Measuring Success: Evaluating Company Strategy With Performance Metrics

We talk a lot on this blog about how to create a successful strategic plan—after all, companies with clearly defined and documented plans grow 30% faster. But how do you know if your plan is successful? This can often be where strategy falls apart. As a recent article in Harvard Business Review highlighted, “…organizations in all sectors struggle to match their strategy design with their performance measurement.”

To be fair, it’s not as though strategic plans are created with zero effort to quantify their success. In our experience, every company uses at least some performance measurement metrics. However, these are often limited in scope or not quite right to adequately assess progress. As PWC’s Strategy& highlights, there are common challenges that persist in companies regardless of size or industry. These include, “a lack of clear linkage between strategic objectives and operational performance measures, limited accountability for outcomes at the operational level, an unmanageable number of sometimes random metrics, fragmented and redundant systems and efforts, and a greater focus on metric analysis than on management decision making.”

Because every organization views itself as unique, it’s hard to prescribe one universal framework for performance measurement. Just as there are common challenges, however, there are practices that work well for any company.

What comes first, the output or the outcome?

Think of organizational output as the result of work we each do to complete activities, when combined with the efforts of all of our colleagues we can aggregate and calculate this output for the entire enterprise. We do this work to achieve an outcome, which can be quantified and measured, this is often a strategic (or key) indicator of performance (a KPI, often referred to as a metric). However, do we alter the work we do, our output, to deliver the desired outcomes, or do we define our outcome metrics based on the work we know we need to complete? The answer is both, interestingly it changes at different levels of the strategic plan. However compounding this dilemma further, have we associated the correct outcome metric for the activity and vice versa? This can be very challenging as it will be different for each company and the market they serve. It’s important that these metrics and activities are selected thoughtfully, as they will dictate the efforts of your entire team and we don’t want to expend resources to achieve an unrelated outcome.

As a start, work to ensure each metric ties back to a high-level specific strategic activity (let’s call that activity an “objective”) – or more than one. This is beneficial across departments, as finance, marketing, sales, operations and more can have clear insights into how the result of their work will be measured against the objective. Keep it simple, though. Too many metrics feel confusing and impossible to achieve. Focus on those that will have the clearest and greatest outcome. 

Make sure the data that feeds your strategic objectives is up to date. This can take the form of regular communications, scorecards, or – a favorite method at StrategyBlocks – visual dashboards that make it easy to see the latest updates at a glance. 

Focus on the results experienced by your stakeholders

As Graham Kenny points out in his article, one of the most effective ways to organize metrics is to start by evaluating the experience of your key stakeholders. One example he gives is of a nonprofit organization focused on helping individuals with autism and their families. At first, the organization designed performance metrics around key issues, such as budget or hiring. However, when they reevaluated their metrics and designed them around key stakeholders instead – people with autism and their families, government, donors and supporters and staff – the path to what success should look like suddenly became much more clear. For example, the organization recognized they wanted to offer more innovative services to clients and, to do so, needed to attract top clinical talent. One tangible and manageable performance metric they created was around increasing applications from qualified psychologists.

Once you properly identify and understand your stakeholders, it becomes much easier to find the path toward outcomes. Outcomes are a fantastic way to measure performance and help companies get out of the too-easy-to-fall-into trap of focusing on processes. Speaking directly to stakeholders to find out what they most need will help make outcomes crystal clear, and from there it’s a much easier exercise to create a standard of performance measurement. Bonus: it can often lead to discovering new metrics you may never have considered!

Remember, strategic execution is a process

Rome wasn’t built in a day, and no strategic plan hits on every cylinder right from the start. Especially in today’s business climate, change is ever-present, and so every strategic plan must come with a healthy dose of agility and a willingness to be disrupted.

Just as the implementation of a strategy should never be thought of as a one-off event, measurement isn’t a one-and-done activity. Don’t be afraid to reevaluate your performance measurement and adjust as needed – it should improve and become more precise over time. As in any process, involve your team members and take feedback from multiple levels of the organization. When individuals see the value and results of a strong measurement program, the incentive to meet agreed metrics increases.

Finally, keep in  mind that while performance measurement is a key element of successful strategic execution, it is impossible to create meaningful measurement from a poorly designed strategy. Start with solid planning and then create the framework to succeed. Let us help you each step of the way – reach out for a free consultation today.