I have often made the point that if you want to understand how to use performance metrics to drive results in business, take a look at professional sports. I make this observation without an impressive understanding of any pro game, but simply by listening to the nature of the commentary, particularly during football games.The statistics just keep on coming.
This year I am hearing more about “red zone efficiency.” As I heard in Sunday’s game, in which my beloved Dolphins fell to New Orleans’ Saints (on All Saints Day, might I add), "the Saints scored in four out of their five trips to the red zone, while the Dolphins converted on only three of six.” I bet the Dolphins are running a lot of red zone plays in practice this week. Here at ActiveStrategy, we would call that implementing an action plan to close a performance gap.The next set of statistics I have in the article in front of me could be loaded in the PGM or “Personal Goal Management” scorecards in ActiveStrategy Enterprise software. Apparently, our infamous Ricky Williams tied his career high with three touchdowns and the dancing Jason Williams had two sacks and two forced fumbles. If that’s all you knew, you would have thought they won.
Let’s venture into the “leading” measures (the numbers that tell the story for the different units) to see if they give us any insight into the ultimate lagging measure -- the final score. Remember, I could use the help of a fantasy footballer, but by my analysis, only two numbers pop when you compare the statistics of the two teams (besides “red zone efficiency”). Those two are passing, where the Saints tallied 276 yards vs. the Dolphins' 197 yards; and penalties, where the Saints gave up only 25 yards vs. 55 yards lost for the Dolphins.
When you read the expert commentary, in fact, these numbers do tell a critical part of the story. In spite of first half interceptions, the Saints' QB was a second half wonder and the Dolphin penalties came at critical points in the second half. Bottom line, all the fantasy football addicts in your organization should be able to lead the discussion on the relationship between process measures and outcome measures. Are the number of penalties a measure of errors or rework or both?
Either way, leading measures are more important in business than in sports, because in sports your “line of sight” between the lagging measure (the score) and the leading metrics is literally and figuratively far better. Even without the commentators spewing out statistics, the most casual observer can tell if turnovers are killing a team or if the QB is getting less protection than the Prime Minister of Sweden. Just watch the game.
In business you need to make more of an effort to define and manage that "line of sight" between the lagging measures that are essential to survival (total sales, customer satisfaction, profitability) and the leading measures that impact those lagging measures.
For example, if cycle time suddenly spikes in your organization (because you're having to do rework in one part of a process, perhaps) and you don't have good visibility into your leading performance measures, business leaders might not see the problem until it's far too late. You could be bankrupt before you know what hits you. The bottom line is that if you don't have good visibility into the leading measures in your business (and their relationship to your critical lagging measures), it's like trying to coach a team on the field without knowing anything but the score.
On very rare occasions in business, you can see that the ball is being fumbled and the solution is obvious (like Starbucks offering a cheaper latte). But most of the time to get back on track you need good data on how you're doing in the red zone plus a good team executing a solid game plan, all of which can be enabled with software. If you're curious about that, I invite you to read more about ActiveStrategy Enterprise software.