- How Do Some Businesses Succeed in Growing to the Next Level?
How Do Some Businesses Succeed in Growing to the Next Level?
Founder of aQetas, Dr. Paul Howard is an expert on growing a professional services business. In this fascinating podcast, he looks at how measurement can be used to drive success. But, he also argues, at the end of the day “businesses aren’t about numbers – they are about people.”
The most important thing is having a shared vision which is communicated across the company and which is expressed in terms of helping customers. Performance measurement can’t be used as a stick to beat people with or they won’t comply with it.
Used intelligently, measurement is a tool for guiding effort to the areas where it can achieve the most effect. Howard points out how challenging growth is: “If you look at small and medium business, of one million only 4% grow to medium, of that only 4 % grow to large.”
An expanding business has to adopt different ways of management, leadership, structure, process, discipline or it will stall, Howard explains. “You have to focus on what matters. It’s an ‘operational whirlwind’. It is hard to focus on a few things that make a difference.”
“Measurement helps you do that. You have to define success. How do you know you got there?” Howard concludes: “It’s a journey. It’s a relatively long journey, not something you can achieve overnight.”
Paul Howard – The importance of performance measurement
Doug D’Argenio: Welcome to the PS Insights podcast series sponsored by Kimble Applications. Professional services organizations strive for efficiency, success, and growth. This series is intended to provide key insights on how to achieve this from industry leaders.
Steve Brooks: Hello. My name is Steve Brooks and, today, I’m talking to Paul Howard about the importance of performance measurement and scaling up small businesses. Paul is an experienced and successful CXO. A CFO over of Attenda 15 years. He helped grow the IT services company from a start-up to $43 million turnover employing 300 staff.
He is now runs aQetas which offers a performance measurement framework based on best practice aimed to small business owners and investors.
You’ve seen several businesses grow successfully from a small start-up. What can business leaders of today learn from the lessons you have learned?
Paul Howard: One key thing I’ve learned over, as you say several businesses over a few tens of years, is that growth is hard. If you look at the small to midsize business market then you can see that, actually, across well over a million businesses, only 4% of those businesses go from small to medium and, similarly, only 4% of medium size businesses make it up to large.
Whenever you do a business plan, you always draw graphs of the growth of the business up into the right and linear or exponential nature as you’re trying to raise money or whatever you’re doing it for. However, it rarely happens that way and the reality is that the growth curve actually has plateaus. Businesses sort of stall for a while and then get going again. And this is primarily caused by as complexity is introduced into the business. It’s introduced normally by just the addition of people so you may start with a few people who can all chat over a coffee, always know what they’re doing and what they are trying to achieve.
But as you grow to 10 to 50 to 100 and so on, you have to start introducing different ways of management, different ways of leadership. You need to introduce structures and systems and processes and governance and discipline. All things which allow you to scale the business. If you don’t bring them in at the right time, you’ll tend to stall and then when you do, bring them in. You can get going again in terms of the growth of the business.
A lot of my learnings, I guess are, through real practise of this and, actually, hitting plateaus and realising you know what we should have done, such and such, a year ago or two years ago. It really is an amalgam of all that experience and I try to bring it together into a methodology and approach, a framework to help other management teams now grow their businesses in a consistent way. To scale consistently, you need, first of all, a real focus on the things that matter. The one thing that I think, all management teams would recognize is that they are time-poor and they’ve got a million things to do every day. They are dominated by the operational whirlwind as they call it and it’s hard to focus on a few things that make a real difference to executing your strategy and growing your business.
As you get more people, you’ve got to make sure those people are aligned to the business, that they’re engaged, that they understand the strategy that you have so that as they come in to do their day job, they can associate that with what you’re trying to do as a business and contribute to it on a daily basis. As you start small, you’re responsible for everything and it’s not a problem. As you grow, you get more people, you’ve got to delegate. You’ve got to make them accountable and have them understand what accountability means and things to make things happen.
You have to have some sort of execution discipline because, typically, businesses, they’re not short of good ideas, which are the right ones to pick? Then, actually, do they have the discipline to follow through on those good ideas to actually get to the outcomes that they’re trying to achieve before, I always say, some other new shiny thing comes along and so that distracts them to go off on another things.
