Metrics Should be Everywhere (Part 2)
by R. Thomas Stocker
In last month’s article I started a discussion There are several key components to this
about metrics and discussed how they can be strategy.
used for competitive advantage at the
First, you have to have a business strategy.
employee level in terms and measures they
It should be in the form of a strategic plan
understand. In this article I want to discuss
and referenced, reviewed and updated on a
how those bottom-up metrics align with
continuous basis. World-class companies
your top-down strategies. The top-down
use the strategic plan as a living document,
strategies are the main driver for business
updating it as needed, at least quarterly.
focus. They are the critical roadmap needed
Most companies update it annually and use
to drive performance and ensure everyone
it as the basis for their annual plan. That
within your company is marching to the
strategic plan is the basis for the top-down
strategy, while the annual plan is the basis
When using metrics, it is important this for the bottom-up metrics.
alignment to the top-down strategy occurs
The second step in using metrics to
because without it, managers, supervisors
competitive advantage is to understand the
and employees will focus on tasks versus
root causes of problems. Many companies
business drivers. Let me explain. Tasks are
don’t tie root cause analysis to tracking their
those activities an individual or manager
key performance metrics effectively. By
may feel are important to their own area
carefully analyzing causal factors and
within their sphere of influence. That may
prioritizing strategies around solving the
be true, but tasks don’t help the organization
largest root-cause problems first, you can
drive value unless they are aligned with the
focus your (usually limited) resources on
business strategy. People by nature want to
eliminating those problems before focusing
succeed, help the business and make their
on lesser issues. Many companies try to
own jobs easier. Unless they have clear
resolve whatever problems they find as they
direction about what they can work on to
find them and thus may concentrate on
drive true business value, they will work on
relatively easy problems and symptoms
those things that they feel add value to their
without ever tackling the big hairy root-
own area. That focus may not align to the
cause issues that will take time and
strategy as resolving a specific task-related
resources to fix but will have the largest
problem or activity may not be critical to
payoff. Prioritization is a key step to
helping accomplish the business strategy.
effective process improvement.
Some people call those things busy-work.
Use metrics for effective review and
So how do you help resolve this problem? It
meeting management. Most companies hold
is not always easy. You must set the tone
weekly staff, production and various other
from the top. You must challenge the
meetings meant to keep the company
strategic projects of each manager and you
information flowing and coordinated. For
must set your critical metrics in a fashion
many, it is a focus on today’s issue of the
that fosters a continuous improvement
day, (firefighting coordination). But it
mentality across your entire company.
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should also include a discussion of longer- questioning progress, results and trends need
term priorities and the progress toward those to be a normal occurrence. Reviewing
longer-term goals. metrics at low levels (with that particular
level’s employees) reinforces the perception
The bottom-up metrics at each level (metrics of how important those employees’ ideas
will roll up to each higher level) and and participation are to the organization.
resulting meetings need to focus on Stimulating their desire to contribute and
performance. Are the top three root-cause succeed will be enhanced.
hurdles to goal attainment being worked on?
Are there sufficient action plans in place to Sharing your strategic perspective through
address the largest issues? As a result of employee meetings on a recurring basis
those actions, are the trends moving in the (quarterly?) helps reinforce the focus on
desired direction? Is the person assigned to what is important to the organization.
that action plan making progress? Is there Sharing the metrics that you use to drive and
an agreed time line? If presented and used monitor that performance is an important
effectively, weekly staff meetings will be element of organization-wide meetings.
much more productive and significantly Keep in mind not all of the metrics you
shorter when the meeting focus is on those share should be financial. In fact, most of
KPI trends going in the wrong direction and the non-financial metrics may be more
why related action plans may not be important than or just as important as the
effective or addressed within the agreed normal financial metrics you are used to.
schedule. Of course I don’t mean to imply Productivity, customer and quality metrics
these weekly meetings do not also focus on all contribute to the financial results of your
today’s short -term issues and goals because business. However, you should focus more
they do. However, the larger discussion on non-financial metrics the deeper you go
around longer-term actions can be into your organization, mainly because those
significantly shortened and focused. employees are significantly further away
from dollar denominated metrics.
In order for a continuous improvement
mentality to be effective throughout the At the end of the day, metrics are a powerful
organization, the tone from the top must be way to help guide the actions you need in
ever present. Unless you and your senior order to accomplish your strategies. When
staff follow up (and through) on a used effectively they will help your team
continuous basis, using fact-based metrics to focus on what is important to your
help guide your organization’s strategies organization’s success; at all levels.
probably won’t be effective. Continuously
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About the author; Tom is a Principal of Boardroom Advisory Group, LLC, an owner advisory and consulting firm. Tom serves on the Board of
Directors for the RI Economic Development Corp’s Small Business Loan Fund Corporation (SBLFC), the finance arm of the RI EDC. He writes
a monthly article for the RI EDC’s Every Company Counts initiative. His articles focus on areas that can add significant value for business
owners. Contact Tom directly at 401-451-9799 or firstname.lastname@example.org.
Boardroom Advisory Group, LLC is a business advisory and consulting firm specializing in helping business owners resolve day-to-day systemic
issues that interfere with cash flow and profitability attainment. The Firm works with both growing and underperforming small to mid-market
private companies. The Firm’s team of hands-on senior professionals find and implement solutions to improve top-line and bottom-line growth,
increase cash flow, reduce costs, improve process, structure, and use world-class metrics to keep the business on track. The team also has
extensive experience working with troubled companies through business restructures and recapitalization. Boardroom Advisory Group’s core
focus on developing strategies to drive and measure performance has resulted in a history of sustainable top and bottom line growth, healthy cash
flow and increased company value for their clients. For more information about how we can help you build a more valuable business visit our
website at www.boardroomadvisorygroup.com.