July 20, 2005
The Role of Measurement
Effective management requires measurement.
“The fourth basic element in the work of the manager is measurement. The manager establishes yardsticks—and few factors are as important to the performance of the organization and every man in it. He sees to it that each man has measurements available to him which are focused on the performance of the whole organization and which, at the same time, focus on the work of the individual and help him do it. He analyzes, appraises, and interprets performance. As in all other areas of his work, he communicates the meaning of the measurements and their findings to his subordinates, to his superiors and to his colleagues.”
Having a useful strategic plan is going to make the managing partner's job easier in two fundamental ways. First, he or she will have confidence that their actions are aligned with the firm’s plan and they will have a practical road map for action. Second, by outlining the priority actions, the partners or the managing partner can much more effectively delegate responsibility among the firm’s partners and associates. In doing so, the managing partner will be more effective and may actually have the capacity to do an effective job of leading the firm while still practicing law. An actionable and measurable strategic plan provides the firm’s leaders with a “framework for decision making” to ensure decisions and actions are made consistent with the priorities and available resources of the firm’s owners. Without such a framework, there is no reliable way to delegate and ensure that the decisions of individual’s will be aligned with firm objectives.
In sports, it’s common to hear “it’s a new world record!” Have you ever wondered why athletes measure everything they do and keep up with every imaginable statistic? Why do football coaches and players spend hours and hours watching game film? Why do pro cyclists install sophisticated computers on their bicycles to track everything from the weather, to altitude, to heart rate and power? Did you know that six-time Tour de France champion Lance Armstrong’s cycling power output and his aerodynamic drag values are closely guarded secrets? Why? Because Lance knows that if competitors have something to aim for, they stand a better chance of beating him! Athletes and coaches know that measurement alone improves performance. Once you have something to shoot at, you can devise a plan to hit the target. If you don’t know how to measure the goal or target, how is it possible to design a training plan or business plan to achieve a given result? It’s actually quite ironic that the sports world, who we know aren’t nearly as smart as we business professionals, understand the discipline of measurement and goal setting much better than business people who all too often don’t measure anything and settle for whatever results they get from their efforts.
To develop a system to measure results and encourage accountability, you need to determine what you are going to measure and why. As a general rule, you don’t need to measure everything that can be measured. And, you should avoid measuring results or activities that do not have a direct or material impact on your strategic objectives or the successful implementation of your strategic plan. We suggest segmenting how you measure results as follows:
- Firm-wide key performance indicators (“KPI’s”)
- Exception Indicators
- Activity Measures
- Goal-specific Measurements
The next four postings will cover each of the four above segments.
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Filed under Management, Planning by Tom Collins