Peter Drucker, arguably the father of modern management, said “What gets measured, gets managed.”
As we manage projects, the activities that we measure need to be carefully selected in order to achieve our organisational goals. One of the issues of only focusing on traditional activity measures is that we are guiding ourselves with purely historical data. This is like driving only using our rear-view mirror.
I recently read The Four Disciplines of Execution, a management book by Chris McChesney, Sean Covey and Jim Huling. The book describes an execution based methodology that has been proven in hundreds of companies across a range of industries. One of the central ideas is about choosing to measure activities that are predictive of success.
A Lead Measure Versus a Lag Measure
The idea is to distinguish between lag and lead measures. The feature of lag measures is that we only know our progress after the fact. Most of our most important goals tend to be lag measures. We want to reduce costs, increase productivity or change a problematic part of our culture. The quarter end report comes in and we realise that we have once again failed to affect the measure that we had identified.
The suggested solution here is to look at lead measures. Lead measures are different from lag measures because they are predictive of behaviour in the future. They give the team influence over the outcome of the measure.
Here is an example of a lead and lag measure.
A very common credit card experience for me is to open the statement at the end of the month and realise that I have spent a lot more at restaurants in the past month than I had planned. This is a common lag measure, I know I’m not on track with my finances but my only point of influence is to start the next month with a vague plan to eat out less.
A lead measure approach would be to create a meal plan, go shopping once a week and cook twice a week. I would measure the number of times I cook, go shopping and my instances of meal planning.
The overall effect here is that my lead measures of meal planning, cooking and shopping are predicting that I will spend less money at restaurants. Instead of feeling bad at the end of each month when I blow the budget, I am taking small steps each week to achieve my monthly goal as well as getting early signals on whether I am on track or not.
Edward Deming, the management and quality guru, said that focusing exclusively on financial data (lag measures) is like driving a car by looking in the rear-view mirror. This critique is not to say that lag measures are unimportant. Lag measures are often the key criteria that drive our organisations. The idea is that lead measures are also needed to predict our forward-facing goals and objectives.
How to identify a successful lead measure
One of the biggest challenges in identifying a lead measure is deciding what exactly we need to measure. How do we focus on the activities that will give us the best results? The key to a successful lead measure is leverage. If our goal is to move a large rock, we want to measure an activity that will have a disproportional effect on the large rock.
Great lead measures tend to have two qualities. They can be influenced and are predictive. The illustration below from The Four Disciplines of Execution demonstrates how correctly selected lead measures can provide the leverage to move lag measures.
On example from a construction site would be a lag measure to reduce the number of errors in on-site installation. One of the main sources of installation errors is that the wrong equipment is delivered to site. A construction site is a busy place and it is easy for the site management not to fully check each delivery as it arrives against the site plans and equipment lists.
A lead measure would be creating a checklist that ensures each item that is delivered to site is checked against the site plans and equipment list. This is an easy task to overlook for a busy site foreman, but keeping the focus on this simple but important activity will have a meaningful impact on the expensive and disruptive costs of installation delays.
Don’t manage your projects by using the rear view mirror. Just using lag measures will result in a historical focus that is often disconnected from the challenges coming up next month.
This does not mean that creating lead measures are easy. Meaningful lead measures require a deep knowledge of the business process and deep engagement with the execution team. Effective lead measures provide us with a sense of control and leverage that lag measures often don’t.
If you are struggling to achieve your difficult goals, I suggest that you think about how the difference between lead and lag measures might apply to you. If you are interested in learning more check out the book here: http://the4disciplinesofexecution.com