The article highlights a gap in the consistency of business monitoring approaches and proposes a way to build comprehensive health metrics for all operational aspects within the organization. The solution aims to ensure clear visibility of all organizational processes and reduce reaction time for any incidents.
Background
Starting from the moment when one person delegates a piece of work to another, a problem of continuous tracking and monitoring becomes a reality. Now we are literally surrounded by small and large businesses whose owners put their future in the hands of tens, hundreds, and thousands of employees continuously working towards the same goal. Since the very first moment of delegation (please comment on when you think this occurred), the operations of organizations, even those consisting of just one person, have become significantly more complicated. We have to handle accounting and taxes, supply chains and logistics, and many more.
To make their ideas possible, entrepreneurs have to hire consultants even before considering their first employee. The consultants typically work regularly, maintain their schedules, and provide comprehensive reports on their activities after each interaction. Then, our business owner collects reports, examines them, uses them, and, at the end of the cycle, stores them. So, the folder with very important documentation is growing, growing, and growing quarter-by-quarter and year-by-year.
Then the happy moment arrives, and our businessman understands that they can no longer make it alone and hires their first employees. Instead of getting a relief, they face another wave of problems to solve: how to pay salaries, taxes, and all the insurance? How to create an appropriate work environment? What responsibilities should be delegated? How to share a Vision and Goals? How to control the quality of work? However, all those questions ultimately map to the most important one: How to ensure the business remains on its growth track?
Usually, the answer comes straightforwardly: I need tools to automate and control processes in my business. Sounds great!!! And for the majority of cases, the world has these tools in various forms, including task management systems, client management systems, infrastructure monitoring systems, and many others. Most of them have paid plans and fees, require learning and onboarding, and…yes! Hard to change if you’ve already committed to them, so, preferably, you need to make your decision once. And, according to the research, if you hesitate to transform and adopt new things, your chances of success decrease.
To embrace the pain, let’s scale this setup to an organization with thousands of employees that handles hundreds of projects running in parallel. Most likely, it has a huge management team, and the heads of the organization receive exhaustive updates on what is going on with their business during monthly (and rarely weekly) reviews. Those reviews cover project successes and failures, as well as main financial numbers, and highlight upcoming efforts.
Problem
Starting from the very first moment of “offloading” functions and responsibilities and ending with a setup where business owners hold themselves accountable only for high-level decisions, people commit to ignoring the details of their business. The larger the management chain, the more information is lost as it travels from bottom to top. Some people call it delegation. But should blind delegation be acceptable? Some people call it a risk. But is it acceptable to risk without attempting to mitigate the consequences?
NO, for sure!!!
Opportunity
We can monitor all changes within the organization by building simple, aggregated metrics that show the state of the entire business. And the majority are on the way to do this. Companies adopt mechanisms like Objective Key Results (OKRs) to communicate and track progress on critical goals. They are using task management systems that allow to get progress metrics for each project, track completion dates, and provide regular reports. IT teams have infrastructure and operations-related metrics and alarms for their ecosystems. Accounting, sales and marketing, logistics – all the departments of any business have their health indicators.
However, all those fractional metrics create a place for ignorance if not measured and evaluated continuously.
What if we introduce a single metric that aggregates all critical health indicators for businesses by combining all valuable metrics we have? Financial, operational, customer-related – let’s merge all of them into one. Afterwards, what if we introduce alarms when this metric starts to behave oddly?
Before we start merging all data points we have into a single chart, here is the list of requirements to consider:
- All contributing metrics should be normalized. In other words, all metric values should be within a specific interval, the same across all of them. For example, from 0 to 1. This is needed to ensure we can control the contribution of each metric to the final value. Otherwise, values like net income or revenue will make values like employee Net Promoter Score (NPS) invisible.
- All metrics should have the same positive/negative behavior. When the value is growing, something positive happens; when it decreases, we need to take action.
- Metrics should be continuous with minimal granularity equal to your desired review time. Try to ensure you have at least one value per day for each. It may be challenging to achieve, but this will pay off in the long term. Let’s return to this topic immediately after this list, using examples to illustrate the context.