Steve Brooks: Performance measurement metrics are very important and your strategies are very important, but how do you make sure they’re aligned? Where do you actually start on that journey?
Paul Howard: If you want to concentrate on a few things and performance measurement helps you do that, you have to start with strategy. And the first step always is to say, is your strategy measurable? Because your strategy may be in the heads of the founders or the leadership team. It may be written down in a PowerPoint deck that comes out once a year to be looked at. It may be documented in a lot of detail. You need to actually say, is it measurable? Typical strategy work is you have an offsite. You all go away and you come up with a strategy and it may be some sort of elevate a pitch, positioning statement, lots of different techniques are used.
But so often, they end up being just full of sort of fine words or if you want to be a bit meaner, weasel words. So, you know, “We’re going to be the best. We’re going to be the biggest. We’re going to be more effective.” These are all terms which mean lots of things to lots of people or different things to different people and can be interpreted by different people in different ways.
Steve Brooks: Your definition of a strategy is more about how you’re going to do something rather than what you’re aiming for.
Paul Howard: No, no. It’s about the “what you’re aiming for” but it’s about trying to quantify what you’re aiming for. If you’re going to say, “We want to be the premier professional services business in the UK.” What do you mean by that? Is that the biggest and if you mean the biggest, is it in a market that’s defined or not? You need to be much more specific. You need to say, “No. Actually, we believe that the market size is this and we want 10% share, therefore, we want to be a 50 million turnover business in three year’s time.” If you can put that into your strategy, you actually now know what you’re aiming for.
Steve Brooks: Define the market, define where you want to be and then you can work about how you’re going to get there as well.
Paul Howard: Exactly that because, otherwise, using the example “I want to be the premier.” How do you know you got there? Will you ever have the data to be able to say, “Actually, I have achieved that.” If you say, “No, it’s at this scale,” or “It’s to get this many clients in this region,” you really need to tie it down so that you know what it looks like when you get there.
Steve Brooks: Have you got an example where you’ve seen a company fail to do that?
Paul Howard: An example of a company I’ve worked with relatively recently was one where a strategy was written down but, again, it was in these rather generic terms. It was primarily crafted by the leadership team, they sort of knew what it meant, or they believed they knew what it meant. What was interesting, one of the things that I do to start off or engage with the business is I do an assessment process. I go in and interview the leadership and the management teams.
And actually, when you sat down and talked to the whole team, it was just fascinating what came back because they all roughly aligned, I think, I would say but the priorities they had because they all interpreted the words differently, meant that they were pulling generally in the right direction but there were definitely some conflicts in there and it was because they hadn’t sat down and, actually, been a bit more specific. And what I did with them in that example was take, a say a more generic “We want to be the biggest and the best” into “Well actually, let’s put a time scale on it. Let’s say in the next three years”.
What could that actually mean for you which allowed us to be actually realistic about? We talked about how many clients that they could actually bring on what sort of revenues were achievable. Primary growth was their drive during this phase and we actually managed to get agreement that we’re going to be this big. We actually didn’t define it in terms of revenues. We didn’t define it in terms of number of seats or users that they could have on their SaaS software in this example. It very, very quickly crystallized to actually, they could express their strategies. Actually, we want to have this many uses in three year’s time.
Steve Brooks: You’ve now got things you can measure within your strategy and that’s important. And out of that, no doubt, you start to get key performance measurements and there are lots of terms around key performance measurements and key results measurements. Can you just explain briefly what those terms mean and what actually should be a key performance measurement and what should be a key results measurement?
Paul Howard: Okay. That’s a really good question. I think, what I don’t want us to do is get hung up on definitions and nomenclature because different people can mean different things. But, I think, it’s all about the principles and the principles I’ll go through now. First of all, the term key performance indicator or KPI. Unfortunately, it’s hugely misused. People use it all the time to, basically, talk about almost any data that’s captured in a business.
The key sort of in the first word, key metric, well everything can’t be key. You’ve got to have some level of differentiation there. There’s a guy called David Parmenter who is a leading writer on performance measurement and he’s quite clear in what he thinks these different measurements are. He’d say there are … First of all, there are metrics or measures and as a business, it’s pretty easy to quickly get up to probably hundreds of different things that you can measure at different places or different levels within the business and they all could be useful to you at different points in time. However, his rule of thumb would be if you had a hundred measurements or metrics then probably 20 of them, or 20% are key measures.
