Metrics Part 2: Framing Decisions with Metrics and Three Free Metrics
By Hillel Glazer, TCV Growth Partner -
Metrics aren’t trivial and there’s no discussion about performance without them. Likewise, there’s no discussion about operations without performance. So just like the transitive property of mathematics (A=B, B=C, then A=C), there’s no discussion about operations without metrics. Since we already agree that metrics are critical, one would think that all business leaders know—
why they’re needed,
how to identify the right metrics,
how to get them,
how to use them, and
what to do with them
One would think that, but clearly, given how rarely metrics do well at what they’re needed to do, how often metrics are just lip service, and how regularly metrics go terribly awry, many of us are disappointed by the reality. It’s no wonder that wiring up an operation for metrics is rarely done well.
That’s how part 1 started. So now you either remember what was in part 1, or you know that you might want to go back and catch up, or better yet, you have enough to keep reading part 2.
Part 1 promised that this part will frame metrics-based decisions and hand you three metrics every business on the planet can start with. But why is a series on metrics veering off into decision-making? Because in Part 1 we established that the sole purpose of metrics is to make decisions. Otherwise, what’s the point? So let’s get on with the framing.
Have a formal process
Does every decision need an elaborate decision-making process? Of course not. Does every combination and permutation of decisions need their own decision-making processes? Also, of course not. The formalized process for making decisions is not a unique process for every for every conceivable fork in the road. It’s just an overall meta-process that is adapted to any kind of decision.
I’d wager that between using major decisions with a formalized process (on one hand) and winging it (on the other), not too many operations have a problem with over-using formalized decision making processes. Having said that, such processes are critical. Having them is not an anchor to slow down an operation—and yet I’ve sat in on a meeting that involved over a dozen high-salaried professionals and ultimately probably “cost” about $15,000 in lost productivity. All in order to make a make-buy decision that weighed two solutions against each other. One cost $1,000, was proven to work, and could be bought and used immediately, while the other would cost tens of thousands of dollars, might not fill the need, and would takes months to implement. Their formalized process failed to set a threshold for when to use it.
Meanwhile many of us have been party to (or victims of) very rash decisions that maybe only looked “rash” in hindsight while sifting through the crater and ashes of the outcomes. You know, the stuff of Harvard Business Review cases and lawsuits. That’s the key to the formalized process: it must have some triggering mechanism. Both to try to ensure it’s used but also to keep it from overreach.
Set Triggers and Thresholds
When should the formalized process be used? Is it when there’s a particular cost or time component? What about risk? How about some quantification of “unknowns”? Is it always economics? Net present value? How can there be a single process (such as I’m proposing) that covers all these possible pathways?
One way is to merely combine them. Usually in some sort of matrix. However, one condition always presents itself and isn’t dependent on any one attribute. Ir-reversibility.
Does the decision-maker have the authority, accountability, information, and resources to reverse the decision within the purview of the job, within the timeframe available without impaction the timing of the work? When the answer is “no”, the formalized decision-making process is strongly recommended.
Know What You’re Comparing
In addition to the obvious—features, attributes, cost, time, etc.—be clear about what you’re deciding. In the thick of it, it’s often easy to loose sight of or inadvertently shift from the decision at hand. Like, the decision about which movie to watch morphs into where to get dinner while it’s right after lunch on Sunday and you’re looking at lazily filling the early afternoon.
But in order to compare anything, your comparisons ought to be anchored to specific criteria. And, you want to rank (or weigh) the criteria so that you can more easily ensure you’re not sinking the right approach on account of something nice to have but not critical. Criteria also helps squeeze out bias among the decision-makers.
Put a Little Time into Looking Around
This is especially important when parties to the decision come to the table angling for a particular outcome. With defined criteria and alternatives to compare, the remaining evaluation has a better shot at being accepted. So find as many possible solutions to compare. Often adding “doing nothing”, “wait longer”, or “eliminate the question” are very valid options often not used.
The disastrous $15,000:$1,000 decision described above was at least saved by the fact that the evaluation criteria were objective and widely accepted. The person who brought the fork to the table wanted the “big” solution to win and thankfully lost the argument. Further, that about half a dozen options were included made the results more acceptable after being able to validate the important attributes from the less meaningful ones.
Lay Out the How
It’s one thing to do a paper study. Very often that’s not enough. Some decisions really are “I’ll know it when I see it.” So… make it visible. There are times when taking more than one path just a little bit down the way is more informative, reduces more risk, costs less, and gets more clarity than days or weeks of deliberations. Piloting different options or taking different options for a “test drive” could be the way to go.
Sometimes the only way to get objective input to an evaluation is to divide and conquer. Whether that’s having different people working on different parts of the decision, running the decision process in parallel with different groups, creating focus groups, or bringing in entirely uninvolved people to take part, you may find that the original group sitting around looking at words aren’t moving you forward.
Even when something as ‘drastic’ as actually trying several alternatives isn’t needed, you do need to lay out how you will “shake and bake” the criteria and generate the values on which the decision will ultimately be made.
The above steps are the entirety of the framework. Anyone is welcome to make them more comprehensive, but not less. Some ways to add some rigor are to predefine roles—both in terms of roles within the decision process as well as different templates for recurring decisions, often based on roles.
Even after this simple framework many businesses still ask—often exasperatedly—something along the lines of “where do we start?!”
So here come the three “free” measures to start with. Why are they “free”? Not because you’re not paying to read this. But because they’re ubiquitous. You already have them and you barely—if at all—have to lift a finger to get them:
Many of you have heard of Deming’s “TQM” (Total Quality Management). No one need look any further for “starter metrics” than the “TQM” germane to this discussion. Stop. Do not pass “Go.” Do not collect $200. Do not measure anything else if you aren’t already measuring time, quality, and money. All three. Not just money.
But what about time are we measuring? What aspect of quality? What else about money?
That’s Part 3. See you there.
But if you can’t wait, hit me up at firstname.lastname@example.org.