Senior leaders have been wrestling with strategy for years. There has been a trend over the last few decades of linking metrics to strategy. This has obvious benefits, but can be counter productive. An article in the September issue of the HBR highlights an example, where this has gone spectacularly wrong. Wells Fargo was an extreme example of where using metrics to drive sales induced staff to setup deposit and credit card accounts without the client consent.There were significant fines, reimbursement of fees and the consequent loss of reputation.
In my experience rules drive behaviour, and the wrong rules drive the wrong behaviour. We can liken a a rule to a KPI in this case. As shown in the above example the drive for measurement, can lead to unintended consequences.
Strategy by its very nature is dynamic, and thus by definition it is difficult to apply hard rules. In fact applying KPI's or hard rules could mean that what you really have is a short term approach rater than a strategy. I think that when measuring strategy, softer KPI's should be used rather than hard financial metrics. Typically these metrics should include elements such as levels of customer or employee engagement, key strategic milestones against a plan, market growth, system change integration and execution to name but a few. These metrics should be dynamic to reflect an ongoing strategy. If the metric is no longer driving a critical output then ideally the metric should be substituted. One of the best ways to come up with the best metrics is to take a scenario planning approach. Furthermore scenario planning can help identify with upside benefits vs. downside risks. Scenario planning also provides greater breadth and context.