Ged: [00:00:00] So for this card, we are going to jump into the topic of metrics. One of the things that people love to hate, just like meetings, just like priorities, people love to hate them.
Milan: Yeah.
Ged: Essential, they’re necessary, but really we’d wish we didn’t have to have them. But anyway, they’re really, really important.
So, metrics, what do we mean by metrics? So metrics are things that we decide we need to count because they are gonna tell us something about how our business is operating. Now humans are notoriously bad at actually coming up with good metrics, and I think that is one of the reasons why this has come up as a card in this, in this series as.
So. Milan, tell me what your thoughts are around metrics. The good, the bad, the ugly, and what we should be talking about today.
Milan: Well, let me say a few things about this particular cart first. So first of all is the spade, right? And
Ged: Mm-hmm.
Milan: [00:01:00] Really about strategy systems, you know, how to, how to get the machine running in the right direction. The machine being the company or the organization, of course.. And as many cars. This one was just inspired by something, something said as somebody said.
And in this particular case that somebody was you. I don’t remember the context, but I think it was a webinar and, and you know, you said those key questions that the organization needs to be asking itself when deciding what to measure and why. So I’ll throw it back to you, like, what are those questions and why do you think, and how did you come up with that concept?
Ged: Yeah, well the, this, this concept came, came to me after running a series. Of annual planning sessions where I was noticing a pattern that, you know, people weren’t entirely happy with the metrics that they had come up with, either at a recent kickoff or the [00:02:00] kickoff a year or so before. And I was putting it back on them and saying, well, look, you know.
These are your metrics. If they’re not right, you need to make them right, because these are things that you should be owning as a, as a leadership team. And they sort of got that, but that really didn’t give them the information or the knowledge they needed to, to actually make them better. And there’s nothing worse than measuring a metric that shouldn’t be measured because it just demoralizes the, and devalues the, the concept of metrics.
Milan: My
Ged: So I think I, yeah. So, so I, I, I guess I took a bit of a step back and I sort asked the question, so, so what? Let’s come up with a list of the things that you should be measuring. So I gave them all a sticky note and said, you know, write down the things that you should be measuring, and don’t worry if you’ve got the same thing as other people.
You know, if we’ve got five cards saying the same thing, well that’s just validating. We probably should be measuring that thing, whatever, whatever [00:03:00] it is. We, we got all those, those sticky notes down and we put them up on the wall and we sort of know, we put duplicates together so we could see that there was a, there was shared alignment there. And then I asked the next question which of these can you measure? So I went round and if someone, if something could be measured, I put a little green sticky on it. And if something could be measured, but it was difficult or it took a long time, I put an amber sticky on it. And there were some metrics that they should be measuring that they just couldn’t said.
Okay, okay, fine. Well now let’s put a red sticky note on that because you know, that’s something that we want to come back to. And so I, I probed a little bit deeper and I said, so you. Should be measuring this, but you can’t. Now, what’s the impact of not being able to measure that? And in some cases, ’cause I did this across a few different leadership teams over that season of annual planning [00:04:00] in, in some cases, the impact of that was pretty significant.
Now they were missing out on the ability to make much better, faster decisions because they couldn’t. And so the next question I asked, which isn’t the third question, I’ll come to that in a moment, was. How long have you not been able to measure that, and how long have you known that you should be measuring it?
And in some cases, they, they’d known about this for about a year or more, even from before when we’d first started. So how we missed it first time round? Well, that’s, that’s on me. I’ll take, I’ll take that one. But I, I guess the realization for the leadership team was, you know, okay, this is serious. If we can’t measure it now, we need to find a way to measure it accurately, reliably, consistently, and we need to do that soon.
So now that was probably a candidate for a Q1 priority for that, for those companies. So the, the last question is, once we know what we should be measuring and what’s what, once we know what we can measure. [00:05:00] The third question in that suite is what do we measure? And the passer I noticed was that, you know, it became like a three circle Venn diagram and the, what we want is a three circle Venn diagram where you can only see one circle.
