Dr Paul Duignan on Outcomes: Just this minute I've come off the net from a virtual presentation to yet another accountants' conference. For some reason, I've recently been immersed in accounting presentations. Seems a little odd for a psychologist. But I kind of like it in that my father was an accountant who received a life membership of his accounting association for his contribution to the accounting profession. So maybe there's some kind of karmic force in action here. This time the presentation was to a two day Strategic Management Accounting Forum. My presentation focused on how to put the strategy back into measurement. I was beating my usual drum - don't start with measurement, start with strategy and then use it to drive measurement.
Everyone in the corporate world is obsessed with adages such as 'what gets measured is what gets done' and 'organizational objectives should always be SMART (Specific, Measurable, Achievable, Relevant and Time bound)'. Another outrageous claim I heard at a conference recently was: 'there's nothing that cannot be measured'. When I was listening to that last one I was reminded of the urban legend that a ship worker building the Titanic scratched onto the propeller: 'this ship is unsinkable'. The 'anything can be measured' claim has a similar touch of hubris and bravado about it.
The reality is that what we measure today is by and large just a mix of what's currently feasible and affordable to measure plus what we were interested in measuring yesterday. It's a fatal mistake to not have a way of talking about strategically important issues which we're not currently measuring. Take as an example a US corporation writing mortgages just before to the 2007-2008 crash. They would have metrics for the dollar value of the mortgages they were writing and for the cost of writing those mortgages. These metrics would have appeared on whatever Key Performance Indicator (KPI) spreadsheet or dashboard system they were using. However, the most important strategic consideration would have been absent from a straight measurement-focused dashboard. This is the ability to hand-off the risk related to the mortgages being written to others. This is something that was contingent on the housing bubble continuing.
Using a visual strategic planning approach such as DoView Outcomes-Focus Visual Strategic Planning ensures that the available performance metrics are always considered against the underlying strategic logic for the corporation's success. Under the DoView approach, this underlying visualized logic has to contain both the measurable and the currently unmeasured. This means that strategic discussions are always conducted against a DoView visual logic that looks more like the second rather than the first visual logic shown below.
Even though the red box is not currently being measured, or in fact because the red box is not currently being measured, it's essential that it be up there in lights during any corporate strategic discussions. This is so that some smart person in the room can point to it and say: 'remember our whole strategy is contingent on that red box'. This would open the way to the risk management discussion which should have been at the heart of any strategic discussion within such a corporation at that time.
If more corporations had had a red box to point to in their strategic discussions, more of them might have started worrying about the timing of when the housing bubble was going to burst. Those who found themselves a way of thinking about that red box thrived, those who did not were taken down. We need to heed that lesson and remember that a corporation's ultimate success is reliant on the quality of its underlying strategy. It's a matter of out-SMARTing overly simplistic measurement-speak with the kind of clear logical thinking about strategy my father would have approved of. Taking a visual approach is central to doing this.
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