Four criteria for strategic measures
March 13, 2010
Yesterday I went to a meeting of the Association for Strategic Planning Atlanta, where some members of a team at Deloitte presented their process for strategic measure selection. One step in the process, after brainstorming measures for each strategic objective, was to put the measures through an evaluation funnel. There were four key criteria for selecting measures:
- Strategic. Does the measure track progress toward achieving the objective?
- Actionable. Will you be able to do anything about it? Will it help you make decisions?
- Operational. Is it something you are able to collect? Can people understand it and do they believe it?
- Economical. Is the cost of collecting the information feasible?
After measures made it through the evaluation funnel, they would be further whittled down until there were 1 or 2 measures for each strategic objective.
Would the measures for your change initiative make it through the funnel?
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What strikes me in measurement is that organizations often fail at the basics, WHAT do we want to measure?, WHY do we need to measure it?, and HOW will do it?
The high-level question about WHAT is: Do we want to measure Value or Performance? Value refers to assets (tangible and intangible), financial/non-financial transactions, value streams in which the organization participates, etc. Performance refers to entities/organizational units, markets, people, processes, etc. (e.g., A Balance Sheet relates to value, a Balanced Scorecard provides insights into performance)
The high-level questions about WHY: What will the measurement enable? Do we need it for status, trend, or both? Does it enable decision-making? Do we need comparability (of value and/or performance)?
The high-level questions about HOW: Is there an objective indicator available? Can we measure directly, or do we need to use proxies? What’s the measurement process? Does the measurement process influence the outcome (and how)? Is it one-time-only or ongoing/repeated? To what extent can it be extended for broader purposes?
If organizations don’t think about the above beforehand, then they end up in situations where things don’t get measured (the measurement never gets implemented), or where it is never acted upon…
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