#26 How to Isolate the Effect of Your Strategy and Test its True Impact

Don't even try and work out how much time, effort, money and opportunity we waste by investing in business strategies that don't truly work. Let's instead talk about how exactly we can go about executing our strategies in a way that tests if they're working, by isolating their effect on our desired performance results.

These effect-isolating methods have been around for donkey's years, and they're really quite simple too, but sadly under-used as part of an organisation's or company's strategy execution.

Method 1: Before, During, After.

Time series analysis is the simplest and weakest form of isolating the effect of your strategies on their targeted performance results. Other factors can come into play over time also. But at the very least, it really helps to know what level performance is at before you execute your strategy, regularly throughout the process of executing your strategy, and for some time after it's fully executed.

If you see changes in your performance result that correlate with when you expected to see such changes, and you can rule out other obvious factors, then it's looking like reasonably good news for your strategy.

Method 2: Controlled Experiments.

No, you won't need to go buy a lab coat and pocket protector. Controlled experiments are simply designs for how you execute your strategy, where you execute your strategy in one area, but deliberately not in another area. For example, imagine your strategy is a new marketing campaign to encourage people to recycle more of their domestic rubbish. Your measure is the percentage of tonnes of domestic rubbish that is picked up by recycling rubbish trucks.

With a controlled experiment, you'd divide up your rubbish collection zone into two groups, let loose the marketing campaign in just one of these groups, and track your measure for both groups separately. You're looking for a signficant difference between the two groups after the campaign.

Method 3: Multi-variate Analysis.

You don't need a 4-year degree in statistics to get this - Microsoft Excel is enough for the basics. In its simplest form, multi-variate analysis is a collection of time series graphs you can visually examine to look at correlations and patterns among a range of factors that affect an outcome.

If you have a new strategy to increase sales revenue, like a customer loyalty program that offers discounts for repeat purchases, how will you know it's working? Particularly if economic downturn is affecting your industry, your marketing department is launching a new product, you get some fantastic but unplanned media attention, and you're concerned about several other factors that might confound the impact of your strategy.

If you track and measure that range of factors each month, say - like average industry sales, sales of new product, media mentions/hits, and so on - then you can build a multi-variate analysis using graphs that could highlight the impact of these factors on your outcome: sales revenue.

The Way to Stop Waste

Even if these methods sound like more effort than you're willing to go to, the truth of the matter is that in relation to the effort you'll be putting into executing your strategies, they're a drop in the ocean. And if you don't use some method of isolating and testing the impact of your strategies, you're making like an ostrich and burying your head in the sand rather than face the cold hard fact that your strategies could be a complete waste of time and money.

TAKING ACTION:
What's your next oppotunity to test a strategy to find out if it's truly working or not? Which method could you use to do this?

#25 Five Reasons Executives Support Performance Measurement

There are some very good reasons why managers and executives DO give time and resources to performance measurement. And understanding these reasons is your key to reframing the value that performance measurement can have for the manager or executive who so far has no interest in supporting it.

REASON 1: Strategy is easier to communicate and cascade.

Todd is a CEO of a not-for-profit organisation. And one of the reasons why he supports performance measurement is that it helped him to clearly define what success meant for this organisation. Measuring success makes it far easier to communicate, and have people understand, the organisation's strategy and purpose.

REASON 2: Feeling a sense of control over the destiny of the organisation or company.

Rod is a CEO of a mid-sized company, and in his own words, performance measurement is important to him because he wants to take his company's destiny into his own hands. Measuring and tracking success helps leaders to feel in control - and sleep soundly at night because they know what's going on and how they're addressing it.

REASON 3: Stronger cohesion and clarity among their management team.

Paul is a Managing Director of a mid-sized company, and one of his strongest reasons for supporting (and championing) performance measurement was the power it gave him to build cohesiveness and clarity among his team of General Managers. Developing measures of success together, he saw how easy it was to check the level of shared understanding of goals and priorities, and each of his executive's roles in executing these within their own departments.

REASON 4: Easier for them to manage upwards.

Col is a CEO of a government owned organisation, and one of his reasons for supporting performance measurement in his organisation was that it makes it much easier to give his Board of Directors confidence that the direction is clear, and progress is really being made. Using measures to communicate clear direction and progress is far easier than reacting to every question or concern the Board has, when they have no objective feedback about priorities or progress.

REASON 5: Improving their own career prospects.

Peter, the manager of a procurement department, was able to demonstrate his management capability through achievement of some very aggressive performance targets. He was able to save the organisation $40M in a couple of years, and objectively demonstrate this saving, by diligently measuring and tracking his procurement strategy. This looks great on any manager's resume when they're applying for a senior executive position.

The point is that if you want your manager or executive to support performance measurement, to give time and resources to doing it and doing it well, telling them about Balanced Scorecards or dashboards or mantras like "you can't manage what you don't measure" simply won't work. You must frame the benefits of measuring what matters, which mean something to *them*, rather than trying to sell them the features.

TAKING ACTION:
Which of these reasons do you think would resonate most with your managers and executives? How can you start talking about performance measurement differently, so you're emphasising the benefits they care about, rather than the features you care about?