In our last post we considered the importance of defining corrective actions for each business metric: a business process with the specific goal of reversing sub-optimal performance trends, and triggering these corrective workflows by setting metric trigger points which identify an acceptable range of behaviors associated with the metric. These insights identify two key design components of a well-defined metric: trigger points and corrective actions. What are the other components of a world-class metric design?
To define the ideal design for a metric, we must keep its purpose in mind: to drive a business toward optimal performance. What else do we need in a metric definition to enable an enterprise to reach its full potential?
Firstly, a clear description of the metric, its purpose and scope, and its value to the business, should be documented. This should include any business scenarios where the metric is particularly relevant, how the metric is to be understood and interpreted, clear definitions of any special terms used in defining or describing the metric design or intent, why the current metric trigger points are understood to define acceptable business behavior and how these were determined, and how the metric is correlated with other metrics in the metric hierarchy.
Further, each metric requires a formula, or rule of some kind to translate the underlying system behavior the metric is designed to monitor into an objective measure of system performance that can be used to evaluate how well the business is achieving its goals. This formula is normally mathematical in nature, where the metric value and trigger points are numerical, but this need not be the case. Whatever the method for calculating the metric value, to be most effective it must be clearly documented, understood, and agreed to by all stakeholders. This includes the data sources for populating all of the variables in the formula, who is responsible for maintaining this data, and how frequently this data must be refreshed. When there are debates about the correct formula or data sources, these discussions and the resulting decisions should be captured for reference. Documenting this information removes ambiguity and uncertainty related to interpreting the metric and acting on it, which is especially essential when behaviors are evaluated and corrective actions are taken based on the metric.
The business roles and relationships tied to the metric should also be clearly documented and understood, including who is Responsible, Accountable, Consulted and Informed in the execution of corrective actions, and any business consequences for prolonged or significant non-compliance with related business processes. In addition, documenting the history of the evolution of the metric definition, past metric trends, any issues or problems and how they were addressed, why certain enhancements were made by whom and why, all serve to explain and justify current business practices and provide guidance for future deliberations in continuous improvement initiatives.
Finally, the technical details of how the metric is reported should be documented: what is needed in the metric report(s), who interprets the reports, what business decisions are made from them, and how/why these required features enable related business processes and add value to the business. Historical changes to report content and layout should be documented to capture enhancement motivations and prevent regressing back to less optimal states.
Clearly documenting all of this information for each metric, where all stakeholders can easily refer to it as needed, facilitates process adoption and compliance, and enables stakeholders to make knowledgeable, informed recommendations for continuous improvement. The completeness and accessibility of this documentation is a key enabler in driving the business to realize its full potential, and is particularly important in dynamic environments where continuous improvement initiatives require frequent modifications to hierarchical relationships, trigger points, formula(e), data sources, and / or the terminology related to each metric.
In our next post, we’ll consider a world-class metrics maturity model, to help us understand the current state of a metric system, which will help us take steps toward improving it.