How does your organisation measure success?
Most people would probably answer that question by stating some sort of financial performance metric: revenue, margin, sales, EBITDA.
Of course they would. After all, we are in business to make money. So what happens when our efforts are entirely focussed on those metrics, when a business manages itself primarily on what their spreadsheets are telling them about last week?
In this scenario, a business becomes reactive. Panic responses to last week’s or month’s bad performance become the norm. Pressure is applied. Emails are sent around with charts and graphs showing how far behind ‘target’ we are, and the business ends up managing itself by looking in the rear view mirror. Even worse, we start asking questions such as: is everyone busy enough? how utilised are we? It’s a small step from there to setting targets for our people through activity trackers and timesheets.
How do organisations make money?
They make money when customers spend money with them. Customers spend money when they are offered products or service that meets their needs. So does it not make sense for us to focus on understanding those needs and meeting them?
In this scenario, a business is proactive. They encourage people to talk to their customers or clients, to work with them and each other, to collaborate to meet the needs they’ve identified. As they meet those needs, as value is delivered, customers spend money and financial performance improves. Rather than asking how busy we are, we are focussed on what we are working on and why we are working on it.
How should we measure success then?
Revenue, margin, sales and EBITDA are all good measures of success; they just aren’t a goal in and of themselves. They are an outcome, a consequence of focussing on meeting the needs of our customers.
Kaplan and Norton created the balanced scorecard back in the early 90s. This management tool was designed to help businesses keep a broader focus on the activities that really matter, to prioritise. The clue was in the name. Organisations were driven to spend time on the things that will contribute directly to delivering on their strategy, and this strategy had the organisation’s vision at its core. The vision being a statement for what the organisation wanted to be for its customers or clients.
It asked us to look at our business from several perspectives; not just the perspective of those who care about the financial performance of our business, but also the perspective of those who work there and the perspective of our customers.
We should absolutely care about the financial performance of our business and use it to measure the success of the work we are doing, but it’s not the only thing that matters. Taking a balanced view, listening to our colleagues and our customers, focussing on how we work and not just what we are working on, are all key factors in defining our goals and driving the success of our organisation.
If we look after our inputs, our outcomes will look after themselves.