InetSoft Webinar: Number One – Measuring Performance Based on the Past

This is a transcript of a Webinar titled "Top Ten Business Intelligence Mistakes” hosted by InetSoft. The speaker is Christopher Wren, Principal Consultant at TFI Consulting.

What I am going to talk about is some of the dumber things I have seen organizations do when they are trying to measure performance, and I've narrowed it down to these top ten business intelligence mistakes.  There are more than that, but I am only going to talk about ten! 

And this is not going to take the full time that we have on the schedule so I have time for questions if you want to discuss any of these things or challenge my opinions about these things feel free.  By the end of the session I’ll probably manage to offend just about all of you, so just be warned!

So the first big mistake that I’ve seen companies make is when they measure most of their performance on the past, lagging indicators in the process. They are judging the health of our enterprise by looking at the past.

I came across a study by the American Productivity and Quality Center in Houston, and it tried to identify who has the best balanced scorecards at American companies. One of the things they found was that in just about all of them, including the ones that they viewed as the best, they were all measuring the lagging indicators. 

I worked with a major bank recently and they told me they had a balanced scorecard and I looked at their balanced scorecard and everything they were measuring was something that already had happened in the past. 

So people haven’t seemed to have picked up on the concept of cholesterol measures or leading indicators but rather still mostly measure the past because those are things the things that are real like money in the bank. Those are things that are real so they are important to them.

At the same time though, they were late to put their attention on problems like we went over budget, missed the deadline on the project, or an employee quit. So whether it’s financial measures, employee measures, or customer measures, there are still lagging indicators or measures on the past. We look at how most industrial organizations measure safety and they do so by counting accidents. How many people got hurt this month, somebody’s got to cut his finger up and put a dot on the chart. As a result, they are having a hard time coming up with these leading indicators. The big problem is there aren’t enough leading indicators on most measure or performance in companies.