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Why the Important Things Are So Hard to Measure
ESG and DEI are examples of things that are strategically important to business success, but are extremely hard to measure meaningfully. One skill helps us solve this gridlock.
The definition of business success has evolved far beyond financial results alone. Over the last 30 years, that definition has opened up significantly, to hold a more complete balance of results that make a business or organisation successful:
- The Balanced Scorecard added customer, internal business process, and learning and growth results.
- Internationally, all the Business Excellence frameworks looked for results defining value from five stakeholder groups: customers, employees, shareholders, communities, and suppliers and partners.
- The customer-centricity movement added more specific customer-related results, like loyalty, advocacy and lifetime value.
- Gallup's research defined the dimensions to make employee engagement a well-defined result.
- The United Nations introduced Sustainable Development Goals, adding even more results for the planet and for political and economic challenges for the world (not just business).
- And more recently, frameworks like ESG (Environmental, Social, Governance) and DEI (Diversity, Equity and Inclusion).
Ever since we left our financial-only definition of business success behind, we've struggled to meaningfully measure what matters. Money movement is easy to capture, so the data for the financial measures is readily available. And accountants already worked out the measures to track.
It's not that easy anymore.
Non-financial results are intangible and complex.
To illustrate what ESG, DEI and other intangible goals are, I sampled from real strategic plans around the world the following intangible goals. Do any of these examples have a similar sound to the non-financial goals in your strategic plan?
- Deliver sustainable transport and travel aligned with the city region.
- Supporting integrated management through adequate legislation and regulations.
- Institutionalize good governance focusing on transparency and accountability and Cultivate a Corporate culture and change management that enhances performance.
- We leverage diverse perspectives from a range of people to improve policy and program advice and delivery.
- Addressing systemic barriers to equity and inclusion and progressively integrating our guiding principles throughout all decisions, processes and outcomes, to transform practices.
- Demonstrate a commitment to a diverse, equitable, inclusive, and accessible [agency] through accountability, data collection, analysis, and effective policymaking.
- We will create a diverse, equitable and inclusive environment that treats all associates with dignity and respect.
- Develop a culture of inclusivity to ensure the work environment actively meets the needs of its people.
Are meaningful ways to measure these obvious to you? Almost certainly not. Strategic results like these often haven't been measured before, so any data about them rarely already exists. We aren't naturally equipped with the skills to quickly arrive at meaningful measures for these, and many other intangible results.
The obvious answer might be simply to leave it to the ESG, DEI and other experts to figure it out and tell us what to measure. Like our accountants did with all the financial metrics. Like Gallup did with the Employee Engagement Index. Like Fred Reichheld did with the Net Promoter Score.
Cookie-cutter KPIs are fine for something like finance, because every business or organisation must meet roughly the same set of fundamental financial requirements. But organisational culture, customer experience, impact on the planet, contributions to the world - these are far more nuanced for each organisation. Cookie-cutter KPIs are almost an insult to the uniqueness and specialness of each organisation.
Don't rely on cookie-cutter KPIs.
If we don't rely on cookie-cutter KPIs, we must be prepared to do some work. Finding meaningful ways to measure the ESG, DEI and other intangible results that deeply matter to our organisational success requires a change in our approach. The change in our approach is a skill worth developing.
There's a clue to the skill we need. It's that the hardest things to measure all have one thing in common: they are vague, intangible, undefined. (They are weasel words.)
If you're already familiar with my work, you probably already realise we can't measure what we can't observe or detect through our five senses. And therein lies the key to making intangible results like ESG easier to measure. We need to define what exactly we mean; what exactly 'it' is that we want to find a measure for.
The way to define exactly what those intangible things mean is to ask questions to unpack them, and zoom in on exactly what about those things matters most to us.
Powerful questions are the key to better KPIs.
Questions like these are easy to ask and exactly what's needed to make our intangible results more easily measurable. They are simple questions, but no-one should ever be afraid to ask them. In fact, if no-one is asking them, you're surely going to waste an obscene amount of time and money measuring important things the wrong way.
Just play with them...
Q1 What does 'it' mean, exactly?
What does governance mean, exactly? What does diversity mean, exactly? What does customer-centricity mean, exactly?
And in answering this, it's quite important that we be as clear and straightforward as we can. So avoiding more weasel words is wise.
Q2 What does 'it' mean to us, in our situation?
What does accountability mean to us, in our situation? What does energy efficiency mean to us, in our situation? What does employee health and safety mean to us, in our situation?
Answering this type of question means contextualising the result for our organisation's uniqueness, to be sure we don't adopt irrelevant parts of these often very broad results.
Q3 What about 'it' is the important part for us?
What about pollution is the important part for us? What about equity are the important parts for us? What about community contribution is important for us?
Not every part of every result is priority to improve. A strategy that be achieved is a strategy that ruthlessly prioritises what most needs to shift, right now.
Q4 If 'it' was already enough, how would we recognise it?
If a learning culture was already embedded enough, how would we recognise it? If executive compensation was already enough, how would we recognise it? If cyber security was already enough, how would we recognise it?
What's the point having any kind of goal if we aren't aware of what would convince us we'd achieved it? Sometimes the only way to understand a result is to imagine how it would appear in the world around us.
Q5 If 'it' wasn't enough, how would we recognise it?
If diversity wasn't broad enough, how would we recognise it? If employee engagement wasn't high enough, how would we recognise it? If our carbon footprint wasn't small enough, how would we recognise it?
This question is the flip side of the previous one, because sometimes, for some people, exploring the absence of something might be easier than its presence.
Q6 How could we explain 'it' to a 10-year-old?
How could we explain data security to a 10-year-old? How could we explain inclusion to a 10-year-old? How could we explain ethical behaviour to a 10-year-old?
This question is another opportunity to rearticulate those intangible results with words that make it easier for everyone to bring them to life in their mind's eye. Weasel words always fail to do this.
Develop the skill of clarifying exactly what your results mean.
When you can't work out how to measure something, it's almost certain you haven't clearly defined that something. But when were we ever taught how to do that? All our education and coaching in business has taught us to write goals in the very ways that prevent them from being measurable.
But when we learn this skill of writing measurable goals, suddenly meaningful measurement is unbelievably easier. It's not really about finding better measures. It's about writing clearer results, and better measures come from that. Here's a deeper dive into what I mean.
Use this article in your own publications...
Read more at measureupblog.com
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