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Tales of the expected

Business performance measurement sounds simple. But for it to have an impact there must be an underlying story of where the organisation is going – a tale understood and endorsed by everyone involved. David Baines explains finance’s crucial role in writing that story – and choosing the measures that underpin it.

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Tales of the expected

To the uninitiated, business performance measurement sounds like child’s play. You decide your goals, choose suitable measures, then track them. Because what gets measured gets managed, achievement follows automatically, right? Sadly, no. Those who have tried it know it’s not that simple.

There has to be a story behind the measures for this to work. This story describes how your organisation is going to achieve its objectives – and the key things you have to accomplish in order to do so. The story has to be easy to follow and plausible. If it’s done right, the performance measures will follow naturally.

But does your organisation have such a story and can you put your hand on the document that tells it? Is it easy for everyone to understand, can they tell the story unprompted, do they believe it?

Unless you can answer “yes” to these questions… why should people strive to achieve the measures by which you judge them? Without their active agreement you have to resort to hoping that they do what you tell them.

Carrots, sticks and stories

My firm has come across many FDs, and their departments, who are desperately seeking the magic measures that will make the massive difference to performance.

But whatever carrots or sticks finance uses, the rest of the organisation seems impervious to its engagement. The nub of the problem is that people’s behaviour is driven by two forces:

• What the organisation tells them to do – the “plans” route on the left.
• What they think is important and what they want to do – the “values” route on the right.

If people don’t understand the plans – or don’t agree with them, or don’t think the measures reflect the plans – the two routes conflict. The bad news is that the “values” route usually wins hands down.

This is an extract from the Finance & Management Magazine, Issue 204, November 2012.