for organizations. In his book, “In Search of Excellence in Project Management,” Dr. Harold Kerzner said, “Project Management is no longer viewed as a system internal to an organization. It is now viewed as a competitive weapon that brings quality and value added to the customer.”

According to Forrester Research, Project manager leaders they interviewed had one common goal: To enable the organization to grow its business by building a core set of practices that delivered consistent outcomes.

Project Management Metrics

Project success measures provide leadership with the relevant information needed to make decisions affecting project completion. It also provides leadership with information so they can continuously identify and promote the impact project management is having on organizational performance. Metrics can include that the project:

  • Was managed within specified quality criteria.
  • Met regulatory requirements
  • Met defined targets
  • Met all deliverables
  • Managed all issues successfully
  • Met customer requirements for product/service delivery, as indicated after the completion of customer satisfaction post-surveys.
  • Had a successful and problem-free launch
  • Demonstrated a rate of return that validated the business case

Other metrics to measure the success of projects include the number of projects that:

  • Completed within their time constraint compared to the number of projects not completed within their time constraints.
  • Completed within their budget constraints compared to the number of projects not completed within their budget constraints.
  • Met or exceeded customer requirements.
  • Aligned with corporate strategy (should be 100%).
  • Were successfully managed (on-time, on-budget, met customer expectations) after training compared to the number of projects that were successfully managed without training.
  • Followed prescribed project management quality processes and were completed successfully compared to the number of projects that didn’t .
  • Applied a risk management process with fewer crisis situations as compared to the number of projects that didn’t apply a risk management assessment.

Measuring Innovation

Why Measure Innovation?

Innovation by nature is a non-routine, creative and unpredictable task. This makes metrics seem like something accountants would undertake, rather than a common skill, that is central to the innovator. And while many argue that too much measurement stifles innovation, it still remains a key requirement for the survival of every business.

Assessing progress and measuring the impact of your innovation activities enables you to change your strategy before mistakes become expensive or great ideas are refused.  While the development of innovation metrics in general is still an emerging discipline, there is absolutely no clear guidance on how companies should approach them in order to measure the success of their innovation initiatives.

Measurement is critical yet we usually don’t think about how to measure the success of an innovation.  Is the innovation meant to change people’s lives? Or to materially improve safety, our standard of living, quality of life, ease of life, convenience, speed, time, or other metrics?  A recent study by McKinsey found that more than 70% of corporate leaders tout innovation as one of top three business priorities, yet only 22% set innovation performance metrics.  The big question is to ask ourselves is, “Why aren’t more companies measuring innovation?”   I submit that it is usually because innovation definitions differ and expectations vary within an organization.

Innovation Metrics

Innovation Metrics identify not only “what” happened but more importantly “why” it happened. Innovation metrics provide management with the data required to support a sustainable innovation culture. They also help motive all employees to embrace innovation broadly and give it an ongoing priority because their overall contribution to the organization and its customers is recognized. Metrics identify not only “what” happened but more importantly “why.”

There are 4 areas to consider when measuring the impact of an Innovation Strategic Plan:

  1. Customers and Other Stakeholders
    • Determine how well you are achieving the strategies designed to address the needs of each stakeholder group.  Ask, “Are we doing the right things?”
  2. Processes
    • Determine the effectiveness of the processes that are critical for innovation.  How good are the processes?  Ask, “Are we doing things right?”
  3. Resources
    • Determine the appropriateness of the internal resources and how effectively external resources have been tapped. Ask, “Do we have access to the right resources?”
  4. Organization and Culture
    •  Determine the appropriateness of the organizational structures, culture, and reward systems to drive innovation?   Ask, “Are we getting the best from our resources?”

Return on Innovation Investment

Return on Innovation Investment provides a tangible measurement for the innovation process. It looks at the organization’s total profits from new products, new services and key business processes generated through the innovation process.

Metrics can include:

  • New revenue generated from innovations
  • The number and type of ideas ready to take through the innovation process
  • How long it takes to move ideas through the entire innovation process

There are several areas where metrics can be applied to innovation.  One is to measure ideas which can include:

  • Increased the number of new ideas
  • Saw an improvement in the quality of ideas
  • More efficient implementation of quality ideas
  • Improved success achieved from the implementation of new ideas

Other innovation metrics include:

  • The percentage of budget allocated to innovation efforts.
  • The percentage of the workforce dedicated to innovation.
  • The percentage of time employees spend on innovation.
  • The number of ideas submitted by employees within a specific period of time.
  • The number of ideas submitted and put through the entire innovation process.
  • The number of ideas submitted by customers, suppliers, vendors and/or consultants.
  • The percentage of killed innovations.
    • Calculate the number of killed innovations divided by the total innovations submitted.
    • If the percentage is high maybe you are being too strict and you should review your selection criteria or maybe your selection criteria is OK but you need to work on the quality of ideas.
  • The percentage of early idea rejections in the innovation process. That is, the number of innovations killed in the early stages of the innovation process divided by the total number of innovation.
    • Why are innovations being killed so early? Killing an innovation before it incurs more resources is not always a valid reason for elimination.  So beware on what you are killing and why you’re doing it.
  • Total costs of “killed” innovations
  • The percentage of employees identifying innovation as a key performance goal
    The percentage of employees trained in the innovation process.
  • The percentage of new products/services launched from the innovation process as compared to the number of all products/ services launched.
  • The reduction in new product/service/process development time/cost.

Summary

Operational metrics are worth implementing in all areas; including non-traditional ones such as Project Management, Innovation and Leadership. This is because using data to evaluate what is working and what isn’t is a very valuable management practice. And it is still a practice that is used far too little. It can play an important role in identifying and tracking progress against organizational goals and identifying opportunities for improvement. It is an important step in formulating business direction and reducing declines in business performance.

 

 

 

Michael Stanleigh

Michael Stanleigh, CMC, CSP, CSM is the CEO of Business Improvement Architects. He works with leaders and their teams around the world to improve organizational performance by helping them to define their strategic direction, increase leadership performance, create cultures that drive innovation and improve project and quality management. Michael’s experience spans public and private sector organizations in over 20 different countries. He also delivers presentations to businesses and conferences throughout the world. In addition to his consulting practice and global speaking he has been featured and published in over 500 different magazines and industry publications. For more information about this article you may contact Michael Stanleigh at mstanleigh@bia.ca