He then differentiates very clearly and, this is very important between a key performance measure or indicator which is either current or looking to the future and the key results measure which is, in effect, looking backwards. This is the second sort of big misuse of the terms and that most people spent most of their time in the rear-view mirror. They’re looking at key results.
If you’re looking at the profit you just received, if you’re reviewing your P&L or you’re looking at the sales number that you achieved in the last quarter, it may give you some insight and some information you can use but it’s all past. What you want to be doing is concentrating on things you can influence and change in the future and key performance indicators are all about the future. They’re not only though about the future. There’ve got to be things that you can change and growth is about change and the execution of change.
So, you’ve got to be looking at things that actually can be measured frequently. Got to be looking at things that are team and processed-based. There’s no good having a key performance measure which is down to one individual and one individual alone. You want teams buying into improving things which will then move the dial around the performance measure. They’ve got to be simple and powerful. They can’t be so complicated and difficult to understand that all that ever happens is people argue about the provenance of the data and the actual number itself rather than it’s a number that’s trying to tell you something and the key is you want to understand what it’s telling you and do something about it.
Steve Brooks: In professional services, what would you say some of the best key metrics to have?
Paul Howard: For a professional services firm, a good example of a key performance indicator would be unbilled days. In a project environment and environment where utilization of your staff is critical to both project performance and on profitability of the business. Unbilled days actually can have a real drag on the performance of the business and it can be because of not billing the client, just literally not billing them for some of the things you should have done, doing things that you shouldn’t be doing and, therefore, not being able to bill it. That’s such time that you can’t bill the client. Or it could be, actually, you’re doing free things to the client.
The classic example way, you’re just trying to keep a client happy so you start doing stuff that’s extra to what you should be doing and you don’t feel that you can bill them. All of those things mean that actually your project profitability is going to suffer but it’s something that you can influence. So if you go back to what are the key things about a key performance indicator, it’s something that you can influence in the future. It’s something that you actually need to measure frequently and discuss as a team frequently. So, actually try and eradicate it. It’s very much team-based and it’s something that you can measure at the team level not at a micro level but it’s also something you can level at a macro level in the business as well so what’s your overall performance.
And because you can measure it at the team level, you can have the teams working to actually say, “How do we eradicate or reduce the amount of unbilled days that we have on the project we’re working on? The set of portfolio projects we’re working on and so on.”
Steve Brooks: How important are trends? It’s not necessarily just about target figure. It’s about the rate of change as well, isn’t it?
Paul Howard: It is. First of all, if you’ve got a measure, if you’re actually going to do anything with it, you’re right, you have to set a target. If that target is its going to double in two years, let’s say, for example, along the way, you need to say, “What does that mean? It’s got a lot like in a year. What’s it going to look like in six months and so on?” So, you need to have a trend for the target itself so you say, “Now, we’re three months and where are we against? Not the target but actually where are we against where we said we’d be at this point in time?”
It depends what the metric is and how frequently it is changing. But ideally, it could be: “We want to double our productivity in two years but to achieve that. We’re going to be three initiatives and, in each initiative, actually, this first one is going to be six months. It’s going to contribute 20% of that change and because it’s going to do that I know that on a monthly basis my numbers got to improve in this way and then on a weekly basis, you can be tracking.” Well, is it happening? Is that trajectory in the right direction? Because it’s not enough to say, “Well actually you know what, what you got is not about knowing I’m in the right place today, it’s where am I going to be tomorrow or a few weeks time.”
And if as you look at the numbers and look at the trajectory, if you can see, Yeah, I’m okay now but, actually, this trajectory says I’m going to miss by 50%. If I keep this trajectory going, the data is telling you I need to be doing something different here, because I can’t keep doing what I’m doing. The point about looking on a regular, frequent basis is not just to look at the number today but to be continually projecting where that’s going to take you as well as the change we’re introducing going to have the impact we want it to? Or does it look like it isn’t, if it isn’t you got to understand what the measure is telling you then understand why that’s happening and then actually have an action plan to do something about it.
