In the last post, titled: 5 levels of delegation techniques to be an effective leader, we spoke about ways of delegating and how managing outcomes is crucial to achieving success. Some of you reached out and ask the best techniques to do that. Today, I just pen that down here.
Over the years - through sheer experience, reading books, getting on the wrong side of the results, leading transformation and others - I have come to value of thinking about these things in three large buckets.
These are things the the world cares about and wants to celebrate/crucify and if complete would say you've done a good job! Net Sales, Profitability, Cost Savings, Margins are just examples of KPIs that fall into this bucket. It is anything that happens after an event occurs. A collection of such lagging indicators usually provide a trend to clarify the future.
A very tangible example for the COVID era is # of people who are vaccinated. This is already complete.
Leading indicators give a view into the future. For example, if the order book for a given quarter is great, you can tell with reasonable belief that the sales will be good. Similarly if a given campaign is progressing well with the click thru rate or conversion rate, the campaign ROAS would be good, and if we are producing enough inventory chances are the service levels will be good.
A very tangible example for the COVID era is # of people scheduled for vaccination in a given day.
It gives an indication of how many people are likely to get vaccinated in a given quarter or against a deadline. If you keep an eye on this and act on what it takes to sustain, chances are when the time comes you would meet the goals of your lagging indicator.
Learning indicators are the toughest. These are the ones that tell you what you need to quickly learn along the way. They are underrated, ignored. For example, if you are losing a deal due to pricing consistently, you would want to know that right away so you can course correct the leading indicators. Similarly, if the campaigns are failing because for certain reason, you would want to know that as soon as you can and fix it.
A very tangible example for the COVID era is # of people overbooked or errored out or suffering from allergies post vaccination.
It gives an indication of things that might be working or not working in the process and how do you distort your effort in the direction.
It's a indicator for an indicator
I often get this from people. It is indicator for an indicator for an indicator. If you want to shed 50 pounds, and you don't keep track of how much you are losing every month, and which food + exercise combination gives you the best outcome, then chances are you are not going to shed 50 pounds.
That is a lot of things to look at. In reality - humans do end up looking at this albeit in a painful way. We are just in denial because the amount of cognitive load it takes to pull this together. As you begin to pull this together, you will end up creating a lot of indicators.
The most important thing here is to identify the Primary Indicator.
The Primary Indicator is the one thing (not two/three) that defines success and we can anchor the company around.
It is often a lagging metric at the highest level and a leading metric at the team level. For example, Uber focused relentlessly on # of rides. It was that one differentiation for them! From there on - you can build a hypothesis of # of drivers, # of requests, time lag from booking to beginning a ride, time to complete a ride, # of cancellations, and so on.
As the company becomes big, this primary indicator begins to dilute and thereby the focus. For example - Uber now has both rides and Grocery. The metrics and management of these while conceptually similar are also different. This is when you begin to form lines of business, departments, and others.
Then there are talking points or secondary indicators. These indicators are used for telling the story. We tackled x number of processes, saved y working days etc. In most situations these are confused.
Balancing culture and behavior
Over indexing on value and outcomes can set up a culture with unintended consequences. Yes it is important to achieve the outcomes but it should be built on the right foundations and should be able to scale.
Let's say you are the head of the procurement function - your primary lagging indicator is almost always going to be savings from initiatives. This is what you want your team anchored around. The leading indicators to effectively track this would be expected savings from the pipeline of ideas, expected savings from these ideas, and actual savings.
Technically speaking the above should be fine. But you can get to it by jerking your suppliers, winning in your negotiation at the cost of someone else's' negotiation, and not focus on things like creating spend visibility which are all important for sustained long term success.
Optionally: It is recommended to break the indicators down into three categories:
- Foundations. The one indicator that basically tells you if the right principles and foundations are being adhered to and the recipient is finding value. It manifests as a Net Promoter Score (NPS), Survey outcomes, project deliverables, or adherence to certain non-negotiable things.
- Value. This is the value metric. As much as possible trying to connect the foundations work to the value becomes important. You will intuitively notice that not all foundations contribute to today's work but are much needed for a sustainable tomorrow. It usually manifests as EBITDA, ROAS, Savings, Service Levels, or some other similar business metric that translates into tangible $ value.
- Scale. It is a measure of your ability to create value at scale. Usually this helps you get to the lagging indicator.
It is dizzying...
Yes but you do this every day today just as a frustrating after thought. You can may be use the simple table below. You can simply write down your portion and give it to your team, have them think about it, and give it back to you. Have a team discussion to connect these and get clear!