You know, this Venn diagram was not like that. You know, that there were things that they should be measuring that they couldn’t. There were things that they did measure that they shouldn’t. Obviously you can’t measure something that you can’t measure, but there were significant numbers of things that people could not measure that they should be measuring.
So that got a lot of insight ’cause it suddenly meant that we were throwing away a whole load of metrics that people didn’t need accounts. But we’d also identified some significant, interesting, valuable metrics that they needed to go out and find a way to measure accurately, consistently, reliably.
Milan: Yeah.
Ged: So that’s, that’s where it, that’s where it came from and I, I use those questions.
Pretty much in every annual planning session and probably in most quarterly planning sessions, but whenever there is a doubt [00:06:00] about whether or not they are measuring the right things.
Milan: Hmm. Let’s double click on two pieces of that one diagram, which are outside of the ideal circle. I, because I really like the thinking by the way. Thank you. Because. The way you said it, I used it a few times, but you never actually said how you used it in the past and this is really good and I’m gonna steal it. Ged: Please do.
Milan: And the, so those two really interesting areas on that Venn diagram of yours we are measuring and we shouldn’t, and then even more interesting what we really should measure, but we don’t know how. Not saying we can’t.
Ged: Mm-hmm.
Milan: We don’t know how yet. Right. I’m a little more
Ged: Mm-hmm. Mm-hmm.
Milan: So let’s start with the first ones, like what are the usual metrics you saw that people are measuring because they always have, but they really didn’t matter. Were there any [00:07:00] commonalities?
Ged: Look, it’s, I’m, I’m, I’m struggling to think of one thing that comes up repeatedly, but there’s almost invariably one or two or three things that, and I is actually adding no value at all, and it’s, and it’s often. It’s often a legacy metric that they’ve just been measuring for years, and they’ve never really challenged or thought through why they’re measuring it, you know, so, so things like, you know, they, they, they, they, one, one of my clients used to count how many, how many customers they had below a certain number of dollar revenue a, a year, you know, so, so when a, when a customer had a revenue that was below this amount, know they would, they would count that.
And so my question to them was, well, you know, why, why do you count this? And they said, oh, you know, a couple of years ago we had a campaign to you know, in to increase the number of smaller customers said, okay, well [00:08:00] have you increased them? Yeah, yeah, we have. Yeah. Yeah. Okay. And is, is that giving you the outcome that you’re looking for?
And they said, yeah, it is. It is. You know, so how long have you been above the level that you deemed to be the right level? And they said probably about nine months. So what purpose is it serving? Now, you had a specific initiative to increase the number of smaller companies, smaller customers. That’s all done.
Do you still need to count it? And they said, no, probably not. Okay, well we’ve just got your number of company metrics down to much smaller number. Now, it doesn’t mean that someone outside of the leadership team isn’t gonna count it, but it just meant that they didn’t need to bring it up as a company level metric.
Milan: So I see several types of these not needed metrics. One of them you just talked about, which is okay, you know, we had an initiative in the past and the outcome of that initiative was measured by something. [00:09:00] So I’m thinking your typical, very important goal from four Dx, right? Like we improve this from this
Ged: Yep. Yep.
Milan: Point, That’s a priority in our language, and it’s measured as the of, you know, moving that that leading measure. So. All good, right? But at once you’re there, you don’t really have to worry about it unless it drops. And that’s a different story, right? Like, let’s not talk about the blinking red lights when something goes wrong. But again, you know, once you’re in that, you know, once you go there, the inertia of attention grabbing another number on the screen, right? That might diminish the importance of the other ones because of the cognitive flow. Just connected to the fact that you have to read the bloody thing. Is there, so
Ged: Yeah.