Steve Brooks: If, for example, your rate of change is slowing, you need to be conscious of that fact because, actually, you may find that although you look like you’re on track, your projection now is actually going to miss your target in six months, a year’s time because your rate of change is slowing.
Paul Howard: Yes, that’s right. There’s a fair bit of preparatory work that’s needed to make sure that the initiative that you’re implementing is going to deliver the amount of change that you actually want it to do in the first place. Too often, you see good ideas. Let’s do this because it’s going to make a difference. If you don’t sit and work it, actually, how much difference is this going to make? An awful lot of effort can be put into initiatives that actually never deliver what was the desired outcome in the first place.
Steve Brooks: How do you actually make sure that what you’re doing achieves the results? How do you actually execute successfully?
Paul Howard: I think, one of the key thing is once you’ve got a measurable strategy is actually to establish what I call a line of sight between strategy and operations because it is operational change that delivers the strategic outcomes you’re trying to achieve and that requires you to understand the cause and effect. If your strategic outcome, say, was to improve your productivity two-fold in three years. I got to actually do what I call a performance cascade and map that down into the operational side of the business.
This is actually how you engage the people in the process because it’s all right. A leadership team standing and saying, “Yep, we’re going to double productivity in two years.” Immediately, some people are going to go, “What does that mean to me?” Hopefully, they’re going to say, “How do I contribute to that?” They may be saying, “Well, that sounds bad for me,” but actually you need to engage them. You engage them by being able to translate that outcome which may be in terms of productivity or profit or something like that, into what does it mean to these guys at the workface?
You do that by just breaking down from that strategic outcome to, “What would that mean in terms of process and in terms of the activity that the guys execute on a daily basis?” Could be actually, “You know what? we can’t keep doing things the way we do it, we need to introduce automation which will free up more of our time so we could be doing other things.” And actually, get them to think about, “What are things I’m going to measure? What are the initiatives I’m going to take to actually change what I do?” Actually, if all the teams are doing that, that aggregates up and you get the outcome that you’re trying to achieve on a strategic basis.
Steve Brooks: If I’m a consultant in a small business and the leadership comes out with these grand strategic plans. Where have you seen it really communicated effectively?
Paul Howard: Let me start by saying the things that you shouldn’t be doing and the things that you too often do see, in fact. A classic one is that people talk about revenue and profit. While the ultimate goal there is value creation and growth, typically, and I’ve done it myself and learned from bitter experience. If a CFO stands up and starts talking numbers at a bunch of IT professionals, for example, you will see them glazed over pretty quickly. But if you can actually articulate what you’re trying to achieve in terms of what they do and how they need to improve the processes that they work on then things come alive.
Typically, KPIs are non-financial. They’re things that are process-related. We all know as an example that customer satisfaction is key. If you’re trying to improve your growth, you want to reduce your churn and if you want to reduce your churn apply customer satisfaction, how do people contribute to that? Typically, if you start talking about the customers and helping the customers, staff are much happier about that.
If you can articulate your strategy and talk about the measures that are around customer satisfaction, about improving and making your life better so you can have more value to the customer, things start to come alive. It’s a few things like that, that actually engage people and get them motivated and, ultimately, one of the key things you’re trying to unleash here is discretionary effort. If you can get to there with your staff then actually the company will be really cooking in terms of how it grows.
Steve Brooks: You’ve talked about taking that 20% of your metrics as being probably key, not the full 100%. How do you choose which ones are best?
Paul Howard: You’re looking for the ones that will engage people. You’re looking for the ones where you get the most leverage. Because, again, there are many, many measures and people have lots of good ideas about how to improve things but you could put an awful lot effort into an area for a relatively small return. By creating this performance cascade, you can actually start to understand. You know what, if I change something by 10% here, the impact in the strategic outcome I’m trying to achieve is, let’s say, 1% is an example. Maybe an example from the IT services business that I was involved in for many years would be something that I called time to value.
