Plays Well With Others – Metrics to the Max!

Peter Drucker

Peter Drucker, the Father of Modern Busines Management

November 2009 would have been the 100th birthday of famed management guru, Peter Drucker, were he alive today.  Now for those of you who don’t know the name, Peter Drucker was no mere guru or simple pundit.  He was in fact the father of management and universally acclaimed as the world’s greatest management thinker.  Anyone who’s taken a business class, studied for an MBA, or had to deal with an IT project to build a management dashboard has been touched by Peter Drucker.  If you have a spare moment, add Drucker’s Concept of the Corporation to your library.

Drucker came upon the scene at a time when management, as a discipline, was a career backwater treated like a red-headed stepchild compared to the other professions. The famed Boston Consulting Group hadn’t been founded yet and McKinsey was perhaps a decade old. A genuine intellectual who stood in the company of Keynes and Wittgenstein, he still managed to illustrate his thoughts in realistic examples taken from literature and history. And he spread his gospel in both the commercial and social sector (as an advisor to the Girl Scouts) from countries near, like USA and throughout Europe, to far, like Japan and China.  Even today, his thoughts and ideas are still startlingly relevant.

One of Drucker’s most famous axioms, and I paraphrase, is If you can’t measure it, you can’t manage it – what we now call metrics. In IT circles, we most often see metrics come to life as key performance indicators (KPI).  KPIs are typically used to track an organizations success in reaching key strategic goals, especially towards hard-to-quantify goals.  We used KPIs heavily during my presidency with PASS, and I encourage you to read more about them so that you can implement them in your organization.  (Start at http://en.wikipedia.org/wiki/Key_performance_indicator or http://management.about.com/cs/generalmanagement/a/keyperfindic.htm to find more information.)

Here’s a quick primer on KPIs, which might even be enough for you to get started.  Remember, a KPI should always be derived from a strategic goal or vision of the organization.  It’s a pointless exercise creating KPIs that are tied back to organizational strategy – hence the word key in the title.  Rather, KPIs are intended to achieve a very specific result.  But I digress.  KPIs generally described by the S.M.A.R.T criteria:

  • SPECIFIC: The KPIs should be specific to the purposes of the organization and aligned with its corporate strategies and vision.  They should balance and complement each other, not compete with or confound each other.
  • MEASUREABLE: A measurable KPI is one that is easy to understand, derived from sensible data points, not from complex indexes.  KPIs measure the drivers of business value and are, thus, leading indicators of performance – that is, they’re good predictors of how well the organization is meeting its strategic goals.  (As an example, lots of organizations have shifted from magazine based advertising, which is nearly impossible to measure its impact, to web advertising, where you can clearly tell exactly how successful the ad is based on the number of click-throughs).
  • ACHIEVABLE: KPIs must be owned by an individual or group who is held accountable for its outcomes, event to the point of tying compensation or incentives to their achievement.  However, the KPI needs timely, actionable data so that its owner can intervene to improve performance before it’s too late to meet the target.
  • RELEVANT: You should have a relatively small number of high-value KPIs that focus attention, rather than many KPIs that scatter attention and energy.  Your organization should also create their KPIs based on standardized rules and definitions, so that they’re intuitively understandable.  KPIs can lose impact over time, they should be periodically reviewed, refreshed, and amended to remain relevant in light of the current business environment.
  • TIMED: KPIs also need to be context-driven according to the targets and thresholds pertinent to their managers within a specified time frame, usually with milestones at quarter-end and year-end. If, upon review, the KPI is not being met, there should be enough information to trigger a series of corrective actions or positive changes for the organization so they can meet the KPI goal.
Measurements

If you can't measure it, you can't manage it.

KPIs, just by their very nature, are as much a process as anything else.  Since you must constantly measure performance relative to the KPI and, upon occasion, take corrective action, the KPIs become an everyday component of your daily business processes.  This strengthens your team and your entire organization. If you’re in a position to start applying KPIs or simply a set of published performance metrics in your organization, I strongly encourage you to do so.  And remember, this recommendation comes not from me, but from Peter Drucker, the world’s greatest management thinker.

Cheers,

-Kevin

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