Targets and Measures

27 August 2008

My recent thoughts on Agile EVA has set me thinking generally about agile measures and targets. There is a growing recognition that inappropriate targets are often counterproductive and distort an organisation’s behaviour in directions that are against the interests of the organisation’s customers.

If we define a measure as a quantitative piece of corporate information, usually trended over time, and target as a quantitative goal for which a business or organisation aims to reach, then the rule of thumb is: set your measures carefully, but set your targets more carefully still.

Using the wrong measure will either waste time or distort the picture you’re trying to produce. In either case, the result is not usually catastrophic. However, setting the wrong target may result in your organisation moving in the wrong strategic direction; for example a target of a 20% increase in sales may result in salespeople chasing any sale irrespective of whether the organisation can deliver or not.

In my view, the correct approach is to first set your target, but base it on an improvement to a customer product or service as perceived by the customer. Note that corporate targets such as a 10% increase in profit – an entirely laudable target for shareholders – should also be accompanied by a customer-focussed target, such as to improve delivery time. Second, set a small number of measures on those internal processes that directly support the target and time-box a change initiative around improvement of the measures. Then confirm that the external target has improved as well. If the target has not been met, but is moving the right direction, then iterate the process. If the target has not improved, then select another process to improve (with its own set of measures).

Not sure how to start? Make a small but measureable change – and see if the target is heading the right direction. If so, iterate; if not, make a small but measureable change in another business area and check the target again.

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