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I’m going to tell you a story. It’s a little cheesy, but bear with me.

You’re driving down a country road…
There are trees on both sides of this straight and familiar asphalt. As the car
picks up speed, you strain your eyes to see further ahead. There are signs on
the side of the road, “wildlife crossing”, “slippery when
wet”, “sharp shoulder”, and you can see these clearly, so you
know there is the potential for disaster. But you’ve got your high beams on, and
a lot of experience driving this section of road, so you’re not worried.

Now, you take a look at the dash and notice something strange: there are no
instruments. No speedometer to tell how fast you are going, no gas gauge to see
how much fuel you have left. That’s okay, you are used to speed, and you are
sure there will be a service station somewhere up ahead. Besides, the car is
running well; the engine is purring like a kitten.

Suddenly, a deer dashes into your headlights 500 feet ahead of the car. This is
where your experience pays off. You visualize the maneuver clearly in your mind.
But you realize something else is wrong. There is no steering wheel to grab and
no way to turn the wheel! You realize that you can’t ‘will’ the car around the
deer, so there is nothing to do but brace for impact. This is turning into a
real nightmare… You wake with a start, and in a moment of clarity, you realize
what the dream must mean:

“No matter how well you drive, or how well your car is running, you
can’t steer with headlights.”

There are many reasons why managers make decisions using “gut feel”.
Some are overconfident, others are forced to decide without sufficient
information, and still others find it too hard to gather or interpret available
data. However, perhaps one of the most common and disturbing excuses for not
paying attention to the facts is the need to fulfill company vision at all
costs.

These managers (or executives) are trying to steer using the headlights- not the wheel. They choose to maneuver
based on where they want to be while paying little consideration to where they
actually are.

A study of 675 executives and managers in Europe and North America found
that 77% of the respondents knowingly made critical management decisions without
making use of supporting data.* Another 16% made decisions based on information
that was so vague the managers weren’t sure the data was valid. Further, among
these managers and executives 43% reported that they did not trust their
internal measurement systems. Almost 60% stated that they made decisions by
“gut feel” more than half of the time. Only 3% of those surveyed said
they had enough information to make fact-based decisions all of the time.

A clear vision is inarguably important; however, it alone is not enough to
direct the critical decisions of a business. The same study showed that 67% of
decisions that were made because they seemed to support the company vision
resulted in failure. Obviously, single mindedness does not guarantee success.

“Responsible metric systems” are measurement strategies that
businesses can use to accurately judge what is happening. I use the term
“responsible” because these metrics are employed within a system in
order to enable managers to respond. They are “response-able”
metrics.

Metrics must provide the right information to the right person at the right
time. They must jive with both company culture and the speed of business. They
must provide adequate information while avoiding too much extraneous data, which
can confuse the issue or delay action.

Some of the most common misguided decisions are made due to the over dependence
on aggregate measures that report only on progress made toward achieving the
vision statement.

A good example of one such metric is the not-so-humble income (profit and loss)
statement. Though this figure is an important measure to shareholders and is an
indicator of solvency, the “bottom line” doesn’t tell you why your
margin is getting bigger or smaller. It cannot tell you the success of
individual decisions, and it does not disclose lost opportunity for greater
gains. Large aggregate measures like the bottom-line don’t distinguish good
strategy from bad, and they provide no indication of the sustainable
competitive advantage.

Medium and large businesses make hundreds or thousands of critical decisions
each period. Responsible metrics must provide enough frequency of information to
allow decisions to be assessed before the period ends. In this way they provide
the flexibility and agility needed to identify which courses of action allow the
realization of a vision statement and which current practices are jeopardizing
those goals.

Proper metrics strategies capitalize on the skills and experience of a
management team by both providing the information necessary to make quality
decisions and the ability to monitor the critical factors determining success.
They provide accurate information to both anticipate change and to exercise
control. In this way, a good system will make it easier to make decisions by
fact, rather than feel, and empower managers to tackle what’s around the next
bend in the road.

* Business Objects Corporate, The Fact Gap: The Disconnect between Data and
Decisions, Business Week Online, May 1st, 2004

Tim Sweet is the principal improvement strategist with Revolve Business Consulting Ltd. Revolve employs unparalleled creativity to help retail, energy, transport, manufacturing and foodservice companies across the United States, United Kingdom and Canada improve performance, quality and customer service. Tim’s written work is currently required reading in business schools across Canada.

To find out what Tim and Revolve Business Consulting Ltd. can do for you visit http://www.revolveconsulting.com