Steer Clear of These Stumbling Blocks in Evaluating Your Strategy's Success
Effective business strategies and success metrics have a symbiotic relationship, but many organizations struggle to marry these two necessary aspects. A disconnection between these elements hinders efficient tracking of strategic progress due to the absence of pertinent Key Performance Indicators (KPIs). Furthermore, improper metrics can lead to misaligned targets, perpetuating a cycle of poor decision-making.
Here are three common issues leaders face when measuring strategic performance and potential remedies:
Incompatible Frameworks:
A new leader at a significant public sector agency implemented a strategy framework based on specific focus areas. However, this framework was misaligned with the existing performance measurement system, which was structured around well-established programs and services. This disconnect caused significant operational challenges, necessitating a substantial investment of time and resources from leadership to bridge the divide. The inefficiency was akin to combining incompatible components, underscoring the fundamental mismatch between the strategic vision and the tools used to measure its success.
Solution: Organize around Key Stakeholders
The CEO of a non-profit aiding those with autism discovered a discrepancy between the organization's strategic plan, which concentrated on internal matters like funding and staffing, and its scattered, department-specific KPIs. Addressing this issue, the CEO restructured the strategy and KPIs around key stakeholders: individuals with autism, family members, government agencies, donors, and staff. By focusing on attracting qualified clinicians through enhanced employment conditions, for instance, the organization measured its success by tracking the number of applications received from competent psychologists. This reorganization created a cohesive system where the strategic plan and performance measurement worked seamlessly together.
Measuring Activity:
Measuring activity instead of actual results is a frequent mistake in strategic performance evaluation. A common exercise illustrates this problem by presenting a hypothetical performance assessment scenario in which success is determined by the sheer volume of work completed, like the number of presentations delivered, with exhaustion at the end of the period considered a mark of success. This approach is rejected as it focuses on work output rather than achieved outcomes. The discussion that follows underscores the importance of focusing on tangible results and encourages those being evaluated or impacted by the work to participate in establishing meaningful performance indicators.
Solution: Focus on Outcomes
A leader at a national construction tool brand discovered that their performance measurement prioritized internal processes over results. To shift the emphasis, they began measuring success based on outcomes for key stakeholders: clients, suppliers, employees, and the parent company. To achieve this, they directly interviewed stakeholders to learn about their priorities rather than making assumptions. Besides validating existing KPIs, this process uncovered unexpected performance metrics for a more comprehensive perspective on achievement.
Lack of Focus:
A CEO designed a performance scorecard that was flawed because it was bottom-up rather than top-down. The CEO simply gathered existing metrics from various departments without first outlining the council's strategic objectives and then determining the most essential KPIs (Key Performance Indicators) for measuring progress toward those objectives. By gathering measures from departments first, the CEO ended up with a list of metrics that may have been irrelevant or distracting. Focusing on a clear blueprint and selecting appropriate metrics can produce a more efficient and targeted evaluation process.
An organization's strategy and performance measurement should be aligned. Organizations must prioritize their relationships with major stakeholders and tailor performance measurements to address stakeholder expectations.
[Sources]1. Herzebach, A., & Hoppensteadt, J. (2017). Closing the strategy-implementation gap: Best practices for driving change in your organization. Harvard Business Review, 95(4), 46-56.2. Kaplan, R.S., & Norton, D.P. (2011). Balanced scorecard steps for building a strategic measurement framework. Harvard Business Review Press.3. Kenny, G. (2023). Beware the pitfalls of agility. MIT Sloan Management Review, 64(1), 10-12.4. Norton, D.P., & Kaplan, R.S. (1996). The Balanced Scorecard - Measures that drive performance. Harvard Business Review, 74(2), 71-79.5. Porter, M.E., & Kramer, N.K. (2011). Creating shared value: How to reinvent capitalism and unleash a wave of innovation and growth. Harvard Business Review Press.
- To align an organization's business strategy with performance measurement, it's crucial to prioritize relationships with key stakeholders and customize the assessment metrics according to stakeholder expectations.
- Measuring business performance effectively requires a focus on outcomes for stakeholders, such as clients, suppliers, employees, and shareholders, rather than merely activities or internal processes.