Milan: Type. Other type ICR, your typical vanity metrics, just, it makes us looking good, you know, and you see that a [00:10:00] lot in marketing where you know, you have metrics that really you can draw a line between and any business outcome. So sometimes you see this metric popping in where people really don’t know what they should measure, so they put something that it’s
Ged: Mm-hmm.
Milan: Because, know, whatever platform you’re using is showing it in front of you. Any, any other type you can think of.
Ged: No, I, I think that probably covers most of the ones I see. I mean, I’m, I’m quite, I’m quite ruthless in, if someone can’t explain why they’re measuring something and what they’re doing about it, if it goes up, down high, low or whatever, then they should probably get rid of it. ’cause they can’t explain what they’re using that information for, then it’s probably not useful.
Milan: Yeah, yeah. You know, I,
Ged: Mm-hmm.
Milan: Look at the metric in several dimensions and that it’s, you know, what is the impact? Meaning, can I drive, can I draw a line between that and the business outcome of [00:11:00] some kind? Second, is the severity, like if this changes a little bit, what is the leverage? Right. Like we, this changes a bit.
Like, is that a big deal or is it like, eh, right. Which, which, you know, you have, you have those. Then what is also interesting is the difficulty of measurement. Not that that would, I. Necessarily drive your decision whether to measure it or not. With the we are measuring it and we shouldn’t.
You very often see relatively easy to measure metrics and that that is a little bit of a red flag that tells you we are only measuring it because we can not because we shared them.
Ged: That’s right. Yeah. Yeah, yeah. And I, I think that that’s, that, that’s an, that’s an interesting one, isn’t it? You know? ’cause you know what my question, what can you measure? It isn’t necessarily that it can’t be measured, it’s that it’s really difficult or it’s not consistent, or it’s not reliable. [00:12:00] So, you know, if you, if you
Milan: Have the data or whatever. Right,
Ged: Well, that, well, that, that, well, that’s the, that’s the obvious one.
Yeah. But then sometimes there are metrics that can be measured, but because it takes so long and because the, the output is so unreliable or inconsistent, effectively, you can’t measure it. Now you can get a number, but the number’s not real. It’s not a real number. Mm.
Milan: How often did you get
Ged: Yeah.
Milan: A situation where you were able to lead the client? You know, I, look, I’m ex data consultant, right? So I used to lift metrics and I,
Ged: Mm-hmm. Mm-hmm.
Milan: So much, you know, when I got into coaching because you know, somebody’s talking, I’m like, oh, you could do that.. Right.
Ged: Yep. Yep, yep. Mm-hmm.
Milan: Anymore.
I’m not allowed. So,
Ged: Yep.
Milan: But how often do you find, like, so why should we measure this? What is the business impact that [00:13:00] thereof, or the meaning, what else can we measured that will answer the same questions?
Ged: Yeah, because I mean, often there’s a way of measuring something in a different way and, and what’s springing to mind here is, you know, there’s this concept of leading and lagging indicators or leading and lagging metrics. I. You know, sometimes we measure a, a lagging metric, whereas a much more useful and much more predictive measure will be something that that leads that lagging indicator.
So what’s gonna tell us right now what the likely impact of that lagging indicator is gonna be, is gonna be so that we can take action on it right now rather than in three months time. ’cause in three months time it’s too late, there’s no point in doing something. In three months time, the the shippers sailed.
Milan: Something tomorrow
Ged: So I often.
Milan: Right? It really
Ged: Often. Yeah. Yeah, yeah,
Milan: Depends.
Ged: Yeah,
Milan: Depends on that. We have so much, you know, there are so many lagging numbers When we say, okay, hey, you know we only had this many billable [00:14:00] hours yesterday where the billable hours you didn’t do yesterday or not gonna get back, right?
Like
Ged: Yeah.
Milan: Capacity, that efficiency is gone. So
Ged: Yeah.
Milan: Do you measure your. Readiness. Your ability to use your time effectively. The billable hours just land where you want them, automatically. And then you just use that to double check and then you use it for a financial forecasting or whatever, right? But what are the things that are actually moving the needles, not just shows you how the needle is moving.
