Holiday week ramblings

Some thoughts on several recent postings to kick off your hoiday week.

(A) Barry suggests Four Questions To Ask When Building Your First Strategy Map:

  1.  What’s the advantage that differentiates us from our competitors?
  2. What are the three most important things we need to measure to drive that advantage?
  3. What are the three most significant gaps or barriers that keep us from leveraging this advantage?
  4. What are the three things we can pursue to close the gaps, overcome the barriers and positively influence our three most important measures?

Good points but I would have liked to have seen a focus on setting strategic objectives, before beginning to measure.

(B) Stuart echos the controversy over SMART objectives by pointing out How Being SMART Isn’t Always the Right Objective.  He believes that SMART fails the what’s-in-it-for-me test and suggest that we look at the problem from a different lens, aka a PRISM.

PRISM is an acronym for Personal, Realistic, Interesting, Specific and Measurable.

I worry that Personal will feel disconnected from the greater good and lead to increased lack of alignment.

(C) Suresh worries about metrics without management and tells how Trent Limited, the retail arm of the Tata Group, used the Balanced Scorecard to sustain dramatic performance increases over long periods of time.

If you want to reap real benefits from BSC, be prepared for the long haul. If you are looking for an organizational “ruler” – an instrument for one-time measurement – maybe you should look elsewhere.

All very interesting but I think that management without measurement can be useful.  Ask Sarasota County.

Better Planning and Budgeting

Over at Intelligent Enterprise, an article entitled “How to Get to Better Planning and Budgeting” provides five questions every finance organization should ask:

  1. Is the planning and budgeting process as strategic as it could be?
  2. Are the budgets as accurate as they should be?
  3. Does your planning really help increase your company’s agility?
  4. Could your process provide deeper insight to more people?
  5. Is the process itself of high quality?

The article is based on a Ventana Research study which finds that “less than half of companies are at a mature strategic or innovative state [of performance management] and 20% at a primitive tactical state”.  As a discipline, we clearly have a long way to go. Not surprisingly, the biggest gaps appear to be around creating a repeatable process and using to support it.

The article also reinforces my long-standing belief that budgeting is not the same thing as planning. In Ventana’s words:

Recognize that planning and budgeting are not the same. While these two activities are related, there are important differences between the two. Planning is about creating a program for action; it’s part of an overall design to achieve specific objectives. Budgeting is about creating a statement of the financial position of an organization for a specific period of time based on estimates of revenues and expenditures. Planning is about things such as activities, people, resources needed and time spent. Budgeting is about money.

And this clincher:

Ventana Research believes that companies spend too much time budgeting and not enough time planning.

My sense is that companies spend more time on budgeting than planning because money is more concrete than objectives. Money is easily counted; not all objectives are quantifiable. As I’ve said on many occasions:

Not everything that counts can be counted, and not every thing that can be counted counts.

All of this is an important reminder that true performance management is still in its infancy.


Are SMART Goals Stupid?

While I don’t know if I’m “Smarter than a Fifth Grader”, I assumed that I was smarter than a goldfish.  But when I read Contrarian Goldfish’s “Smart Goals are Stupid”,  I began to wonder. After all, I wrote about the usefulness of SMART objectives.  So, let’s investigate:

1.    Specific
CG says “you cannot predict the future and you need to be flexible to change course as circumstances change”.
I agree but think that’s missing the point. Objectives are destinations, not paths to get there. If there’s too much traffic on a road, you should be free to try a different street.  And yes, you should have the flexibility to update your objective as execution influences strategy.

2.     Measurable
CG says that the best goals are closely tied to very strong feelings and emotions which you can’t measure.
I think he’s confusing quantitative and qualitative measures.  If you want to know how people feel, ask them.  Surveys can measure lots of things.

3.    Achievable
CG says that “achievable goals will not inspire you, and you will give up because the end result is not motivating enough for you to go the extra mile”.
I say that objectives should have multiple stretch targets over time so that 85% attainment at any given point should be rewarded.

4.    Realistic
CG says “competition is much higher for realistic goals” and that we should stretch for unrealistic ones.
We should definitely set stretch targets (see my comment on Achievable).  However, I think the ‘R’ should be Relevant, as in individual objects should support team and organization objectives.

5.    Time-Bound
CG says “it is more important that you make progress towards your goal each and every day than to set some arbitrary date for achieving your goal”.
Good news.  We agree on one.

Regardless of whether they are SMART or something else, be sure that people understand the objectives before you start measuring them.