Measurement drives behaviours

Performance tracking and measurement take on new importance at times of uncertainty – Zoe Bailey, head of strategic operations at Withers & Rogers, offers tips on building effective key performance indicators.

Against a backdrop of uncertainty, rising inflation, a cost-of-living crisis, a war in Europe, fallout from Brexit and further political change domestically, monitoring business progress and effectiveness has become critical to decision-making and longer-term success.

This is something we are acutely aware of at Withers & Rogers and is a key area of focus. Having a range of well-balanced key performance indicators (KPIs) which hold the business to account is not an easy task, but getting it right is a critical tool in helping a firm achieve strategic success.

It is fair to say that a professional services firm’s most valuable asset is its people.  Measuring culture, people engagement and the more emotive metrics, if done well, can be incredibly impactful as a firm navigates change and explores new ways of doing things.

But how can KPIs help?

KPIs can help provide information about how a business is performing against strategic ambitions, milestones and provide an additional lens to help make decisions. Among all the uncertainty, they can provide a checkpoint of certainty – an anchor in somewhat uncharted waters. They can highlight red flags that signify the importance of action and remedial intervention, providing short-, medium- and longer-term checks on business performance.

Where do you start?

A good place to start is by visualising what ‘success’ looks like or by scenario planning.  Scenario planning was big in the 1980s and has had a resurgence in recent years thanks to Covid and other large-scale events which have impacted businesses globally.

Scenario planning is a way to assert control over an uncertain world by identifying assumptions about the future and determining how your business will respond.

There are six helpful steps to scenario planning that can be summarised as:

1. Think about possible future scenarios
2. Identify trends and driving forces that might impact these
3. Create a planning template that captures each scenario
4. Take each scenario and develop the narrative – what might happen? How might it happen?
5. Evaluate the scenario – what is good about the possible outcome? What risks does it present?
6. Apply this thinking to your current strategic aims. Do you need to change, tweak or amend your current priorities based on your thinking?

Now that you have kicked the tyres of your strategy and have a clearly determined path, you need to put checkpoints in place to measure your progress. Imagine you are going on a journey – you plan your route and have a degree of certainty that you have selected the quickest, safest and most expedient way of getting there. You set off but despite your extensive planning, events can take place that mean you have to change course. An accident happens which causes extensive delays, or a tree falls down and blocks the road –  numerous scenarios could unfold, and you need to change course. KPIs, like satellite information, provide that check on your journey to make sure you are making the progress you need and help inform if a change in direction or strategy is required.

Ensuring that KPIs are aligned, relevant, measurable, achievable, timely and visible are also considerations when identifying your internal measurements.

It is also important to be disciplined and report on KPI progress on a regular basis. This reporting becomes the drum beat of your story – it keeps you focused, grounded and ensures you remain truthful. This isn’t about crippling the business with number crunching and data gathering, it is about recognising that KPIs tell a story. Sometimes the measurements may not be as positive as you may like. The questions to ask are – why? And what can, and should we do about it’?

Successful measurement in a business ensures that behaviours are in keeping with the firm’s values and they will drive the successful execution of its strategy.

Beware of the dark side

When determining which KPIs are right for your business, you need to ask yourself, what behaviour will this measurement drive?  It is important that your measurement encourages appropriate action and that you take the time to test that the measurement is having a positive impact on performance. The reason for this is that every KPI has a dark side – the unintended consequence of putting a metric or measurement in the spotlight. When thought through poorly, KPIs can lead to dysfunctional behaviour. The best way to bring this to life is through some examples:

1. If you only measure sales, you will create a sales culture where selling is king, competition is rife and it is the key consideration of everyone working for the business. The stage play “Glengarry Glen Ross” (for the more mature reader) or the film “The Wolf of Wall Street” (for the younger generation) bring this to life perfectly.  It can lead to a very cutthroat and aggressive environment.
2. On the other hand, if you only measure client satisfaction, you are likely to create a culture where client service is the focus, where people go out of their way to help clients regardless of the cost. People may help each other with a common purpose around client care, but it could become extremely costly to a business especially if client care is time consuming.

Having good ‘leading’ indicators (KPIs) is important in driving the right behaviours to support growth. As a firm, Withers & Rogers has a large number of KRIs (key report indicators) – ‘lagging’ indicators which provide a historic understanding around progress. These are important to a business but should also be balanced by ‘leading’ indicators – KPIs. This is an area we have been focussing on more recently and are still working through. A good process to follow for KPIs is:

1. Identify – a set of relevant KPIs to track
2. Create – dashboards or scorecards
3. Evaluate – how well business goals are met based on KPIs
4. Change – strategies and processes as needed to improve performance
5. Assess – whether the KPIs still align with goals and adjust if needed.

McKinsey states that “CEOs who insist on rigorously measuring and managing all cultural elements that drive performance more than double the odds that their strategies will be executed. And over the long term, they deliver triple the total return to shareholders that other companies deliver.”

At Withers & Rogers, we have spent time articulating our purpose, ‘Building Trusting Relationships’. Our purpose underpins everything we do, and it is important that we have leading indicators that help measure our purpose. If we find a way to measure our purpose in its purest sense, our numbers will take care of themselves because we will have people who are happy, who love what they do.  This leads to happy clients and a ‘happy’ level of revenue, growth and profitability. Well, that is the aim.

Parting advice

In wrapping up, it is important to retain an element of consistency when measuring success, don’t let your KRIs or KPIs gather dust. The results and output tell a story which can inform business decisions, not just today, but also in years to come. Make sure you take the time to get your metrics right, listen to what they are telling you and don’t be afraid to change course if they point you in a new direction.