This would resonate with a professional services business as well because it’s basically about the length of a project. In IT managed services, you would typically have a deployment project to put an infrastructure in place and then you get into your recurring service which then runs from then on. Time to value is very simply, how long it takes you to get that service up and running for the client. The client wants time to value to be as sort as possible because they get the service and can actually use it to execute on their business.
You wanted to be as short as possible because you want to get to your recurring revenue stream quicker so it improves your revenue. Time to value actually is measured from sort of a time when a sales guy comes in, “I’ve won the deal.” to you actually being live for service but if you think about that, think about who contributes to that and how can you actually shorten that. If your target is lets shorten than that period by 10%. A good example would be everybody thinks well that’s sort of that engineers building servers doing design, testing the systems and so on.
Actually, the very first thing is getting a contract signed. And in IT managed services, that can be quite complicated. Typically, you’ll often hear people say “well, a contract takes as long as it takes to get signed.”
Steve Brooks: How important is cost to sale then?
Paul Howard: For me, that’s really, really important. You can spend many cycles getting a contract signed. With lawyers just batting stuff backwards and forwards and just telling the business it will take as long as it will take. It’s complicated. What you hoped was two weeks can become four weeks or five weeks or whatever. What we did in that case, we said, we actually, we’re going to set a rules. We will give it two weeks and if things aren’t looking like they’re going to close, we will sit down with the senior people in both businesses. We’ll sit down and say we want to get the lawyers in the room. We’re going to lock everybody in that room until we’ve done it.
More often than not, that actually had the desired effect and took on something that was a typical three months’ cycle actually we’re saying two to three weeks in that cycle. It was an indirect team, not a direct team in your business actually contributing significantly to the value added.
Steve Brooks: You’ve talked about having a strategy, having a measurable strategy and you’ve talked about the different key performance measurements and metrics you can use within an organization. How does the business leader actually start? How do you translate this kind of theoretical stuff we’ve talked about and actually go and do it?
Paul Howard: That’s a very good question because a lot of what we’ve talked about so far is sort of theoretical really. Its really you can have a paper strategy. You can identify things you’re going to measure, but like anything, it’s all about execution or execution, execution, execution. And how do you make that happen? I think, if you’ve got a measurable strategy, if you come up with key initiatives that you want to make that strategy happen. So, how do you actually execute on those initiatives?
A key part of that is cadence. Actually, getting on and doing stuff and doing stuff to or getting a rhythm in the business that drives execution. Often, businesses, you know, they come up with a bunch of things they’re going to do and they set off with great enthusiasm and passion but after a month or so when it’s maybe a bit harder than they thought or isn’t happening in the way they wanted or, actually, you know what, that operational whirlwind came back and distracted them. They find they’re not making the progress. They lose heart and the initiative sort of languish a bit.
What you’ve got to do is have a disciple and a cadence to actually stick at it. Ways to do that is that you need to introduce a cadence, you need to have regular get-togethers, regular meetings that are not just chats about how things are going but are very focused and very driven. If you got a set of measures that you’re capturing then, when you have a meeting to review where you’re at on a weekly basis, there’s got to be a dashboard with the numbers on it beforehand. You’ve got to have an owner of the metrics. That owner’s got to be able to talk about, “Well this is where it is.”
A little earlier, I talked about what is it “Why is it what it is ?” and then “What do you do now?”. And that’s a real sort of like a mantra for the meeting. This is what the measure, this is where it’s at. This is where it is compared to where it’s meant to be. If it’s even ahead or behind, why is it? Let’s have a discussion about the cause and effect, why is it better or why is it worse? If it’s worse, is it worse by an amount that we should be doing something about it or we’re actually happy with the trend. If we’re happy with the trend, let’s keep going. If we’re not, what actions are we going to take now, to actually mean that in a week’s time or two weeks’ time as we talk about this again, we’ve actually corrected that trajectory of what we’re doing.
And by having the frequency of the meetings relating to the frequency of the change that you want to introduce, you get everybody focused and they should be, “What are the measures telling us? How do we interpret that? What are we going to do about it?” Nothing else. That’s what the meeting should be about. There should be a set of actions come out of that and then next week, you do the same thing. And that creates this cadence and a momentum behind what you’re trying to achieve. And if somebody has a problem, they should come to that meeting going, “Yeah, we’re off target. This is what I’d like to do. Can the team help me do this?” And then everybody gets very focused on execution.
