Why must Managers and Leaders be wary of an obsession with "final outcome" measures?
In today's world of objectivity, data-driven decision making, and the dire need to quantify everything, there is tremendous emphasis on measures of success (or outcome), and for good reason.
However, amid all this data buzz, many leaders, teams, and companies get caught up in an obsession with final outcome measures that sets them up for failure in spite of their best intentions. Talking to entrepreneurs, managers, and leaders I realize this is often the primary reason why we end up missing our end goal that we had so objectively defined.
While I was recently working on business development and partnerships opportunities for SplitSecnd, I came upon The 4 Disciplines of Execution, by Chris McChesney. Sean Covey, and Jim Huling. I was particularly struck by Discipline 2 in the book that talked about Lead and Lag measures and seemed to hit the nail on the head of this problem.
The real problem, it turns out, lies not in the absence of a measurable outcome, but rather in the absence of measures along the way that lead us to that desired outcome. We could think of these as the individual stones that bridge our path from start to the desired finish.
The final outcome measure or the objectively defined goal is called the lag measure because it's the end result. Measures along the way that lead to the final outcome are called lead measures. The challenge, however, lies in identifying the lead measures that can act as levers to help us reach our desired outcome. Covey et al. suggest looking for two very important and inevitable attributes for lead measures:
They be predictive of the final outcome.
They be influenceable.
Weight loss example:
An excellent example is that of losing weight. Let's say that a friend of yours wanted to lose weight and did the right thing of objectively defining the end goal of, say, losing 12 pounds in 1 month. That's a very specific and clearly defined desired outcome. Excellent. But, is that sufficient? No, because they now need a plan to achieve that goal. So, when you ask them for their plan they declare that they would "diet" and "exercise" for one month and at the end use the same high precision electronic weighing machine to measure their weight with which they started. Would that be sufficient? Unfortunately no, because they could be on the wrong diet or the wrong kind of exercise program or both through that month by the end of which it would be too late to take corrective action. The only option left then would be to extend the deadline of the goal. In most cases in the real world, especially in a competitive business environment and even more so in the startup world of entrepreneurs that could mean the end of the line.
The right approach would have been to define lead measures, i.e. "actionable or influenceable" measurements that our friend could have taken and analyzed over the month so that necessary adjustments could have been made to their plan. They could have measured 1.) calories consumed on a daily basis, 2.) calories burned on a daily basis, 3.) recorded their weigh every 3 days, and so on. These measures are both predictive of the desired outcome and also influenceable through the course of the project and would have helped our friend maneuver the path to their end goal.
Sales Example:
Let us say that a company wanted to increase sales from 500 units to 620 units over 12 months. That would be the desired final outcome and hence the Lag measure. An increase in sales by 120 units (from 500 to 620) over 12 months could be thought of as increasing sales by 10 units on average monthly sales compared to the previous year. That does NOT qualify as a lead measure because it still the same "end goal" with just the time duration changed from 12 months to 1 month. It may be predictive of the final 12 month outcome, but it is not an influenceable measure. It is still only an outcome measure.
Examples of lead measures in this case would be, on a weekly basis, the 1.) average productivity of sales reps on the team, 2.) conversion rates of leads into sales, 3.) rates of lost sales due shortage in inventory, etc. These are predictive of the desired final outcome and also influenceable. If these are analyzed on a frequent basis and the knowledge gained from them be applied to correct the course of action, the chances of meeting the monthly and the final annual sales goal become stronger.
Sticking to and executing this approach is easier said than done though. The key lies in thoughtfully and meticulously identifying and defining lead measures and executing the measure and adjust process diligently. Capturing and analyzing the lead measures frequently well before the final outcome is measured enables us to hit our final target more often than not. Obsessing with the final outcome alone is not only insufficient, it actually gets in the way of achieving it !