Sunday, November 27, 2011

Metrics + No Consequences = Don't Bother

Regular readers of my blog will know that I have a keen interest in the area of metrics and their misuse.

This article pertains to project execution however there may some readers who see relevance in their day to day business environment.

Management guru Peter Drucker said, "What's measured improves". Whilst I agree with the sentiment, my view is that creating metrics (measurements) is a futile exercise if there are no consequences, should the metrics be continually missed or ignored, or alternatively should they be exceeded with little to no recognition.

We all live with metrics everyday, outside of business, and miraculously seem to (in the main) be able to meet the objectives. For example, traffic speed limits. Typical traffic roads rules include set speeds for various roads. Government authorities impose speed limits, for various reasons, that road users are required to obey. Should anyone break the speed limit, and are measured doing so, the repercussion may be a fine or loss of driving points (if relevant to the given country) etc. Should one choose to continually break the speed limit, and get caught, the severity of the action taken by the authorities may be increased i.e. increased monetary fines, potential loss of licence etc. In summary should a driver choose to ignore the set metric, there are consequences. In part (I appreciate not all) this helps ensure the majority of road users keep within the set parameters thereby helping to ensure an orderly road system.

Yet in the everyday business world there is often a chasm between the set metric and the outcome.

I have seen a numerous projects and "transformation programs" where a key platform of the recommendations is the introduction of new metrics aligned to the deliverables (prize). I have seen these same companies set up fantastic spreadsheets tracking the progress in line with the new metrics. However time and time again the prize emblazoned on the PowerPoint presentation does not materialize. Please do not get me wrong, there are multiple reasons why a project / program does not achieve its objectives (including setting the wrong objectives and metrics to start with) however in my opinion the lack of consequences for not adhering to the new measurements is often a considerable reason for a project's performance.

I am not suggesting firing anyone and everyone for missing a number or objective however I am suggesting that if a metric is in place and it is ignored or missed by a mile then there should be an action plan to get things back on track, including resetting the metric or objective if appropriate. Likewise, it is equally important to recognize those who do meet and / or exceed the set requirement. Again, I have seen many employees work ridiculous hours to achieve a specific objective only to end up incredibly demotivated because their effort in achieving the metric was overlooked.

Part of the action plan may be the need to review the metrics or objectives themselves. How many times have you looked at a Balanced Scorecard and scratched your head wondering who is really responsible for achieving what? (As an aside here is a great article on this particular issue - link).

My suggestion to anyone reading this is that the next time you are assigning metrics ask yourself, "If this objective / measurement is or is not met, then what?" If the answer is "absolutely nothing"...don't bother.

Sunday, November 13, 2011

What Would You Learn If Your Plane Crashed?

Peter Drucker is quoted as saying, “Follow effective action with quiet reflection. From the quiet reflection will come even more effective action.

When Mr Drucker says "quiet" I am would hazard a guess that he was not talking about a  plane crash. 

However this is exactly Ric Elias's experience. 

Ric Elias had a front-row seat on Flight 1549, the plane that crash-landed in the Hudson River in New York in January 2009. What went through his mind as the doomed plane went down? At TED, he tells his story publicly for the first time.

The video is titled: Ric Elias: 3 things I learned while my plane crashed

Time for a little quiet reflection.

Sunday, November 6, 2011

Sales: Are You Delivering?

Over the last two weeks I have had a couple of interesting experiences that demonstrate a classic example of a business not executing appropriately across the total business (or value chain).

Recently I purchased two products from two separate online retailers. The first item was a TV and the second item was a Smart Phone.

Both online retailers touted their ability to deliver significant savings to the customer (i.e. me) due to their low cost business models. And to be fair, the prices on both products were far lower that I had seen in traditional retail outlets. Additionally both online retailers provided free delivery. So in summary, the proposition to me was brilliant. I was purchasing well known products, through reputable online retailers at below market prices and I did not need to leave the comfort of my lounge chair. How could I go wrong????

Retailer 1: The TV
The website gave the option to choose the delivery date. I purchased on a Monday and chose to receive the product 2 days later on the Wednesday. At 10am Wednesday morning I received a call from the delivery driver saying he will be at my house at approximately 12 to 12:30pm. At 12:30pm my new TV was delivered.
Experience Rating - Excellent
Probability of repeat purchase - High

Retailer 2: The Smart Phone
After I purchased the item, I received a confirmation email that included the line "Products listed as "In Stock" are usually dispatched within 3 business days." 3 Days came and went very quickly. In fact 7 days came and went very quickly. I called the order inquiry line.... and was asked to leave a message. Then I sent an email, to which I received a response saying "There have been slight delivery delays on some Samsung phones in the last week. We pride ourselves on the speed of our service and delivery and almost always our Canon, Apple, Nikon and Samsung products are dispatched within 48 hours. There have been some airline issues for International flights ...." yada yada yada. Long story short, my phone will be delivered next week - 15 days post the purchase date.
Experience Rating - Crap
Probability of repeat purchase - Low

Now lets break this down into a very simple value chain analysis. (Note: Please do not email me saying this is not a proper Value Chain. I understand this. This is merely for illustrative purposes).

Retailer A:
Retailer B: Smart Phone
1 Source product Achieved Achieved
2 Price product and highly competitive rates Achieved Achieved
3 Provide comprehensive and easily to navigate on line retail environment Achieved Achieved
4 Accept payment for product (nice way of saying take upfront payment) Achieved Achieved
5 Provide delivery window Achieved Achieved
6 Deliver product within specified time frame Achieved FAIL

This is an excellent example of how failing in execution can minimize one's competitive advantage. Here we have two like businesses with similar business models. And yet one has an significantly increased probability to generate further income from its customer (me).

Why is this? In a previous article (Under promise and over deliver) I quoted Tom Peters, "Formula for success: under promise and over deliver". In the case of Retailer B, simply delivering would be a win (sorry I could not resist).

The reason the the final outcome, that is repeat purchasing, is so different is the ability to execute the total Sales process.

Sales is not simply getting extracting money from a buyer. It is understanding the total value chain that is required to generate repeat purchasing. The inability to execute against any step along the Sales value chain reduces a company's competitive advantage. In the case of Retailer B, as a consumer would you care about the problems with the international flights or the outsourced freight supplier i.e. the retailers logistics. No, as a customer you would care about making sure the product you have paid for arrives on time. Quite simply the customer expectation is "deliver what is promised"!

It does not take a genius to develop a strategy of selling high volume product at competitive pricing. However it does take great execution to deliver a competitive advantage.