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Metric Madness?

CFO magazine reports that more than 70 percent of balanced-
scorecard implementations are failing. One major reason seems
to be that managers are drowning in metrics. But is this true?
If so, will Excel provide the solution?

CFO magazine reports on a recent survey about the success that more than 2,400 companies have had with balanced scorecards. The results seem grim.

These scorecard implementations are failing their companies, the report said, by not providing "concise, predictive and actionable information about how a company is performing and may perform in the future."

"The reality is that even the most complex businesses have only around 10 to 15 key elements driving performance," explained one executive with The Hackett Group, which conducted the survey.

Is it really a bad thing for managers to rely on more than a hundred metrics, rather than 10 to 15? Your answer to this question can influence Excel reporting in significant ways.

The Reporting Pyramid

Management reports should be designed like a pyramid.

Upper-level managers typically should receive fewer pages of reports about any area than their direct-reports receive. But in total, the upper-level reports typically cover a wider scope.

For managers, "looking under the hood" usually involves meetings and more-detailed reports...that is, a larger number of lower-level metrics.

The significance of "looking under the hood" becomes obvious when we keep in mind that the logic of reporting pyramids operates at most levels in an organization. As this figure illustrates, each level's summary information tends to look like detail to the next higher level of summary.

Having Many Metrics Could Be Bad...

If the managers in the survey were following 130 equal-level measures, they would be working in chaos. Those measures would communicate many independent facts, but no meaning. No bottom line.

Because few managers could work this way, I'm nearly certain this was not the typical setting in which those many measures were used.

...Or It Could Be Good...

Suppose a senior manager has seven direct-reports, each of which has similar numbers of people reporting to them. And suppose each manager relies on ten key metrics.

The manager easily could follow 130 measures by following her own 10 measures, her direct-reports' 70 measures, and 10 measures each for five lower-level managers.

From this point of view, the manager still follows only 10 measures. She uses the other 120 measures to help her to better understand and control the underlying processes that generate her ten measures.

In short, those 130 measures would fall into a logical and consistent hierarchy. And that's a good thing.

...Unless Excel Reporting Is Uncontrolled

One of Excel's great benefits is that it allows users to think out of the box.

We add some facts from this source, toss in some facts from that source, mix in a pint of logic and a gallon of inspiration, and...voila! We have new insight. Then, given enough time and encouragement, we create another analytical report. And another.

But where should these marvelous new reports fit into your company's current reporting structure? Where should they fit into your managers' busy day?

Many Excel users overlook these critical questions. When they do, they easily can bury managers in hundreds of unrelated metrics each month, just as The Hackett Group reported. If Hackett's survey really did find that managers are drowning in more than 100 unstructured metrics, unstructured Excel reporting likely was at fault.

The Magazine-Quality Solution

The problem seems unsolvable. On the one hand, managers need to concentrate on the key metrics that drive their business. This means they can't be distracted by the interesting but off-point analyses that creative Excel users often generate.

On the other hand, managers would be unwise to ignore the unexpected problems and opportunities that their Excel users discover. Because that which hits the fan seldom is distributed evenly, a manager eventually could regret that he never found the time to read a young bean counter's early warning.

Perhaps the solution lies in the way that magazines handle this problem. Business Week, for example, divides its content into standard sections, International Business, Economic Analysis, Government, and so on ... roughly equivalent to the well-defined scorecard elements. However, the magazine begins every issue with a section of miscellaneous items, which it calls Up Front.

Business Week dedicates three pages to its Up Front section each week. Those pages contain roughly a dozen condensed topics, including a cartoon. The editors manage to fit the most-interesting miscellaneous content into those three pages ... without using small type. Other weekly magazines offer similar sections.

If your managers are buried in ad hoc analyses, perhaps a three-page Weekly Findings report is the way to rescue them.

This one report, distributed weekly or monthly, would contain summaries of the most important key findings from all the ad hoc reports that the department has generated during the period. The report would be long on text and small charts, but short on numbers. Analysts would be forced to explain the significant issues, using very few words. Analysts could no longer merely distribute long Excel reports, leaving the interpretation to their managers.

This approach forces analysts and managers to focus on what the analyses mean, not merely what the analyses say.

Whether your company uses balanced scorecards or not, your managers probably suffer from metric overload. Using a fixed-length weekly report of miscellaneous findings may be the way cure your metric madness.