In my continuing conversation Insights From Implementers, I asked Implementers with whom I have relationships about issues that get raised by my Clients. I asked three questions, and I’m grateful for the responses and the discussions I have had about them.
How do you help Leadership Teams focus on tracking measurables that are predictive and not simply reporting what was?
The Scorecard can report three types of data: what has happened (such as financial results), what is happening (work in progress, efficiency metrics), and what will happen (new business leads, proposals, work approved but not completed or perhaps started). The easiest types of data that can be measured are what has happened: sales, bank balances, project completion rates. However, one of the biggest challenges for a company is creating a Scorecard that measures the right things, and is predictive; that is, it provides direction of what has to change in order for the company to make the business plan.
Whatever processes a company follows are meant to be predictive: if we do these things, this way, all the time, we will get this outcome, which will drive the achievement of the business plan. Which of course means the process first needs to be identified and documented.
This can be a challenge for companies that have grown organically and have evolved with each stage of growth; the processes are fluid and evergreen. The outcome of that approach is that it is hard to measure anything because everything is changing, or constantly being re-built. It can also be a challenge for Visionaries who have been successful reacting to business situations, and zigging and zagging to compete and win; documenting processes don’t seem like a good use of resources, and inhibits their ability to make decisions in real time.
In companies that have long term project or retainer income products, or where it is difficult to quickly adapt to changes (closing new business, or adjusting capacity as a result of new business), it makes sense to measure the gates and milestones of processes to develop predictive measurables.
The EOS approach is to first document the 20% of the major steps that get 80% of the results. Looking at the Core Processes each department completes does require discipline, but is critical in order to be replicable and scalable. Making it up as you go does not work (for long).
Taking the “Getting What You Want” approach to process development helps break down components into sequential steps. If the end of the process is a specific outcome, then it can be parsed into a series of steps that have to be completed in sequence to get to the final outcome.
Perhaps the simplest example of this is the sales process. To get this much revenue, this many deals need to be closed, this many quotes need to be written, this many opportunities need to be identified, this many meetings need to be had, and this much inbound marketing and outbound sales activities need to happen. There are similar types of outcome based processes in operations, HR, and finance.
So by looking at the components of the process, and measuring how well the process is being followed, it becomes predictive of the results the business should be achieving. That is, by measuring the process, we have a proxy for measuring the intended outcome, long before the results come in. Measuring those processes on a weekly basis is then predictive of capacity challenges, purchasing requirements, and cash flow balances. Therefore Leadership Teams can plan required resources and actions.
The real risk of not documenting process is that it is otherwise difficult to hold the Leadership Team accountable to results; it is the measuring of processes that are predictive of the results the process should achieve.
What are good Integrated Scorecard measurables, cross-departmental, for project based teams?
One of the challenges of Scorecards is that the processes are often integrated, cross-departmental, and dependent on other people accomplishing something before you can do what you are accountable for accomplishing.
The same approach of documenting Core Processes identifies cross-accountabilities. By asking the question “What has to happen just before this process can begin?”, you can unpack the End to End Process a company follows to achieve their business plan. Departmental processes usually require inputs from other departments before they can begin. Production scheduling needs Sales deliverables. Finance cash management needs materials purchasing and required inventory levels. HR needs production levels for capacity planning and hiring decisions. And Sales forecasting needs strategic planning and business objectives.
The 20% approach to process documentation allows Leadership Teams to start on cross-accountabilities, without going down the rabbit hole of having every single departmental process being complete. It allows the identification of measurables to be tracked that ladder up from the departmental Scorecard to the Leadership Team Scorecard, creating visibility across departments of what is really driving the business plan. There is only one Scorecard for a Leadership Team, and while individual seats report on their measurables, the Scorecard is intertwined based on processes upon which is was built.
How do you address Leadership Teams that can’t seem to solve the Issues that make the measurables off track?
If a measurable is consistently off track, it is usually because the measurable needs to be broken down to understand the processes that contribute to it. Measuring the close rate versus leads identified is valuable. But if the number is always red, then is the objective reasonable, or is it a function of a process failing, that drives the outcome not being achieved?
Predictive Scorecards are the output of process development. However they are also the starting point. What are we trying to measure, and what process would we need to achieve that measurable? By asking questions up front about what can be measured, and what that would predict, a department or Leadership Team can identify and document the processes that lead to success.
This then becomes a check for the Accountability Chart. If this is what we want to measure, and this is the process that needs to be followed to achieve it, does the Accountability Chart reflect that? Do we have the Right People in the Right Seats to deliver the process?
If the Leadership Team moves from the Scorecard, to the process, to the Accountability Chart, then it can solve the Issues that make the measurable off track.
To be fair, none of this is easy. In my experience working with Leadership Teams, the Scorecard is the most difficult to get right. Some data points are obvious or intuitive. But they generally measure what has happened. Getting to what is happening, or what is about to happen takes work. Fortunately EOS is well-suited to the task. And the role of the Integrator is to manage the overall process.