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Performance measures are mostly focused on improving performance in what we already do. But can this business-as-usual focus on existing performance measures sabotage necessary change?

This is a question posed by Measure Up subscriber, Aaron, who works in the lighting industry. Aaron explained that the industry has had a large degree of market turbulence, mostly from the shift from analogue to digital LED.

And the consequence has been a necessary shift from selling lighting products to selling light as a service, and dealing with a lot of new competition. The problem is that the existing suite of performance measures were focused on the old business model. They were deeply entrenched, and a stick-in-the-mud for shifting to the new business model.

It’s hard to know how to stop existing performance measures from sabotaging necessary change, unless you have a framework to make the transition clear and practical.

Firstly, discern the role of performance measures in business-as-usual versus strategic.

Business-as-usual measures monitor the results that are fundamentally important in the operation of the organisation. For a business in the lighting industry, results like these will be business-as-usual:

• Employee engagement
• Customer satisfaction with product delivery
• Cycle time of product delivery
• The usual financials: revenue, costs, profit

Strategic measures monitor the results that might not exist yet, but essentially need to as the organisation changes. That’s what strategy is: it’s about change. For a business in the lighting industry that’s shifting to sell light as a service, results like these might be strategic:

• Employee capability in selling light as a service
• Customer retention
• Cycle time of service delivery
• New service profitability

It’s these new strategic results that need some deliberate attention to design new performance measures for them.

Secondly, test the alignment of existing and new measures to the new strategy.

Mapping the new strategy from top to bottom provides a canvas for testing existing performance measures for fit. If we’ve designed them deliberately, we can assume the new strategic measures will fit. And some business-as-usual measures will still fit the new strategy too, particularly if they are under threat from the change (we call this a conflict relationship). For example:

• change most often requires investment, so continuing to monitor costs might be important
• change is hard for people to go through, so continuing to monitor employee engagement might be important

But some of the business-as-usual measures will no longer be relevant at all, and calculating and reporting them can stop. And there will be some that just need to sit in the background and only get attention if they signal a problem.

Thirdly, freshen up performance reports or dashboards to spotlight the most important.

The most important performance measures will include all the strategic ones and the business-as-usual ones that fit on the new strategy map. And these must become the fresh focus of performance reports or dashboards at all levels.

The first part of freshening up performance reports is to remove any measure that doesn’t fit the new strategy. Only the measures that fit the new strategy should be included. And the second part of freshening up performance reports is to make sure they facilitate improvement action (by focusing on answering only three questions).

Just like the linking of layers of a strategy that’s been cascaded from top to bottom, performance reports are linked in layers too. The teams that have the most influence over specific strategic or business-as-usual measures will be the users of the performance reports that include those measures.

And don’t do any of this without involving the people.

The conversations about which measures are strategic and which are business-as-usual need to happen at all levels. And it will only work quickly if leaders and managers facilitate these conversations, not direct or dominate them.

The mapping of strategy and fitting of the right strategic and business-as-usual measures also gets more traction when people are involved in the mapping and fitting of the part they most influence. This is where ownership of the organisation’s change is founded.

The freshening up and linking of performance reports also needs to be done by the people that will use them. If this happens, people will use those reports willingly, and then you have a catalyst for shifting people’s focus from the old business model to the new.

Both business-as-usual and strategic performance measures can help an organisation change. The key is to test their fit to a well-mapped strategy.
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DISCUSSION:

What have found the biggest obstacles to be in realigning a measurement system to a radically new strategic direction?