“What gets measured gets managed.”

– Peter Drucker

Companies are constantly setting various goals and targets, establishing missions and visions, but at the end of the day, what the leadership measures is dollars. Now, money in itself is not bad. A company needs to make a profit to survive. However, I see a flaw in the approach many (dare I say most) companies take in using money as the primary measuring stick for performance.

Among those who have studied continuous improvement methodologies, it is safe to say these individuals understand that metrics, or KPIs, are imperative to measuring, improving, even driving, positive behaviors in your people to move an organization forward on the journey of continuous improvement. These metrics should be the kind that help people understand their current condition, or performance, with an ability to take corrective action early on in a process to influence those metrics. Leaders should be available to coach their people as this information is gathered and presented. These types of measures are called lead measures.

However, organizations that use financial metrics to drive behaviors are often promoting actions that can prove erratic due in part to the fact this kind of information is collected and produced at the end of a month, or a quarter. This is too late to help people be proactive, and is why such measures are called lag measures. These kinds of metrics can also cause frantic activity at the end of the month or quarter, as people struggle to meet established targets. In turn, this can reduce quality, increase accidents, delays in deliveries, etc. All the wrong behaviors.

Edwards Deming is quoted as having said, “Managing a company by looking at lag measures, such as financial data, is like driving a car by looking in the rearview mirror.” How true.

It is natural at work for people to respond primarily to what they are measured on, thus those measurements drive behaviors, for better or for worse. Why spend time on something that isn’t part of your performance review, or the boss isn’t asking about? Repeatedly over the years I have found myself dropping various activities if no one is showing any concern for that particular activity and it isn’t being emphasized as pertinent to a process, or the business, in some fashion. No one is immune to this, and in fact to most it would simply make sense to focus on those things the boss enquires about.

Some questions leaders should be asking themselves:

What are the behaviors we want to promote in our people?

Are our metrics driving the right kinds of behaviors?

Are our metrics relatable to those who are impacting these metrics?

Are our metrics ones that can be acted upon quickly?

None of this is to say you shouldn’t be monitoring your financials, just that the rank and file of your organization most likely have trouble relating to them, or may not see how what they do at work directly impacts those financials. Good leaders work with their people to develop meaningful metrics that support the work they do, promote those metrics, and review them with their team, so the team members can understand where they are, where they are going, and how they can impact those metrics to drive a positive outcome. This, ultimately, impacts the financial goals the top brass is concerned with.

I’ve found that trying to drive appropriate behavior with financial metrics is usually like trying to push a wet noodle. Get your metrics aligned to drive the appropriate behaviors within your team, and your financial targets will fall in line.

Jeff Adams is the author of “7 Essential Skills of Leadership, How to Lead Your Organization to Operational Excellence.”  which can be purchased at https://goo.gl/vu1UCV.  Jeff holds multiple certifications in continuous improvement methodologies, including Lean, Six Sigma, and QRM. More information about Jeff and services offered can be found at www.continuousleadership.com. Online training is available at https://goo.gl/H147Dy.