Aligning organizational metrics to business strategy

Unless you work for a very small company, most organizations I know engage in annual strategic planning activities. Many, however, don’t review their balanced scorecards at the same time. When I’ve seen this, I’ve always asked why these aren’t being updated. Almost every single time I was told that the company wanted to have consistent year-over-year metrics.

I wholeheartedly agree that there is basic information that needs to be measured annually, though, one must measure the success of top line strategies. Strategies change over time, therefore business objectives need too as well. Measuring the success of those business objectives is critical. 

As part of the strategic planning process, identifying key performance indicators (KPIs) for the varying business objectives must also be reviewed. For example, if your organization decides that it wants to penetrate a new market, it needs to measure the success of that strategy. To do so, it must measure the performance baselines for that market (be it number of customers, revenues, market share, etc) and then measure incremental performance throughout the year. 

The next step is to then ensuring employees will support the organization in achieving its objectives. This to consider is whether or not the company has a sales force or an employee base that can influence or impact the success of that particular strategy. Assuming it does, it needs to create and incorporate targets for the business KPIs into business unit and individual performance plans. These then need to feed into the organization’s bonus or incentive programs.

As a last step, organizations need to stop reporting on data that isn’t relevant to that year’s strategies. While there is nothing wrong in capturing that information, assuming its automated and requires no effort, spending time reporting information that is irrelevant to decision-making related to achieving that year’s business objectives adds no value to the organization and is simply wasteful.

As mentioned earlier, there are basic KPIs that organizations need to measure. However, it is important to remember to incorporate the metrics that are be fluid within a business’ scorecard as well as integrating them into employee performance plans.

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