2. The article entitled \"Staying on Course with Strategic Metrics\" explains th

Question

2. The article entitled "Staying on Course with Strategic Metrics" explains that there are two major categories of metrics: management and strategic. Management metrics focuses on the vision and goals of the organization. Both metrics must be clear, meaningful, objective, and measurable. Destination metrics, which is a new term for me, answers the question "How will we know when we have arrived?" (Krentz, DeBoer & Preble (2006).

In most companies, strategic metrics at the vision level, are reviewed annually, and goal level strategies are reviewed semiannually or annually. Management metrics at the strategy level are reviewed weekly, monthly, or quarterly. Tactical level metrics are reviewed daily, weekly, monthly, or quarterly.

The section on setting targets was also interesting because you have to decide where to set your targets.

Questions to answer: If they are set too low and are easily achievable, is that target really benefiting the organization? Stretch goals should be set at a reasonable level, one that can be met with extra effort and innovation. Setting target corridors is useful because markets change and can be unpredictable. Setting a low and high target gives a range that can be accomplished.

Krentz, S., DeBoer, A., & Preble, S. (2006). Staying on course with strategic metrics. Hfm (Healthcare Financial Management), 60(5), 86-93 8p.

Explanation / Answer

A prospering business requires close and careful management to ensure the success of new investment decisions and expansion plans.

Through performance measurement systems, it is easy to keep track on the progress of business. It gives all required information about the running business and it also provides the starting point for a system of target-setting that will help you implement your strategies for growth.

The benefits of target-setting

Once the decision of key areas that drive business performance is finalised, then a natural next step is to start setting performance targets to give everyone in your business a clear sense of what they should be aiming for.

Creating Strategic Metrics

The reason behind creating strategic metrics is to improve the efficiency of the team. Measurement must be regular, so a well-run organization needs to generate monthly financials and track metrics of team on a regular basis. The ongoing measurement and regular reporting serve to reinforce the drive to achieve strategic objectives and track progress toward the company’s goals.

How strategic metrics helps organizations to do long term planning? First, consider that metrics are made up of measurements against a target or goal. To create clarity around desired outcomes, apply measurements that make sense toward a target goal. If a strategic objective is to increase sales, then use a simple metric like the increase in sales volume. Also, create benchmarks to make the goal achievable over time, rather than setting an unspecific strategic objective such as “increase sales by 15 percent.” Break the goal into measurable milestones, so your metrics become an increase of 1 percent the first month, 2 percent the second month, 5 percent the third, and so on to achieve the strategic objective. Adjust the targets as needed to achieve and even exceed your strategic goals.

Sometimes Strategic visions becomes difficult to understand at all levels, but by breaking your top level objectives down into smaller concrete targets you'll make it easier to manage the process of delivering them. In this way, targets form a crucial link between strategy and day-to-day operations.

Being SMART About Setting Strategic Objectives.

1. Specific: Goals of team must be narrowly defined. Goals can provide a general direction, but SOs reqiure specific metrics that provide milestones of achievement. For example, “increasing profits” it too general, but “increasing sales by 25 percent” is specific and provides a marker for success.

2. Measurable: All strategic objectives need to deliver measurable results. At the end of the planning cycle it should be possible to determine if SOs were achieved or not, which means providing both the metrics and the means to measure those metrics. For example, “increasing customer satisfaction by 10 percent” could be a measurable objective, but only if you have the means in place to measure satisfaction. What does customer satisfaction look like and how do you determine if there is a 10-percent improvement? A measurable objective would be to “improve customer satisfaction survey scores by 10 percent,” the implication being that you have a measurement tool in place.

3. Achievable and Actionable: An objective can only be strategic if you have the means to accomplish it. Every SO needs to be achievable through direct action. For example, an SO such as “reducing the economic impact on sales” is not necessarily achievable and it certainly isn’t actionable since you have no direct impact on the economy. However, an SO such as “increase sales by 10 percent” is both achievable and certainly actionable.

4. Realistic: In addition to setting actionable objectives, SOs also must be realistic. Challenging objectives are acceptable, but don’t set the marker so high that it can’t be reached given available staffing, resources, and capital.

5. Time bound: Deadlines for achievement are critical, otherwise SOs become open-ended. All objectives need to have a timeframe that coincides with measurement, e.g. “increase sales by 10 percent in the next six months.”

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