Most businesses today have a set of measurable operational goals such as KPI’s or OKR’s as benchmarks for executing on the company’s vision. The power of having clear and measurable goals is that it focuses the company by ensuring that the day-to-day tasks align with the overreaching vision of the company. In other words, to achieve a successful business the daily operation must be decomposed into smaller and more easily managed tasks, with a definite connection between the daily micro actions and macro strategy. However, how does a leader know if the enacted micro actions of the company are aligned with the vision of the company? Simple, measurements.
Measurements help organizations know if the work that is being done steers them on the right path. In other words, measurements help the company know what is working, and where there needs to be change. When talking about measuring a company’s success factors, most businesses focus on operational outcome variable such as revenue or number of new customers. While these objective measures are a great indicis of the success of the company, they only measure half of a company’s strengths and weaknesses. To measure the full business, one must also assess the value creators of the company, the human workforce. After all, it is the processes, the leadership abilities and the satisfaction of the workforce that progress the company towards success.
Measuring the Human Factor
While measuring operational outcome variables such as the number of new customers can be quite straight forward, it can be more challenging to measuring the subjective qualities of human experience and skills such as the effectiveness of leadership, satisfaction of the workforce or the grade of innovation in the company.
To understand how subjective human factors can be measured validly and reliably we must look to the field of psychometrics, i.e., the science of measuring unobservable constructs. For measurements, psychometrics applies factor analyses, a statistical method of describing variability among variables in unobserved constructs. A factor analyses reveals whether underlying dimensions describe one or a few factors in a larger number of observations or variables.
Let’s explain with an example. Your company has a goal of becoming more innovative. The employees are willing and eager, but the company still struggles to create new or improved features. They perform a survey asking their employees about their struggles. The results show the employees to have several issues such as lacking creative processes, budget constrained, too much politics, and employees not being open to productive feedback. A factor analyses of the results show that all these issues have one main thing in common (a single factor), the company is too afraid to fail. In this manner, the analyses give the leaders in the company the information they need to create more productive processes.
What Should you Measure?
Quantifying the subjective human experience of otherwise unobservable factors such as grade of innovation or effectiveness of leadership is essential for a company to improve. Using psychometrics and factor analyses, one can not only measure the organization’s performance, but also compare performance across time.
Using standardized and validated measurements allows businesses to compare results between departments to gain insight and create a better working environment. Additionally, the quantification of human factors allows for a simple visualization that any level of the organization can use as benchmarks for prioritizing which areas to improve. Allowing leaders the ability to introduce to the company specific interventions aimed at the core of the problem.
Implementing Intentional Measurements of Operational and Human Factors for your Business.
Knowing the importance of implementing good measurements for both operational and human factors, look into what you should measure in your company and how you can implement measurements to improve both performance and work satisfaction.
We at Østlyng & Bjerke are embarking on ajourney to create validated measures and benchmarks aimed at companies wanting to assess and improve areas of their business. So far, we have created a measurement of a company’s grade of innovation including benchmark scores from a sample of 347 leaders in the public sector. We have also developed a validated measure of leadership capabilities.
But that is only the beginning. We are looking to create more measurements aimed at the areas and challenges that your company might be facing on your way to reaching your goals.