Prioritize performance trajectory Track trajectory of the metrics that matter and make trade-offs to accelerate performance improvement

Introduction: Increasing impact

“Are we getting better at achieving our outcome?” This is the crux of workgroup performance, and almost no one measures it. Not only that, but in times of more rapid change—when the requirements, the technologies, the competition, and the contexts often change minute-to-minute, day-to-day, and incremental improvement can’t keep pace—the important questions to consider are, “Are we getting better at achieving our outcome quickly enough? Are we getting better, faster?”

It may be insufficient to commit to a particular outcome. In a world of exponential technology advances, we need exponential, or accelerating, improvements in performance. That means committing to a trajectory, not just a target. Frontline workgroups will be making decisions and solving problems, in changing contexts, with limited time and other resources. It can be easy in this type of environment to get caught up in the immediacy of the day-to-day demands, acting to maximize impact in the moment but getting only incrementally better and possibly moving in a direction that could soon be obsolete. Pressures on the larger organization may push the workgroup further to focus on efficiency at a time when it needs to be focused on creating more value or delivering a better outcome. A key to shifting the focus away from efficiency is to identify and prioritize what will have the biggest impact on the shared outcome.

Setting high-impact performance objectives and tracking the trajectory of their improvement can help workgroups make trade-offs that may accelerate them toward better and better delivery of the shared outcome instead of getting distracted by incremental or short-term gains. As Amazon founder Jeff Bezos noted in 1997, “Because of our emphasis on the long term, we may make decisions and weigh trade-offs differently than some companies.”¹ Focusing on trajectory can help workgroups prioritize the signals that matter and balance opportunity with distraction, discipline with flexibility, and experimentation with learning.

As workgroups come together to tackle the unexpected, the right performance objectives, and metrics against them, can help the group better understand the impact of their work, improve decision-making around priorities, maximize learning in the short and long terms, and continue to motivate action to figure out how to reach the next level.

The prioritize performance trajectory practice: What it is

This practice is about explicitly identifying and tracking the key metrics that matter for improving the shared outcome. It involves regularly assessing trade-offs across the metrics in order to achieve greater impact faster. The emphasis is on looking at performance over time and not settling for linear improvement. The performance trajectory indicates whether the workgroup is building in enough opportunity for experimentation, learning, and knowledge creation to keep up with, or ahead of, the changing environment.

• Focus on value. What does performance mean in terms of the value we deliver and what we are trying to achieve? Define better in the context of the shared outcome, and clarify how it might be measured.
• Focus on workgroup operating metrics. What frontline metrics could have the greatest impact on the organization’s key operating metrics? What metrics and performance objectives will support improvement in the outcome? One challenge is that most organizations don’t measure workgroup performance, either at a point in time or over time. The individual is measured, and business units are measured, but few organizations track anything at a workgroup level.
• Make small moves, smartly. Take actions to understand the key drivers of the shared outcome, and what aspect of performance is most meaningful to improve for that outcome.

. . . and what it isn’t

• Efficiency. Efficiency-based improvement can increase for only so long before it generally tapers off. You typically won’t accelerate performance improvement by focusing on efficiency.
• Financial performance. Revenue is usually an inadequate metric for value and, with few exceptions (such as for sales groups), is almost meaningless at the workgroup level.
• A lot of numbers. The metrics that matter can change over time, but if you have more than three key metrics, you likely have too many.
• Performance snapshots. Performance at a particular point in time offers little useful information about where you are going and how you might get there.

Putting the practice into play

Caught up in the action of the day, workgroups often need to make decisions fairly rapidly; even reflection and post-action debriefing may be compressed. They won’t have the luxury of waiting for quarterly reports to see how effective their actions were, and the financial metrics would yield little insight into an operational workgroup’s effectiveness in any case. Instead, for workgroups faced with prioritizing their own efforts and resources, the question is: What can we look at, today, that can give us an indication of whether we are taking the right actions to achieve the impact we want to in the future? Workgroups that want to accelerate performance improvement will have to identify which metrics matter most and track their trajectory over time to make better, more informed, trade-offs.

Identify metrics that matter

The winners in this exponential age will likely be those that can focus most effectively on the relevant leading indicators of performance. Good metrics can provide visibility into impact at any time. This can motivate the group and also overcome complacency, highlighting relevant trends and flagging potential problems and opportunities earlier.

