Chris Davis suggests how leaders can extend beyond just writing SMART goals to successfully manage through metrics and drive behavior.
This post is the Executive Summary to the five-part series. To read and download the full paper, click here.
Leaders must hold themselves, their peers, and their teams accountable to their own articulated strategic intent.
Executive Summary: How do we know we are successfully pursuing our strategy?
Without awareness and accountability to metrics, leaders can’t know how successful their strategy is. Developing a cascading metrics-centric accountability framework is a critical first step to driving desired behavior. However, a well thought out design does not necessarily promise an effective implementation of such a framework. Therefore, leaders must consider and actively address the management dimension of metrics to ensure their organization maintains focus, alignment, and accountability for pursuing the company’s strategy.
Let me first address a common question: “what is strategy?” One commonly held definition of “strategy” is: “an integrated set of actions designed to create a sustainable advantage over competitors(1).” Based on this definition, the first natural question is: “Why do we need a strategy?” Having a strategy is critical for any endeavor so that there are no wasted efforts in an “integrated”, focused attempt to accomplish a set of objectives. There is not enough time in the day or money in our pockets to endlessly and carelessly pursue what we hope to accomplish, and a strategy helps us accomplish our objectives efficiently and effectively. The next question then is: “how do we determine if we have succeeded?” The key word to putting any strategy into practice, and enabling measurement, is “action”; actions can take place at varying degrees of breadth, focus, and granularity, and organizations can gauge the degree to which these discrete events change the status quo. Without measurement, the stewards of any strategy will not be held accountable for the quality of the strategy, and the evaluation of accomplishing one’s objectives becomes a vague and subjective exercise.
When developing a “strategy”, organizations regularly discuss various hierarchies of intent, but are not always able to differentiate or align missions, visions, business strategy, functional strategy, operations, and tactical plans (among others). In order to determine the success of any strategy, organizations must clarify the relationship between these conceptual elements, and how one element can drive the other. In order to narrow its focus, this article will treat only four main tiers in a strategic cascade (in order):
“Actions” are best described in verbs, which is why words like “grow”, “improve”, “increase”, “reduce”, and “optimize” are popular choices when articulating a strategy. The power of these simple words lies in that they imply the potential for quantification. With quantification comes the ability to know whether or not your organization is successfully achieving what it desires to, as well as the rationale for either staying course or changing tack. Quantifying, assessing, and acting on business performance metrics improves decision making, leads to greater accountability, and ultimately increases the likelihood of achieving a strategy. One study has shown that data-driven decision making can improve output and productivity by 5-6%(2), a significant return on effort for organizations who face densely competitive industries.
The other key words in the aforementioned definition of strategy- designed, integrated, advantage, and sustainable- offer instruction on several themes that can help organizations better manage through metrics.
- Design: establish a framework of performance metrics that align to each level of the strategic cascade
- Integrated: ensure that the performance metrics framework tiers up and down, providing alignment throughout the cascade that can enable decision makers to assess what is best for the company, not just their piece of the company
- Advantage: focus on a metrics framework that will help position your company in its industry; your company may not want to be the best in everything, but in aggregate your metrics should aim at demonstrating performance above competition
- Sustainable: target a metrics framework that will support your company’s continual growth, avoiding focus on only near-term benefits, or surge and crash cycles of performance, that will inhibit the organization’s long-term viability
There is a frequently cited “best practice” acronym for designing metrics frameworks, called SMART, which encapsulates many of the aforementioned themes and helps organizations outline useful metrics that truly assess the success of strategic pursuits(3). There are several industry interpretations of what the acronym stands for, but one common interpretation is that it stands for Specific, Measurable, Attainable, Relevant, and Time-bound (please see Table 1 in the appendix for other industry iterations of this framework)(4). While this commonly held interpretation of the SMART framework is quite useful in developing a strategically-aligned metrics framework, it does not completely address the need to manage an organization through the metrics. Therefore, in order to fully realize the value of a robust metrics framework that assesses success at the Vision, Objectives, Tactics, and Projects level, I propose considering additional management dimensions to the SMART framework:
The above “design” aspects of the SMART acronym should be augmented by the “management” dimensions in order to successfully implement a metrics framework that drives:
To reemphasize the point: it is not enough for managers to simply write objectives or goals, and the following table summarizes how leaders can successfully address the various management dimensions of SMART that are a critical next step to success:
|New Dimension||How to Successfully Address the Management Dimension of SMART|
While aligned to the SMART acronym, the management dimension does not necessarily follow a logical order, but does contain several interdependencies and overlap. Organizations that address these management dimensions when designing a strategically-aligned metrics framework will be able to move beyond the ivory-tower exercise of strategy creation to the grounds of value realization. The remainder of this article describes and explains the importance of the management dimension, as well as how your organization’s newly SMART metrics framework should align to your broader strategic framework.
(1) “Thinking Strategically”. McKinsey Quarterly, June 2000.
(2) Brynjolfsson, Erik et. Al. “Strength in Numbers: How Does Data-Driven Decisionmaking Affect Firm Performance?”. Social Science Research Network, December 12, 2011. <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1819486>
(3) Doran, G. T. “There’s a S.M.A.R.T. way to write management’s goals and objectives”, Management Review, Volume 70, Issue 11(AMA FORUM), pp. 35-36. 1981.
(4) “4 – SMART metrics”, HowTo.ComMetrics. <http://howto.commetrics.com/smart-benchmarking/>, “SMART Criteria”, Wikipedia, accessed September 29, 2010. <http://en.wikipedia.org/wiki/SMART_criteria>