Smarter Companies Measure What Really Matters

by Jay Deragon on 09/09/2013

_what-we-measureBusiness leaders have been obsessed with measures that don’t tell you what really matters.

The measurement mentality has been reinforced by management consultants who have emphasized the world of statistics, measurement, rigor and process:  an appealing array of tools that, in isolation, promised control and predictable outcomes. This has been further reinforced by stock markets that expect results as forecasted. Thus being able to predict outcomes became valuable and critical to shareholder value.  Everyone knows, or has been taught to know, that the only thing that matters in business are the numbers.

An article in LinkedIn Today by Bernard Marr titled “The 75 KPI’s Every Manager Needs To Know” says:  Key Performance Indicators (KPI’s) should be the vital navigation instruments used by managers and leaders to understand whether they are on course to success or not. The right set of KPI’s will shine light on performance and highlight areas that need attention. Without the right KPI’s managers are flying blind, a bit like a pilot without instruments.

The article goes on and list KPI’s for  financial performance, understanding customers, gauging your market and marketing efforts, measuring operational performance, to understand employees and their performance and finally to measure your environmental and social sustainability performance. While Mr. Marr says Without the right KPIs managers are flying blind, a bit like a pilot without instruments.  It could also mean that managers are indeed flying blind if they are looking at the wrong numbers that don’t tell you what really matters.

What Matters Is What Needs To Be Measured

The 21st century is clearly demonstrating that unpredictable is the norm. Business is unusual rather than usual and thus what we measure to determine the effectiveness of what and how we do things needs to change. Businesses are no longer the measurer’s rather the stakeholders now hold the measures and satisfaction, six sigma and all the traditional supplier oriented KPI’s are reflective of the management mentality of the 1980’s.

We’ve been trained to measure output which is reinforced by our accounting systems and Wall Street. Meanwhile we’ve failed to measure input. Likewise we’ve been trained to measure the tangible things while much of our economy, the value of a business and life in general comes from the intangible things. Such things are now identifiable, measurable and visible because of digital technology. Intangibles are more than just IP, R&D and such things as defined by the GDP. They are all things that fall under human, strategic, relationship and structural capital. Such things are the things that matter most in the 21st century. And such things matter most to stakeholders, people.

People don’t care about the traditional KPI’s businesses use they care about the things that will enhance their life. Such things are intangible and today business has the chance to make such things tangible.

Smarter Companies, and their management, measure what really matters

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