Goals and Measures

Let's look at goals and how a good measure is supportive to the goal. I will connect a few things that I have learned over time.

Andrey Salomatin writes about Theory of Constraints (TOC) and applies it to Software development. So far, he has 3 articles: Systems thinking in management and Work hard enough and you won’t finish anything and I bet you look good on the plant floor. Well worth reading.

However, the one that really triggered me thinking was the first: Systems thinking in management. I am not sure whether I ever thought about it before, but he has a nice phrase in his article:

Goal has nothing to do with System’s internals. Look for it outside of the System.

One of his examples (he has more) is an airplane. Airplanes don't exists to fly (internal), they exists in order to let people travel fast from A to B (outside). Good one. But he got further. He was describing a situation where misaligned measures are contra productive to the goal of the system. Measure get misaligned when internal goals are prioritised over external goals. Instead of using his example would I like to describe the story that I heard earlier and that made this article so relevant to me.

I once was on an Enterprise Architecture conference where I was lucky enough to listen to Roger Burton. He told a story about a global manufacturing company that was his client (he didn't provide a name but a hint that we would all know it). The board of that manufacturer wanted to reduce the time from the order until the customer got the ordered goods. For some 2 years all the programmes to improve that time didn't help. He was looking at the problem from a measure perspective. His philosophie behind that was the simple "mantra":

You get the process you are measuring.

So, people will adjust their processes in order to improve the measures. If your salary is connected to a measure, wouldn't you do the same?

What were the measures in Roger's example?

• Sales team members got a bonus for every order coming in in the last 2 days of the month (one can easily imagine how this one started). This meant that sales people whenever possible delayed the order in order to get it placed at the end of month (reinforcing the perceived need for this incentive). Result? First delay for the customer.
• Production team was measured on costs. How do you drive down costs? Increase batch size! So, production team was delaying production of goods in order to increase batch size.
• The next one was internal logistic, it was a global manufacturer after all, so unfinished goods needed to be send regularly between plants. How do you drive down logistic costs? Fill the truck/container. What was logistics measure on? Cost. Does waiting to fill the container improve total turnover time?

He only named these 3, but I can easily see how other departments were working against misaligned goals, too. Roger's story ended with the comment that the board was seeing improvements quickly once the measures were aligned with the goal of the company, to reduce order-to-delivery time.

Align your measures with your goals. The goal is not within your department. Not even within your company. If you want to make money by selling, you are already misaligned. Your customer's benefits are what you need to measure against. Which, interestingly enough, was the topic of my previous post.

By the way, I found Andrey's articles through my current favourite blog, Knowledge Jolt with Jack.