Ged: Yeah, I, I, I see a lot of reluctance to, to use a metric that isn’t absolute, which, which often means that people are reluctant to use leading indicators. Because they’re not. It’s not 100% certain that the outcome you’re gonna get is x, you know, it’s probably 80 or 90%, or, you know, depending on how good your data is.
So I, I see particularly within developing [00:15:00] leadership teams, you know, because right the way through their careers, they’ve been told, this is your number, you’ve gotta hit it. They, there’s a reluctance for them to sort of commit to a leading indicator. ’cause it’s not absolute, you know, 60 of these things may tell us we’ve got 30 of those things in three months time, but it could be 35, it could be 25.
But what we do know is if we’ve got. Two of these things in three months, we’ve probably got none of these things. So, you know, it is giving us an idea of what the fu what’s gonna happen in the future. But because it is an absolute, people are reluctant to say, yeah, we should count that. They, they I’m not sure why people can’t make their conceptual leap of this is gonna tell us what’s happening in the future.
They get there eventually, but particularly in more junior members of leadership teams, that all through their career, they’ve been told, you know, this is your number, you know, this is your number. And that conceptual leap is often difficult to make, but interested to see if, if you’ve seen the same thing.
Milan: It might be that not, not really. [00:16:00] So I’m, I’m like, you know Ged: Mm-hmm.
Milan: I wouldn’t say shocked, but I’m like, you know, this is so obvious, like, why would somebody struggle with that? But when you’re saying they’re used to, this is your number, and they’re not given the context, they have never
Ged: Yep. Mm-hmm.
Milan: Right. They
Ged: Yep. Exactly. Mm-hmm.
Milan: Affects potential future numbers. Ged: Yeah.
Milan: Down the stream, there is no, you know, there is no three because you can easily say, well, in order to have a reasonable confidence that we are going to hit a num 30 of these things in three months, we’ll need at least 35 of those things Now. Right. Once you present it like
Ged: Mm-hmm.
Milan: Like, yeah, of course I need to do 35, otherwise those guys are screwed, right?
Ged: Yeah. Mm-hmm. Yeah,
Milan: Might be that the, you know, they were giving, given the number in isolation without really
Ged: Yeah,
Milan: The context and why that number is important. I don’t know,[00:17:00]
Ged: Yeah. Ab, absolutely. Yeah. Yeah. And why would you commit to a number if that was the case? So, yes, so that’s probably one of the reasons. Yeah. Hey, Milan, I’m curious now, what are your thoughts around slow metrics? So metrics that don’t change very often. But probably pretty important anyway.
Milan: Well, I think it’s interesting because you know, you quite often run into that in the hard to measure metrics or hard to
Ged: Mm-hmm.
Milan: It’s like, why would I be looking at the same number every day?
Ged: Mm-hmm.
Milan: You have to, going back to the idea of the impact and severity, right? What happens when this metrics change and how important that is? Right.
Ged: Yeah. Mm-hmm.
Milan: Just because it doesn’t change every day doesn’t mean it can’t change any day ’cause outside effects or something. I’ll give you an example. I was working with an engineering team and engineers are always [00:18:00] very interesting. I, I’ve, I’ve run into this couple of times with several clients in different industries, but once you start looking to engineers about metrics, they’re like, know, we have projects, we are running, we have deliveries.
Like, what do you want us to measure? And eventually we end up with several teams actually on one metrics. And that’s a deviation from a plan, meaning that, hey, we have a plan that we are delivering this particular project, and it’ll go into production on September nine. Right. And now we are at zero.
Meaning we are good. We are on target, right? So nothing, nothing today tells us that we are going to miss that or crap. We just got a call from a, from a vendor that you know, their factory burn down. So we are plus. 25 that can be, you know, that’s huge, right? That could be, that could be massive or hope, you know what?