If the adage what gets measured gets managed is true, it is important for workgroups to be thoughtful about measuring what matters. Too often, it is also true that we measure what we can, or because we can, not because it matters. Measurement should reflect what you value and what will be most important to achieving the shared outcome at any given time. While it may seem obvious, the most important thing for a workgroup to measure is generally workgroup performance, against the shared outcome and the objectives that support the shared outcome. Within the workgroup, that means prioritizing group performance objectives over competing agendas, at either the individual or department level. Shifting incentives toward workgroup performance can help, but that decision is often outside the group’s control. Beyond the group’s performance of the shared outcome, what else matters? Define a few objectives that can have a significant impact on improving the outcome, and identify the associated metrics that will be most important at a point in time to indicate whether the group is on track.

But focusing too heavily on measurement and metrics based on what is available can lead to undervaluing areas in which measurement or data is less available. One consequence of being too focused on the metrics at hand—whether or not they are the right metrics—is that we may dismiss feelings and gut instinct. Don’t give up on your gut just because you can’t measure something. For a workgroup, that means treating gut instincts and feelings as potentially valuable inputs and exploring them as part of developing approaches and making decisions. Such feelings may reflect important information that hasn’t yet fully emerged about the context or connections between disparate and unarticulated ideas. Workgroups that deal only in facts may miss important information and be hostage to courses of action guided by irrelevant or incomplete metrics. At a minimum, a gut reaction should make us ask some questions: What assumptions are guiding this feeling, and how true are they? If I had no background on this problem, what would I see and believe about it? Do we need to identify new metrics? Workgroups can use gut instincts to reconsider the objectives or look for alternative proxies that better represent progress on the desired trajectory.

Too many metrics can be as bad as no metrics. The point is to closely watch a few numbers, not to spend a lot of time collecting, reporting, and managing metrics. Too many metrics can dilute the group’s focus. Identify the few that can give the group the best information about how they are doing and what to do next to have even more impact. Each Amazon “two-pizza” team, for example, focuses on a single business metric, with that metric serving as the team’s “fitness function.”² The metrics are a tool for discussion, course correction, and learning, not an end point or the basis for assessing rewards and punishment.

Not all metrics are created equal: Some might indicate a company’s financial success or highlight a single initiative’s marginal impact on reducing turnaround times. While senior executives tend to use financial metrics as a measure of performance,³ workgroups should put operating metrics before financial ones. Good metrics are leading rather than lagging, indicating what impact an action is likely to have, while there is still an opportunity to influence and adjust it. This is important because failures can unfold over long periods of time, and leading indicators can help you get ahead of the potential challenges before the failure plays out. Financial metrics are generally easy to measure but tend to be lagging indicators, reflecting the financial impact of a previous operating environment. They’re also often difficult to tie back to specific initiatives or workgroup performance. Operating metrics, such as customer churn rate or time to introduce new products to market, tend to be more timely and thus more useful, reflecting a current state of performance that is within the workgroup’s ability to affect. They anticipate the resultant financial performance.

In working on Harmony of the Seas, Royal Caribbean Cruises Ltd.’s (RCL) largest and most technologically advanced ship, the company’s Ecorizon workgroup was committed to making it the most energy-efficient cruise ship on the seas. The group began with an objective of reducing energy use by 12 percent over the most energy-efficient ship at that time. The workgroup identified 89 initiatives that could improve the ship’s energy efficiency—from the weight and amount of materials used in the ship’s hull and the types of engines installed, to energy reminders for guests, glass thickness on balconies, and interior designs that maximized natural light. The workgroup focused on a few initiatives that would drive the majority of the energy savings, but over the course of three years, it also pursued “quick” wins, always keeping an eye on progress against the energy-efficiency metric; ultimately, the group delivered a more than 20 percent reduction in energy use.⁴

Figure out which leading metrics will be most important at any point in time. The optimal operating metrics, ones that can have the greatest short-term impact on the shared outcome, could give the workgroup a tangible lever with which to improve performance. For example, instead of focusing on call-center costs, a company that aspires to deliver top customer service might identify a short-term objective, such as reducing average time to resolution, that would accelerate progress toward that long-term outcome. This objective, and the associated metrics, might lead the group to prioritize an initiative to find trends across calls. A recent study found that companies that measured a relevant nonfinancial factor (and validated that it had an impact on value creation) earned returns approximately 1.5 times greater than those of companies that didn’t.⁵

