How do you measure your team’s success? The “Four Voices Framework" offers one such method, giving leaders four independent factors to gauge whether their organization is meeting its most critical customer obligations, doing so in a way that is accountable to resource management, considerate of the people tasked with doing the work, and accommodating of non-negotiable requirements from regulators and auditors. Yet oftentimes leaders get sidetracked if they listen to one voice to the exclusion of the other three. However, you can keep your organizational metrics on track by avoiding six common pitfalls – here’s what to watch out for.
Pitfall #1: Exclusive Focus on Effectiveness and Voice of the Customer
Cause: Myopic obsession with growth
Impact: Mortgaging your future
An insurance company’s leadership and board were committed to growing rapidly - nearly at all costs. While it’s critical to listen acutely to the Voice of the Customer, the only metrics that this leadership team tracked were related directly to sales. By focusing exclusively on growth, they fell into the trap of mortgaging their future to gain short-term revenue. The company grew at the expense of ignoring the cost of sales, employee health and happiness, and even regulatory requirements. As a result, it was no surprise that their margins had declined even as revenue increased, and their top talent left to work for competitors that offered a better work-life balance.
Pitfall #2: Exclusive Focus on Compliance
Cause: Excessive risk adversity
Impact: Growing your own monster
Risk management is healthy, and it’s only prudent to listen to the Voice of the Regulator. But as with many things in life, it is possible to have too much of a good thing when it comes to risk aversion. Consider the case of a state government agency led by directors who had been burned decades earlier for having inadequate regulatory controls in place. As a result, the organization evolved into a massive bureaucracy in which regulatory compliance was prized far above all else. They did not track how well they met customer requirements, nor did they monitor employee satisfaction. Without a well-rounded look at the holistic aspects of their organization, their expenses ballooned as they created a massive bureaucracy dedicated to endless reporting against regulatory requirements. In fact, the more measures they had in place, the more reporting and people were required to determine why the agency’s metrics were in the red. Despite the agency’s consistent clean bill of health in meeting obscure regulatory requirements, the leadership team was cleaned out when the agency’s inability to meet basic customer and employee needs, despite swelling budgets, became too bad to ignore.
Pitfall #3: Exclusive Focus on Efficiency and the Voice of the Business
Cause: Belief that efficiency alone can lead to survival
Impact: Race to the bottom
When prudent expense management turns into compulsive cost reduction without understanding the other four voices you can find yourself looking myopically at savings and cannibalizing some of the other metrics that are of equal or greater importance. When equity owners want to raid a company for a near-term cash windfall or leaders lose confidence in their ability to compete effectively, a common tactic is to try to salvage margins by reducing capacity. Unfortunately, unlike revenue that has a theoretically unlimited upside, a company hits a natural limit approaching zero when it cuts costs. Consider a major retailer that has struggled to adapt to rapidly evolving paradigms of on-demand omni-channel fulfillment and increasing numbers of “seasons” each year. After cutting rapidly through obvious largesse, these companies wind up cannibalizing their own productive capacity for free cash flow. As a result, employees leave and regulatory requirements are shirked, resulting in an almost inevitable race to the bottom.
Pitfall #4: Exclusive Focus on Voice of the Employee
Cause: Overlooking the business for the people
Impact: All about the employee
The war for talent requires organizations to listen to the Voice of the Employee and prioritize the respect, happiness and welfare of employees to be successful. At the same time, leaders must also manage the business basics of profit and loss. Consider the case of a health care firm, which for years has been so laser focused on culture and keeping everyone happy that they have found it increasingly difficult to make decisions in a hyper-consensus-based norm. They focus on the value of compromise instead of understanding and supporting effective decision making. The firm prioritized doing the right thing to the detriment of accountability and basic business math. While the consistently outstanding employee morale and retention statistics are loudly trumpeted, the organization does not track patient outcomes or financial metrics consistently or effectively. As a result, the firm consistently ranks below (in some cases far below) peer benchmarks for financial health, patient care, and regulatory requirements.
Pitfall #5: Lack of, or Too Many Voices
Cause: Absence/Abundance of measurement in the system.
Impact: Flying blind/Too many instruments
Most organizations have data with no means of measurement or too much data clogging their systems. One government agency director maintained a 144 page-book that was generated every week with numbers, but no information that would enable good decision-making, no targets to compare results, and no sense of priority. While internal stakeholders asked for this information, none of it mattered as the overwhelming collection of data was useless in the absence of true data management.
Pitfall #6: Confusing Activity with Outcomes
Cause: Not doing the work to understand what matters
Impact: Project managment-run company vs. Strategy-run company
Many organizations believe that tracking activities is the same as tracking outcomes. Activity-based metrics track what you are doing and are usually expressed in counts such as dollars spent or the frequency of meetings or training events. Activities are easy to measure and are simply a mechanism to create and deliver value that internal and external customers expect. By contrast, outcome measures, like patient health, profit margin, desirable employee retention, customer loyalty, and regulatory compliance, track how you’re doing and indicate whether you’re on track and point to where you need to prioritize improvement or innovation efforts.
The Bottom Line
Organizations that take the initiative to understand their performance through a smart and holistic measurement approach enjoy a competitive advantage because they have a much clearer understanding of how well they are operating and the ability to quickly identify gaps that need to be addressed. They are seeing their value stream from all angles and able to keep a balanced perspective on status, issues and improvements. But measurement is challenging, and it’s not uncommon for organizations to stumble along their journey to measure well. Keep vigilant and always be ready to spot the six common measurement pitfalls to prevent your performance monitoring approach from breaking down.