- The metrics have weights to ensure the contribution of the most valuable metrics is more visible. For sure, you want to be notified when your sales drop by 20%. At the same time, a 20% decrease in completed tasks by employees may be just a sign that the vacation season is starting.
- [Optional, but very recommended] All metrics should be collected automatically without manual calculations made by people. In general, this is the only way to ensure a consistent and reliable mechanism.
Let’s conclude the storyline with an example of how different metrics can be approached. The example will be related to the IT space, but building an analogy should be feasible.
Example: Converting deliverables and features into metrics.
Note: For simplicity, we will consider a daily reporting interval, meaning that we aim to have at least one data point for each metric per day. This setup should unblock daily status updates. If you want to have more granular statistics, replace “day/daily” with the required granularity in all the places below.
Situation: You have teams working on multiple projects simultaneously. Each team tracks its progress in the ticketing system and updates it promptly. Each project and each effort in a specific project has different values for the company. Currently, C-level executives receive written status reports with highlights on a weekly basis and a detailed written report every quarter.
Goal: Have a hierarchy of metrics that can replace all the reports and allow for review of project statuses daily.
Approach:
Step 1: All employees should be aware of the priority for their projects and organizational goals. This will unblock prioritization of efforts and provide correct weights for merged metrics. For this, the organization should introduce consistent mechanisms to communicate its objectives, for example, OKRs.
Step 2: Employees working on projects split each project into a set of milestones and granular tasks (the number of milestones and tasks may change along the way). All the work log items should be recorded in the task management system. The goal of this step is to strike a balance between having as granular tasks as possible while not impacting productivity. Ideally, each task should be closeable within one day.
Step 3: Based on the OKRs, managers assign weights to projects, and work begins.
Step 4: Daily, we need to collect the following stats:
- Number of tasks completed and remaining for each project and milestone. If teams perform task estimation, the ticketing system should provide the number of story points remaining and the total for each milestone and project.
- Estimated completion date (ECD) of milestones and projects and history of ECD changes.
- Weight of each project and/or milestone.
- Number of employees actively working on the project.
Step 5: Convert stats into valuable metrics.
Note: Based on the information collected in the previous step, you can create a variety of metrics. Here we will highlight some of them, but please don’t be limited by this list and introduce metrics for each aspect of the project you want to be visible.
- Project and milestone completion percent, normalized to 0-1 interval. It is as simple as the ratio of completed to total tasks or story points.
- Velocity of the project or milestone – a percent of tasks/story points completed per day.
- Risk status – a number from 0 to 1 characterizing the chances of completing a specific project/milestone within ECD. 1 – means no risks, 0 – the effort is entirely off track. To make this possible, we need to introduce a criterion of risky state. In other words, identify what the difference is between a project “On track” aka Green, “At Risk” aka Yellow, and “Off track” – Red. For simplicity, let’s assume that project managers include a 10% buffer in each project’s ECD to account for unpredictable risks. In that case, the Green state is defined as the project being delivered on ECD without a 10% buffer. The At-Risk state is described as still being within ECD, but the project will need some time taken from the 10% buffer. The Red state is defined as the ECD will not be met, and most likely to need to be shifted. Now, to find the real expected ECD, we need to divide the effort remaining on the project (in tasks or story points) by the team’s velocity, which will give us the number of days the project will take to complete with the existing resources allocated. By comparing this data point with a number of days to ECD, we can identify a risk status and alarm in time.
Step 6: Merge metrics into one, taking into consideration weights. Just multiply the normalized value of each metric by its weight, sum all the values, and divide by the sum of all weights.
Step 7: Visualize the aggregated metric, ensuring that clicking on it reveals all the separate metrics that contributed to it. This will provide a possibility to dive deeper into each specific dip and spike in no time.
That was it; it’s not simple, but once you’ve completed this exercise, you will see no issues expanding it to cover all aspects of the org’s operations.