We,
Ged: Yep. Yep.
Milan: A easier solution and we are minus seven, right? So we are, we are creating, creating those things. [00:19:00] So I’ll, when everything goes well and you are within that range, awesome. It changes, the leadership team needs to know, because there can be a whole cascade of things. So for those metrics, I go down to lights usually. It still green? Yeah. So we can, you know, we can process that in millisecond.
Ged: Yeah.
Milan: To interpret a number, you’re literally just saying,
Ged: Yeah.
Milan: Or are we not? Right? And that’s it.
Ged: Yep. Yep, yep. And I, I think, you know, one of the, one of the limitations of the system we use metronome software is, and I’ve, I’ve argue, I’ve sort of, and I’ve suggested this as a change to the platform a couple of times. You know, a metric that has a, an ideal point, but then goes amber or red. If it goes too far up or too far down at the moment, we have to make a choice of, you know, what’s bad.
If this is a good number, what’s a bad number in one direction? I’d love for there to be one that goes red up or down, depending on an ideal state. I mean, the, [00:20:00] the, the metric there that springs to mind is just the number of people you know. If you are, if you are counting the number of people because you are a growing business and you need to have certain number of resources in place at a certain time, then.
A low number is just as bad as a high number. You know, if you’ve got too many people, then the CFO’s gonna be knocking on your door saying, why have you employed all these people? Or, or we, you know, we’ve, we are carrying too much of a, a head count for revenue. Or if you’ve got a low number, it means that the, the heads of are not hiring fast enough to get the right capacity in place to deal with the load that’s coming down the track.
Milan: You know what? I think that you can make an argument that in our world of forecasting and hitting plans number of metrics are like that. Because
Ged: Mm-hmm.
Milan: There is a red flag there are too many sales coming because you are gonna mess up your delivery. Right, because they’re
Ged: Yeah. Mm-hmm.
Milan: That. So, [00:21:00] I am, I’m all with you. I literally had this conversation yesterday with a with a friend of mine who used to be in sales. He’s an entrepreneur now, so he’s getting back to sales, but from the other angle. And he said that he had a problem in his job and that he said he was so good, right? So he showed up, he got his number, this is your number, he hid it in four months, it was his annual quota. Right, and it was professional services company completely unprepared to deal with that. So besides the
Ged: Yeah.
Milan: You know, his sales managers screw up majorly by not, you know, putting KFFM in front of him. You know, I think this is great example because when we are doing, when we are forecasting an impact of something, they are upper and lower boundaries within which we want to operate.
Ged: Yeah.
Milan: Not saying that crossing it is bad, but it means it requires attention.
Ged: Something needs to happen. Yeah. There needs action to,
Milan: E.
Ged: With [00:22:00] it. Yeah.
Milan: And, and you know, we use this concept elsewhere, right? Like even you’re doing reviews, for example, is not necessarily bad, it just means we need to talk. Right?
Ged: We need focus. Yeah, we need attention. Yeah. Mm-hmm. Yeah, absolutely.
Milan: Excellent. But that will be under
Ged: Hey.
Milan: Probably in the future.
Ged: Indeed. Yeah. Yeah. Milana, it occurs to me that there is one question that we haven’t talked about, and just before we wrap this episode up what, and if, if it’s okay with you, I’ll ask the question and answer it, but I’ll be curious to see if you have a different answer. So I often get the question, what’s the difference between a metric and a target? Now for me, explaining this as simply as I can, a metric is the thing you are counting. The target is the number you want that thing to be at, at a particular point in time, end of the quarter, end of the year, end of three years.
So a target is just a metric with a timeframe attached.[00:23:00]
Milan: Is the desired value.
Ged: Yes. Yes, that’s right. Yeah. At a point in time. At a point in time, yeah.
Milan: Exactly the same thing. So we want inconvenience
Ged: Mm,
Milan: Electrons by doing that.
