How does one strike the right balance between setting strategy and driving tactics? An interview with a business leader shows how dashboards were implemented at his company in order to make the connection between execution and strategies.
“A strategy is only as good as the action it inspires. I first really understood strategy when I could visualize the connection to execution, using dashboards.
— Business leader of a large European medical device company
The higher one rises in an organization, the easier it is to become detached from the day-to-day action. Often, business leaders lose the pulse of the business, which limits their ability to help improve operational performance. As the saying goes, “If you fly high enough (above the clouds) the sky is always blue!” But, how does one strike the right balance between setting strategy and driving tactics without falling into the trap of micro-managing? The following is an interview with an unnamed business leader of a $1 billion European medical device company. It shows how dashboards were implemented at his company in order to make the connection between execution and strategies for driving profitable growth.
iSixSigma: In your own words, what is a dashboard?
Business Leader: Dashboards are about translating strategy into action, and following up on execution. How can you judge the effectiveness of a strategy if you don’t execute, follow-up and evaluate objectively your success?
What is exciting, is the visual aspect of the dashboard. It shows you the link between the outcomes you are driving, like up-take in new products, and actions that you believe drive those outcomes, such as education programs for surgeons. You can literally see how your business is performing now and the results you can expect in the near and medium-term future.
A dashboard lays out the outcomes (objectives), drivers (tactics) and metrics (leading indicators). They are displayed over time, actual against target performance. We color code the metrics using a traffic light scheme: green, yellow and red. If an indicator stays red, it is telling you to stop and investigate.
iSixSigma: How do dashboards help you as a business leader?
Business Leader: Before we started using dashboards, I could sometimes experience this “wall of agreement” when I asked for commitment to execute. People would say “yes, yes” and go back to doing what they always did. Why? Because most well-intentioned managers are overwhelmed with things to do. Despite their best intentions, they lose focus. The dashboard helps you stay focused on the outcomes you are driving and tactics you are pursuing to reach the goals you set.
While we have always done annual strategic plans, once it was written it was put in a drawer until we had to revise it a year later. What was missing was the ownership, the commitment and transmission from strategic objectives to tactics to actions throughout the year. By reviewing the dashboard monthly on an operational level and quarterly at the management board level, we keep the focus and can see how effectively we are doing what we said we would do.
iSixSigma: How has this changed the way you judge and manage performance?
Business Leader: Before, performance was judged retrospectively. Good and bad performance was based on lagging indicators. Someone’s business could look good at the outcome level, but how do you know that it is the result of action he/she took that will lead to sustainable growth? You know the old story, when business is good, it is the result of good management. When it is bad, “it’s the economy” – in other words, something the manager can’t control. In working with dashboards, you define performance expectations very clearly. It forces responsibility for execution and accountability for outcomes. Rather than just judging performance, I am now setting the agenda, the tactics we are using to execute agreed goals and targets.
Now, if performance is poor, we can drill down. Did we fail to execute? Did we define the wrong tactics? Has something changed in the competitive environment? Did we set the wrong priorities or targets? You can see links and patterns between actions and outcomes that help you make better tactical decisions. Rather than sitting on the sidelines, I am in the game with my team in a much more proactive and constructive way. The dashboard gives me visibility so I know better where to get involved and at what level.
iSixSigma: What advice can you give about creating a dashboard?
Business Leader: The hard part is to define what the key strategic outcomes are and make the links to the essential few things that drive those outcomes. The discussion about outcomes and drivers is as important as the actual dashboard because you are educating people about the causal links and getting their buy-in on the priorities. You are defining what it means to win.
Very important are operational definitions so everyone keeps score in the same way. For example, what do you count as an education event for a surgeon: a conference, a presentation, or hands-on instruction in the operating theater? You are not just developing a good performance measurement system, you are clarifying expectations about who will do what.
Don’t try to include everything in your metrics. If you struggle to make a good operational definition, you are probably making it too complicated. Pick a proxy measure that you think is a good leading indicator. Since dashboards are a communication tool, keep the measure and the message simple.
Stick to what is essential to measure, rather than what might be useful to measure. You have to not look at the other measures, even if it is tempting, because it will cause you to be unfocused.
To be useful as a management tool, the measures have to be fresh. If you can, take the input for the measure from an automated information system and do not ask people to do additional work inputting additional information. Nothing turns people off more quickly then more administrative work.
It took us two years to build a system that we are happy with. My advice is start. Don’t worry about getting the perfect set of measures from the start. The main thing is work with one or two measures you know are important and improve them as you go.
iSixSigma: How can I select the vital few measures when I have not yet been able to correlate outcomes and drivers?
Business Leader: Start backwards from the strategy and the goals you have set in a two-to-three-year time frame. Concentrate on the outcomes upon which the strategy depends; for example if you are going for growth, and market share is the key, then concentrate on market share as one of the outcomes. Don’t pick more than four or five outcomes, because when you drill down to drivers and metrics they will quickly multiply. At first, don’t try to track more than 15 items at the metric level.
If you have Six Sigma projects aimed at improving key process drivers, you should be able to validate and calibrate causal relationships. The control phase of important Six Sigma projects should help you “wire up” the dashboard.
iSixSigma: How do you create ownership for the dashboard?
Business Leader: The fact that we had to find our own way was perhaps an advantage. I did not pretend to have the answers to what we should measure and how. I genuinely needed the support of my managers and stakeholders.
In a consensus culture, such as we have in Scandinavia, involving people in the development process helps create the buy-in and ownership for not just setting up, but using the dashboard as a day-to-day management tool.
Aligning departmental and personal goals and objectives with the dashboard is the other key to getting people to use it. The more my personal objectives overlap with the dashboard targets, the greater my incentive is to track and improve performance using the dashboard as a self-control instrument. In our business, a sales manager can earn as much as 20 percent and more of base pay depending on his / her reaching defined targets. Of course, they want to continuously track leading indicators and outcome measures to know how they will do.
Once we sign off on the goals, objectives and strategies for the new year, we have a “dashboard challenge meeting.” The purpose is to scrutinize what drivers or metrics need to change, if any. We test whether the targets are aligned with the revised strategic goals. This is the second year that we held the challenge meetings. Now they are more about what are we going to do and how to use the dashboard, and less about the measures.
iSixSigma: In hindsight, what would you do differently?
Business Leader: I would have planned the dashboard initiative as a project. How to deploy dashboards is something we had to learn as we went. I would have involved people more in determining outcomes, drivers and metrics. It is about buy-in, but it is also about the quality of the information. That is a good reason to get more people involved. It also is training and development for them to think about the business more systematically.
iSixSigma: What are your next challenges?
Business Leader: The dream would be that the dashboard is so good that you could reward against execution and leading indicators rather than outcomes.
About the Interviewer: Steve Crom, the managing partner of Valeocon Management Consulting, conducted this interview. He has more than 20 years of experience helping clients achieve breakthrough results. Mr. Crom has worked with clients such as Johnson & Johnson, Zurich Financial Services, Airbus, Siemens and many other Fortune 1000 companies. Based in Germany, he is fluent in English, German and French. He can be reached at [email protected].