Many companies are measuring the wrong things and ending up with the wrong results. Many times we see organizations get stuck on measuring what’s easy instead of what’s useful. Or they focus on metrics that tell them whether they’ve succeeded or failed rather than measuring the behaviors that drive success.
Predictive metrics are the solution to this problem. Predictive metrics are fundamentally different from results metrics in that they measure a process or behavior rather than an outcome. The Predictive Metrics Tree is a tool that ensures that what you’re measuring helps you achieve your program goals. It provides a direct line of sight between the project goal and the few (three to five) key metrics that predict the likelihood of achieving the desired goal.
Benefits of the Predictive Metrics Tree
- Measuring things that matter – not just what is easy to measure
- Measuring three to five elements instead of dozens allows the project leadership to focus on the most critical areas and make better decisions
- Establishes an early warning system that helps you get drifting projects back on track
Constructing a Predictive Metrics Tree is a cross-functional group process. Staying focused on the three to five key drivers that will have the greatest impact on the program goal is critical. Having identified these drivers, it is easy to come up with initiatives and metrics that monitor progress. Define each level in the diagram as follows:
- Project Goal: The project goal is a shared objective that is time-bound and measurable. The team derives the goal from a broader organizational and/or corporate goal. This is the result metric that the team typically measures. Examples include delivering a project against a specific schedule, as well as cost, quality, and revenue targets.
- Key Drivers: Once the project team establishes a goal, identify the three to five key actions that will have the greatest impact on achieving that goal. It is important that the team limit the number of drivers to sharpen their focus on high-impact areas and to avoid measuring everything.
- Initiatives: The initiatives are the key actions within each driver that will ensure that the team achieves its goal. By identifying the key initiative within each driver, the project team continues to narrow its focus to gain clarity on the actions or behaviors that will lead to accomplishing the goal.
- Predictive Metrics: The predictive metrics measure the processes or behaviors that drive progress toward the goal. For each initiative, the project team will identify one measurable parameter as the best indicator of progress. Make sure that each predictive metric has a detailed definition, and that you specify how frequently you will collect the data, the units of measurement, and target values for the metrics.
Once the team defines three to five predictive metrics, they should track them on a daily or weekly basis. Do this in the weekly project team meeting or management review. Construct a predictive metrics dashboard as a single presentation slide and include it in the review.
The predictive metrics in the chart above include:
- Schedule Prediction Accuracy Metric – measures schedule deviation against the planned schedule using the formula [Actual Schedule – Predicted Schedule/Predicted Schedule]; target value: less than 10%
- Résumés Screened Metric – number of candidates screened via phone screen; target value: more than 10
- Weekly Conversion Rate Metric – number of prospects per week who are converted to customers entering a one-year agreement; target value: 40 per week
- Estimated Cash at Close – predicted cash at the closing of the next round, target value: $1M or more
The metric “Résumés Screened” is an example of the power of predictive metrics. Many managers would be tempted to measure the initiative “10 New Hires” with the metric “number of new hires this week or month.” But the latter is not predictive. With the metric “Résumés Screened,” you get an early indication of whether or not you’re going to hit the goal of your initiative (10 New Hires).
Since you monitor this predictive metric on a weekly basis, the hiring manager knows when she must budget time to screen résumés. Over time, you can set targets for the number of résumés you need to screen to hit the goal.
A Predictive Metrics Tree is one of the best process management tools. The predictive nature of these metrics allows managers and their teams to see where they stand and where they are headed relative to a target, and to continually optimize their approach. The Predictive Metrics Tree helps align the organization and reduce waste because all the initiatives are coordinated and tied to the larger objective.