The reporting indigestion analogy is not accidental. To understand how organizations can better manage information we’ll look in 5 steps at what and how they’re “eating”*:
1) Know what and why you’re measuring and when it’s time to act
The first and most difficult step is letting go. It means accepting that in today’s world it’s impossible to absorb all information available. Instead of ignoring it, organizations should mirror Yer’s behaviour and ask themselves more often “What do we need to know?” “Why do we need it?” and “Does it pay the effort to obtain this info?”
Letting go means reworking your reporting process to a reduced number of KPIs. I’m always astonished to discover organizations working with dozens (sometimes hundreds) of KPIs, whereas the name itself suggests they should be KEY performance indicators.
Once you’ve picked KPIs, does it give you a solid basis for action? Do you know what impact it has when your KPI goes below the threshold (falls below a 85% level for instance) or are you reacting to a top-down incentive? Do you know what you’ve got to do to leverage it above threshold? What’s the price to pay for a corrective action versus a preventive one? If you can’t answer these questions, like in the case of an obscure “customer response rate” KPI, then your KPI is better off in the bin.
2) Does your data tell you a story (concise, coherence and in a trend)
Ok, it’s fun to do a cross-section of every item sold (or produced) in your catalogue by region, customer age, customer sex, salesperson, distribution channel, range, etc. But which story does this tell you? How often do you really need this information? Do you need it in a report or can you generate it to answer a one-time question? Is this a changing information that needs to be observed up close (like in a product launch) or will you get the same figure month after month?
In order for your data to tell a story, it needs to be concise, coherent and generate a trend.
Concise information means that anything could be bundled into 5 or 6 categories maximum. Everything that’s below 5% of anything should be “Others” (just like in polling results). Once one element of “Others” floats above 5%, a new category is created. Conversely, if your “Others” represents 25% of something, then you’re not measuring anything.
Coherent means management should get 2 A4s maximum of graphs and charts that are connected to tell a story of how the organization is evolving. Add to that a one-pager with qualitative data, ideally selected from customer and front-line employees testimonies. From that story, it should be clear where the trends are.
3) Deep-dive trends outside your regular reporting process
To deep-dive a trend, you must know what would be a relevant time span. How further back must you look in order to turn past-oriented information into safe future-projections? In which range of possible outcomes does my estimation sit? How long into the future? Is this a projection that’s helpful and worth the effort? What are the assumptions and the hard data in this trend? From which point can I say my estimation becomes “guesstimation”?
Those are not easy questions to answer for most cases, so it makes no sense measuring them into regular reports. Only when it becomes important to focus on a KPI should managers incur in trend analysis.
4) Automate reports that are official obligations
SAPs shouldn’t be used to generate monthly strategic reports. Instead, they should produce automated reports to cover financial and legal obligations.
It’s daunting to see how many organizations have polluted their systems with unstructured information to a point they’re unable to generate automatic reports on key financial figures. The “cheapest” and most common solution is to hire an army of accountants to pass around home-made Excel sheets in mind-numbing number crunching and to copy figures around to serve headquarters’ fanciful requests.
The problem is that there’s nothing cheap about it: mistakes are made, sources are lost and most importantly those employees leave disappointed with the lack of meaning they obtain from their job (forcing newcomers to rebuild their own Excel sheets).
If it’s an official obligation, hire an external consultant to adapt your SAP to respond to it and consolidate global figures in HQ at the push of a button. This is certainly a short-term investment that pays off for a long term substantial (and often invisible) cost.
5) Periodically look at the ecosystem and use the data as a basis for dialogue
As reports become concise and coherent, it won’t be long before management notices they’ll need new information. Resist the urge to “add” and instead “replace”. What don’t I need to know at this frequency anymore? What could become a quarterly or annual indicator?
By having a short management report, managers will spend less time in meetings going through non-actionable data and more time discussing strategic decisions and how the reports can evolve with the direction of the company. They could also use this time to conduct specific deep-dive studies on trends. Conversely, the longer the report and variety of sources, the higher are the risks of option paralysis and poor decision making (based on awkward data integration and biased interpretation).
To the employees that were producing those reports (mostly Yers), there are also many benefits. First, they’ll spend more time participating in value-adding activities and less time stressing about collecting meaningless data in short delays. The ownership and engagement in the work delivered will increase along with the recognition for their inputs. Since the report will change more frequently, managers will engage with them more often to discuss new directions, clearly share new strategies, obtain feedback from the field on feasibility and provide much appreciated mentoring on business administration.
Managing data in a productive manner is not a side question, it’s a priority item. Transforming a heavy administrative machine into a lean and nimble start-up is more a matter of will than organizational size. The key to achieving this is to break the vicious cycle by moving the scale from “Doing things right” to “Doing the right things”.
Once an organization focuses on doing more of the right things, innovation and commitment follow. Psychologist Barry Schwartz reminds us in the following video that “even the wisest and most well-meaning people will give up if they have to swim against the current in the organizations in which they work”, the same way Tom did in the previous post. How many Toms are you willing to lose?
How’s your company managing data?