Steve Brooks: Who should own the metrics because some metrics are, obviously, cross discipline.
Paul Howard: You’re absolutely right. And I say, typically, a good KPI will be cross disciple and impact multiple teams. You have to have one owner who is responsible to make sure that measurements are being taken, that dashboards are populated, that there’s an agenda to follow in a meeting. Because if you don’t do that, you potentially get people being able to sort of point in different directions and say, “Not me, not my problem”. So, you need one owner of the metric but that doesn’t mean they’re responsible for the execution of all the things that are contributing to improving that metric.
Steve Brooks: Who should own the metric in terms of level of person within the organization? Should it always be the CEO? Should it always be the CFO? Should it be the sales manager? How do balance who owns which metric?
Paul Howard: I would say that the CX team shouldn’t own any of the KPIs because the KPIs are happening at a lower level in the business and they’re been influenced by teams whether it’s a project team or a sales team or a service management team. But it should be lower down in the business because they’re the guys who can influence that metric. And actually, are the guys executing the projects influence that metric.
The CEO cares that, that metric is being achieved. Because he knows that if that one is being done and two others are being done, the outcome that they’re going to get up at the strategic level is going to be what he wants. And he will be looking at the results indicator up the top level and he will be paying very keen attention on those metrics and trying to help those guys achieve them. But the ownership has to be where the change can be executed.
Steve Brooks: You mentioned about getting the reports out. You need data to get reports and you need a system to get reports out. What do you expect from a system to deliver that kind of information?
Paul Howard: It’s ultimately very important that you have as much automation as possible. If the mechanism of data capture is lots of guys recording numbers in spreadsheets and then aggregating lots of spreadsheets, it’s ultimately a real drain on a number of people in the business and also is very difficult to make it happen in a timely fashion. Ideally, the systems that you use will capture the data that you need so if it’s a professional services business, people have got to be time-tracking. Information has got to be aggregated at project level, at corporate level and so on.
If you’ve got project-based data that you can aggregate and you can actually create the KPIs within the systems rather than coming out of the systems and recording them in spreadsheets, that becomes much more powerful. If you can then make sure you can enter targets in systems so you can compare actual numbers against targets, you’ve then got the basis of creating some sort of dashboard which you can then use. What you don’t want is the day before the weekly meeting, the guy responsible for the metric has to spend two hours, transposing a load of numbers on to a spreadsheet, it’s got to be in the system and available so everybody can see it. That then means there’s no argument about provenance of data.
Too often, you see people spend the whole meeting debating or almost filibustering to avoid taking action by debating the numbers rather than actually saying, “No, they are what they are. Now, let’s spend the time getting some insight and some action on the back of it.”
Steve Brooks: How involved should the team be within defining that strategy? Can you give me an example of where a leadership team manages to communicate not just once but continuously and effectively to their team?
Paul Howard: We talked about cadence of meetings which are trying to drive change around key performance indicators. There’s also a need for a cadence of meetings and communications around strategy. Too often, you see there being some offsite that comes up with a PowerPoint deck which is launched at the beginning of the year. “This is the 2017 plan, guys.” And then, actually, is never seen again and not necessarily referred to again until, guess what, we’re planning 2018. Effective communication actually says no, this is our strategy. These are the four initiatives that we’re going to execute this strategy this year and there is regular communication.
And it’s not just we’ll have a quarterly company meeting and give people an update. It needs to be part of almost the DNA of the business. So, everything is geared, all the meetings the business has, are geared back to the fact these are four important things we’re trying to achieve this year. And actually, you want to be challenging the business. Say, if what you’re doing isn’t helping, these things happen, what the hell are you doing it for?
Steve Brooks: Where have you seen this communication about strategy done effectively? Can you give me an example?
Paul Howard: Yes, I can. As I said, what it shouldn’t be is a company launched at the beginning of the year and then maybe a quarterly meeting update because that just doesn’t get the urgency and the cadence we’re talking about across. A far more effective way that I’ve seen work is what is often called beer o’clock in a business way. Actually, not just the CEO but members of the leadership team in effect on a rotational basis, standing up at the end of every week on a Friday at 4:00. And in the case of this in a big open plan office, the way it worked was actually standing on a desk and getting everybody gathered around with the beer or the smoothie or whatever it was.
