Dear Abby-Gail: How Much is Too Much?

Dear Abby-Gail: How Much is Too Much?

There has been a lot of interest in my recent blog post:  “Balanced Scorecard Gone Bad: What’s that Funky Smell?”  Several people have posted comments and questions in various forums, but one in particular deserves special attention.

Dear Abby-Gail: I believe a key point in your message is that a strategy is never static due to external changes (e.g., competitor moves, new technologies), so it will require continuous adjusting.  But this raises a different question. Since as strategic objectives change or the emphasis of what to accomplish within strategic objectives change, this means some KPIs may be dropped and others added (or their weightings may need to be tweaked). As a result, how much change in KPIs can an organization tolerate?

Dear Gary: This is an excellent question.  When strategy changes, then KPIs will have to change. Organizational tolerance to change is affected by several things.

(1) Is the scorecard system engrained in the organizational culture such that management trusts the system and uses it to make decisions?  If so, they will have relatively high tolerance for change in the KPIs because they understand that the change is necessary if they are to continue to rely upon the system to make strategically relevant decisions.

(2) Given that you know you need to adjust the KPI, how quickly can you achieve 7 data points on the new or adjusted KPI?  In other words, is there baseline information available that will help you quickly establish an XmR chart?  If not, can you achieve frequent enough reporting points to have useful trend analysis within 6 months?  If you were using an excellent KPI in the past and then switch to one in which it will be a year (or more) before you have enough data for management to have the 7 data points needed to make statistically sound decisions, this will cause frustration and lower the tolerance for the necessary change.

(3) Can your software system handle these changes without losing your historical performance on the objective (assuming the objective does not change)?  Knowing that you won’t be throwing away historical information increases tolerance for change.

(4) What about rewards tied to KPIs?  How do your Human Resources processes link individual or group performance and incentives to KPI performance?  What will be the result of changing a KPI right now?  If it can’t be changed due to a covenant with employees, can it be removed from the calculation so that you don’t keep working towards an “expired strategy”?

I invite feedback from others.  What else has impacted your organization’s tolerance for needed change in its KPIs?  And does anyone want to share their tips for overcoming resistance to this sort of change?

For more challenges and solutions, we invite you to explore The Institute Way: Simply Strategic Planning & Management with the Balanced Scorecard.

Skinny Jeans and the New Math

Skinny Jeans and the New Math

I am an engineer by training and a math geek at heart.  So articles about girls and math catch my eye.  Did you know that researchers agree that one’s ability to excel at math and science is as much about attitude as it is about “natural gifts” or gender?  This affirms my own less-than-scientific research findings.  I have a daughter and from her earliest years, I showed her how to apply math to everyday activities (baking was our favorite hands-on lesson, of course).  And anytime friends of hers would complain about how hard math was, I’d make them all stand up and shout, “Girls ROCK at math!!!”   It’s all about the attitude.   Of course, I had a good role model for this. My father showed me how fun math was when I was a child as we built motors together and played around with electronics…scribbling equations and schematics as we went.  I never feared math and science…they were FUN!

In my work life, I’ve discovered that dread of math, especially statistics, is widespread in the business community.   So let’s tackle something fun:  the concept of correlation.

When developing performance measures in business, we sometimes face a stumbling block in that the thing we desire most to measure is, unfortunately, impossible to measure directly.  So, we have to look for a “proxy” measure that is correlated.

Let me illustrate with an example from daily life.  Let’s say I want to know if I am maintaining my ideal weight versus gaining weight.  It’s easy to measure that directly – hop on the bathroom scale.  But, unfortunately, I can’t.  I travel constantly so I do not have a bathroom scale with me most days.

So I have a correlate that I measure.  I always carry the same pair of skinny jeans with me.  As long as the jeans will button, I am fairly certain of what the bathroom scale might say, if I had one.  The fit of my jeans is correlated to my weight.   Now, a statistician will remind us that “correlation does not equal causation.”  This simply means is that I need to consider that other things may be causing my jeans not to fit – for example, maybe they shrunk in the wash.  But understanding this, I am reasonably certain that they are a good proxy measure while on the road.

See how easy it was to master two important concepts for measuring performance in business – Direct Measure and Correlated Measure?  It’s all about the attitude!!

To learn much, much more about how to develop meaningful performance measures, we invite you to explore The Institute Way or join us at an upcoming training course.

PS: Our Balanced Scorecard Saved The U.S. Army $26 Million

PS: Our Balanced Scorecard Saved The U.S. Army $26 Million

I was working with an Army command at Ft. Sam Houston this week and had invited a special guest – Scott Hencshel – to address the group regarding the organizational challenges of implementing a balanced scorecard system within Army.  (Scott’s command is also stationed at Ft. Sam Houston –  Army Medical Department Center & School (AMEDDC&S), an Institute “Award for Excellence” winner.)

As Scott was wrapping up, someone asked a final question, “What was the biggest benefit that AMEDDC&S realized after implementing its strategic balanced scorecard?”  Scott talked about alignment, focus, and data-driven decision making.  Then as he was making his way to the door he turned back and said, “Oh yeah, we immediately saved the Army $26 million.”

Say what?!?!

AMEDDC&S is where the U.S. Army educates and trains all of its medical personnel – over 27,000 soldiers. One of the strategic measures on AMEDD’s balanced scorecard is “attrition rates.”  Before the scorecard was implemented, it was commonly believed that discipline issues were the primary reason for soldiers not completing their training programs – because resolution of these discipline issues were what consumed everyone’s time.  Once the scorecard was implemented, attrition was measured more thoroughly and two discoveries were made:

  1. Attrition was MUCH higher than originally thought.  The traditional calculation was flawed and attrition was actually over 34%.  That means 1/3 of those entering the medical training programs would “drop-out” thereby wasting the Army’s investment in their training.
  2. Academic performance, not discipline, was discovered to be the primary reason for attrition.

So as the scorecard team delved further, they looked for root causes of poor academic performance resulting in attrition incidents.  They discovered that a major cause was a lack of communication between the Brigade leadership and the AMEDDC&S faculty.  Students in the medical training program were being assigned Brigade duties that prevented them from having proper opportunities to study and prepare for classes and exams.   A prime example was students falling asleep during final exams due to having served Brigade guard duty the night before.

Once the communications issues were corrected, overall attrition rapidly dropped from 34% to below 20%…thereby saving the U.S. Army $26 million.

PS:  Did I mention that I have the best job in the world?!?  It is extremely rewarding to hear about results like this.

For more examples of break-through performance, we invite you to read “The Institute Way: Simply Strategic Planning & Management with the Balanced Scorecard.

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