Everything’s important – safety, quality, productivity, recruiting, retention, cash flow, culture, sales, pricing, marketing, technology, legal, learning and development, succession planning, etc. But when everything’s important, nothing’s important.
Constraints
Due to limited resources (time, money, people, equipment) we will never be able to manage everything we want to with excellence. We have to make tradeoffs. If we don’t make explicit tradeoffs, we’re “muddying the waters” for our teams.
Have you ever worked for an organization with no goals? Ever worked for an organization with way too many goals? Which one’s worse?
Problems
When we have too many goals and too many “priorities”, we run into problems:
- Conflict: The more goals we have, the more likely we are to have conflicting goals. I’ve seen multiple instances of employees achieving goals that undermine the business. For example, the billing department that was so focused on minimizing the days-to-bill and days-to-collect that they deliberately chose not to bill anything that customers might argue. Or the trucking company so focused on increasing rates that they end up losing the good freight and hauling the ugly freight no one else wants.
- Pick and Choose: When people have too many goals placed upon them, they either ignore them all or only focus on a few of them. Rarely will everyone choose to focus on the same goal. And rarely will they all focus on the most important goal. Often times they will focus on their favorite goal or the goals that are the easiest to achieve. When this happens, we’re giving away the power of goals to channel the energy of the organization to get things done.
- Trust: People want their leaders to lead. When employees are asked to focus on more goals than they are capable of, and when goals are frequently changing, and when employees are criticized even after achieving goals – employees lose trust in their leaders. This loss of trust becomes a tax on every transaction that slows us down and increases costs and hurts morale.
Solutions
What’s a leader to do? We have to make hard decisions involving painful tradeoffs. After years of watching several organizations tackle this problem from different angles, I’m convinced the best solution is to (1) Identify a very short list of the most important metrics, (2) Review a longer list of metrics at appropriate intervals, and (3) Rotate through 1 critical metric outside of the whirlwind.
1. Critical Few
Identify the critical few metrics that reflect your organization’s reason for existence. These should provide a “north star” that everyone everywhere is aware of and can constantly align their actions to.
It’s so easy for us to get lost in the leaves and branches of the trees that we fail to see the forest. We need a “north star” to help us see the “forest” in addition to the “trees.” As Stephen Covey said, “The main thing is to keep the main thing the main thing.” At the end of the day, everyone needs to understand we’re winning when these metrics are moving in the right direction. Individual and team metrics are important only if they help us win on these critical few metrics.
“The main thing is to keep the main thing the main thing”
Stephen R. Covey
It will take some work to find out what your critical few metrics are, and you might have to cycle through a few and modify your definitions until you get it right. Once you get it dialed in, lock it in and only make changes in very rare circumstances. In the words of the quality guru W. Edwards Deming, we need to have a “constancy of purpose.”
There’s no one-size-fits-all template. We recommend a balanced scorecard that reflects the organization’s critical needs from a few different perspectives:
- Customers: This is usually a quality metric and/or an on-time-delivery metric. Some companies use a customer satisfaction score or a customer retention score.
- Shareholders: Jim Collins promoted identifying a single “profit per x” metric in his Good to Great book. Some companies prefer a profit metric like net income or EBITDA or a profit ratio like ROI. Others may make deleveraging or revenue growth or stock price their essential shareholder metric.
- Employees: Safety is almost always one of these metrics. Employee retention/turnover and employee survey scores also form good metrics.
- Critical Strategy: If your company has a critical, sensitive component to their competitive strategy that requires constant monitoring, this should be one of your critical few metrics too. This could be an internal metric of a critical process, or a metric of a critical vendor, or an industry metric. This metric won’t tell you if you’re winning or losing, but it will help you keep your sails pointed in the right direction.
2. Dashboard
In addition to your critical few metrics, it’s important to also maintain and review scorecards and dashboards of other important metrics. Large companies may have hundreds of other metrics they track throughout their various locations and departments. These reports are important and useful. But please make sure everyone everywhere knows that these other metrics need to be viewed as secondary to the critical few metrics. “The main thing is to keep the main thing the main thing.”
3. One wildly important goal outside of the whirlwind
In the book The 4 Disciplines of Execution, the authors promote a powerful method for picking one “wildly important goal” to focus on outside of the day-to-day whirlwind. Long-term success as an organization requires we balance the immediate needs of our critical few metrics with the imperative to invest and improve the organization. Sometimes, this “wildly important goal” will be an urgent response to an external shock like COVID 19. Other times it may be a focus on an important-but-not-urgent strategic priority that will help the organization develop a new business or make a game-changing improvement in quality, cost, or speed.
This “wildly important goal” is not a permanent member of your critical few metrics. Rather, it is a temporary member. We bring a sharp focus to it for a moderate period of time (usually between 3 to 18 months) to make a big improvement. Then, once we achieve the goal, we retire it and shift the focus to the next priority. We systematically work “on the system” (rather than “in the system”) to continuously improve it.
Jim Collins promoted a similar concept that he calls BHAG (pronounced bee-hag, short for “Big Hair Audacious Goals”). These are clear, compelling, game-changing goals. The best example of a BHAG is John F. Kennedy’s goal of landing a man on the moon and returning him safely to earth “before this decade is out.”
Power
There is real power in identifying your critical few metrics and keeping them in front of everyone. It’s a powerful tool for building trust, clarifying purpose, and aligning systems. Developing these metrics requires some frustration and hard work, but the payoff is huge! If you’re lost in a forest, imagine how helpful it would be to have a map and a compass. These metrics are your map and compass.
With the help of an experienced guide, you can make this happen very quickly. Please contact our team at dpxconsulting.com. We have decades of experience with lots of organizations and can get you set up with exactly what you need. We provide a complete package to help your leadership team (1) brainstorm and identify the critical metrics and goals, (2) build a refreshable scorecard of those metrics and goals, and (3) work with leaders to incorporate processes and systems to communicate and keep the organization aligned around these metrics.
