The objective gap: can you align everyone to the objectives of the business?
Every day’s a school day. It’s no different if you’re the ‘expert’ in the room.
I spent yesterday running a workshop for leaders at a large global corporation, walking them through the Intersections foresight process and introducing Stratification, our framework for agile organisations.
We’re quite upfront that neither of these processes are a ‘magic bullet’ solution. They are simply different ways of examining, and potentially solving, a common problem: How do you build a sustainably successful business in an accelerated age?
One component of the Stratification framework is a Unit Template, designed to help people understand the inputs, outputs, and metrics of each business function. I built it as an attempt to segment out the functions of an organisation in a format that could be simply understood as a set of building blocks that — when assembled together — create value.
What I had never had to articulate before a series of smart questions yesterday, was where this set of functional metrics sat in the overall corporate hierarchy — a space often rich with different objectives and KPIs (key performance indicators).
This is in part the result of how our toolkit is developed: not through academic enquiry but through experience.
In two consecutive consulting projects it was clear that the leadership didn’t have a clear definition of the value that each business function, support or otherwise, added. While the sales team can be measured by revenue, how do you measure procurement, finance or HR? Even marketing can be tricky: how do you separate their success from that of the sales team or others?
We decided this was an important question to ask. Each of these functions contribute to the sustainable success of the organisation, but putting simple measures on their day-to-day activity to monitor performance is hard.
Sometimes people do it, and do it well.
Sometimes people create KPIs but these measures aren’t always well thought-out or aligned to the corporate goals, let alone to each other.
For example, manufacturing might have a target for a minimum batch size, because that is what is most economic to produce. But logistics may be optimised around much smaller batches, based on what the customer wants.
Often though, people just don’t create these metrics at all. They provide individuals with a set of objectives, against which they can be measured. And they have a corporate set of KPIs to which everyone — notionally — contributes. But in the middle? There is an Objective Gap.
When all the numbers are going in the right direction, this is fine. Individuals might get pulled up for failing to hit their targets, but as long as the corporation keeps on a profitable growth track, no-one questions function-level performance.
When things start to go bad though, problems become visible. Disconnects and inefficiencies become clear. Issues that should have been identified earlier if functions were properly targeted and measured. The objective gap widens.
Sometimes these issues are internal. Like the issue between manufacturing and logistics.
Sometimes have an external effect, like the conflict between working capital and service benchmarks — another common issue. If a customer wants products quickly, you typically hold more stock of them to ensure they’re available on demand. But this requires more working capital, as well as storage space. Measure the right things at the right level and you can strike a balance, or perhaps identify the need for a more sophisticated solution. Measure just one, and you will operate to the detriment of the customer or the business.
Thanks to yesterday’s session I’m now even more clear about what value is added by this part of the Stratification template. It’s not necessarily about adding metrics. It’s about thinking more clearly about what’s already in place, filling in gaps, stripping some out, and removing conflicts.
And it’s about considering the gap between individual and corporate goals: not everyone can be perfectly aligned to the objectives of a company of tens of thousands.
But you probably can align them to an understandable goal shared with the people around them,