Then just saying, actually, everybody, come away from your desks. We’re just going to gather around for 10 minutes to communicate actually a number of different things but always making sure that some of the messaging around the strategy and the key initiatives that were trying to be achieved were communicated. It wasn’t via graphs, it wasn’t formal presentations. It was actually a sheet of paper at best and people took turns. It gave a message that all the leadership were on the same page. They’re all focusing on the same things to be doing. It just gave you snippets. Again, it wasn’t at all formal. It was informal but it got people knowing what was going on instead of waiting for those more formal quarterly sessions.
Steve Brooks: That links into the importance of culture and that’s clearly a cultural decision the leadership made. How important is the culture in this kind of performance?
Paul Howard: It’s absolutely everything here. There’s a quote from a guy called Dean Spitzer who wrote a book about transforming business through performance measurement. And he said that, even though performance measurement uses numbers, it’s not about numbers. It’s actually about perception and insight and action which are all soft things they’re people things. And the reality is that unless you have the people engaged, unless people see performance measurement as an effect, as a force for the good, then you’re not actually going to achieve what you want to try to achieve in terms of strategic execution.
It starts absolutely at the top and the first thing I do when I go in and do an assessment in the business is. I interview the CEO, I interview the leadership team. You pretty quickly know from a few chats whether or not the business is actually up for it. And to be honest, if they’re not. If they’re not open to the idea of performance measurement and actually committed to introducing change into the business then actually it’s a waste of time. You’re not going to achieve anything.
It’s all led from the top. The CEO, the leadership of the business have to show that they’re committed and as we all know, action speaks far a lot than words and it doesn’t take much if a CEO doesn’t attend the meeting, doesn’t back up the fact that change is trying to be introduced and this number is the most important thing that if, say, actually, you say these are the three key strategic projects for the year and then they immediately introduce something new which derails the other things. That sort of behavior immediate de-powers what you’re trying to do as a business. So, it starts from the top. The culture as you say the people have got to want to use performance measurement.
Too often, the thing that is used against people, not with or for people. You measure metrics and you measure process, you measure in ways of improving process, you’re not measuring the individual. As soon as the individual thinks that’s what’s happening then they will be skeptical at the very least. And actually, quite often, can become fearful and afraid of their jobs if they think this number’s not here, I’m going to be kicked out of the business. There’s another quote, W. Edwards Deming said, “Performance measurement without the opportunity to improve is harassment.” I just really like that because it’s absolutely right. It really is. If it’s used as a stick to beat people with then it has actually the opposite effect of what you want. If it’s a way to get people to understand better to engage more, to contribute, then actually it’s a cause for the good.
Steve Brooks: How involved should the team be within defining that strategy? Can you give me an example of where a leadership team manages to communicate not just once but continuously and effectively to their team?
Steve Brooks: We’ve talked about a number of different things we talked about performance measurement is actually a very broad subject and covers many things. I think, what it is, it can give you a framework in which to drive focus so that you’re focusing only the few things you really need to be doing. It allows you to engage and align the people in the business to what you’re trying to achieve. It helps make people accountable. If we all agree these are the numbers and the number are telling us something then we’ve all going to face up to that and deal with it.
It introduces or it can introduce an execution discipline which you have got to establish and maintain to make sure you complete what you’ve started. I guess, I’d also say it’s a journey. It’s a relatively long journey. If you don’t use performance measurement across a business, it’s not a quick fix. It’s not something you can introduce overnight. You need to get people involved, get that strategy measurable, get people engaged in understanding the measures that matter to what they can affect within the business. And then, actually, get that introduced and get that cadence and discipline introduced into the business. It’s a journey but it’s one that if you embark on it and stick at it, you actually have the framework which allows you to sustainably grow your business.
Steve Brooks: Is there a first step a CEO listening to this should take on that journey?
Paul Howard: I think, it is. Actually, that first question, is my strategy measurable, do I know what success looks like, do I actually think all the people in my business do too?
Steve Brooks: Thank you very much, Paul.
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