How can workgroups target the right metrics? First, understand the connection between action and result through small what-if experiments that can test which metrics have the biggest impact on performance. Beware of metrics that are used as a matter of habit or convenience that could be flawed or inappropriate for the objective. For example, in the well-known story of Moneyball, Oakland A’s then-general manager Billy Beane changed the game when he chose to focus on then-arcane metrics such as on-base percentage and slugging percentage based on a deep understanding of cause and effect.⁶

Operating metrics are just the beginning. With new technologies that make the invisible visible through sensors and real-time capture, workgroups may find new ways to monitor interactions and other patterns that would define new metrics that matter. For example, research on social metrics has revealed that certain patterns of interaction within an organization can help to accelerate the introduction of successful new products and services.⁷

Everything important you manage has to be on a trajectory to be ‘above the bar’ and headed for ‘excellent.’

—Ray Dalio, Principles: Life and Work, 2017

Track trajectory, not snapshots

A trajectory is a path, a series of positions over time. A snapshot, which is how many organizations look at performance, is a position at a single moment in time. Workgroups that accelerate performance over time are on a steeper trajectory—over time, the end point could be very different than a workgroup on a path of linear improvement. Looking at any given snapshot, however, wouldn’t tell a workgroup whether its performance was accelerating or incremental. Snapshots offer little useful information about where you’re going and how you might get there. Workgroups aiming to accelerate performance should pay attention to the trajectory—considering where they started, the rate of progress, and the direction they want to go—and not get too excited or discouraged by performance at any given moment.

When Billy Beane started using his new metric analysis to acquire players, the new Oakland A’s roster got off to a slow start: After 46 games, the team had a record of 20 wins and 26 losses. Beane ignored the discouraging snapshot, sacrificing short-term fan approval by refusing to abandon his metrics and bring on higher-salaried stars, and focused on trajectory. By the latter half of the season, the A’s had improved to 68–51—and then came a 20-win streak, taking the team’s record to 88–51. The A’s ended the season with 103 wins and 59 losses. Beane constantly reevaluated his system of leading indicators—beyond the simple win-loss column—as the environment changed, aiming to confirm that he was best using the metrics.⁸

While Beane’s example shows the potential value of focusing on the group’s trajectory when snapshots would indicate the group is performing poorly relative to others, it can be equally important to maintain a focus on acceleration when snapshots indicate the group is doing well. An upbeat snapshot can breed complacency: If the snapshot indicates that we are hitting a pre-set goal or performing as well or better than competitors, we are typically satisfied. There can be two problems with this:

• As industries or markets undergo significant change, an organization’s known competition may be less and less likely to be the relevant performance marker, and today’s drivers of high performance might be obsolete tomorrow.
• Snapshots can be easily gamed in the moment—by making teams smaller, for example, and pushing the remaining people to work harder. These tactics generally can’t be sustained and, over time, generate diminishing returns or even productivity erosion.

For a workgroup to focus on acceleration, it should find a relevant way to track its improvement relative to past performance. For some workgroups, tracking metrics in and across situations over time might mean clustering projects of similar type or scale or looking at improvements within a longer-term project and being aware of the factors that could limit direct comparison. Focus on metrics that can be tracked in relatively short intervals—these may provide more data about changes over time that can inform how workgroups approach reaching the next level of performance. For example, at sparks & honey, a New York-based advertising agency, every two weeks a small workgroup reviews a key set of operating and performance metrics related to the group’s daily “culture briefing,” a critical driver of the insights and pattern analysis that underpin the agency’s products and services. Looking at the week-over-week changes in the metrics and comparing them to the longer trajectory can allow a fast-growing company to scrutinize what is shaping performance, identify areas to explore or improve, and develop new approaches to reach the next level.⁹

A workgroup can track performance over a series of events even if many of the group members change from one project to another. The performance of the overall pool from which they are being pulled should be accelerating over time, creating new knowledge and practices. This is another argument for keeping metrics simple, easily understood, and few.

But how do workgroup members know if they are on the right trajectory? If competitors aren’t a relevant guide for how high to aim or how fast to move, what is? Don’t get trapped into comparing against others. The comparison should be internal, to the workgroup’s own trajectory so far. Keep moving the edge. Where are we improving most rapidly, and how can we do more of that? Where is improvement slowing down, and how can we change what we’re doing to improve the trajectory? It can be valuable to look at the performance trajectories on other fast-moving edges, including in unrelated arenas—not to judge success but to ask what can be learned from them, especially about effectiveness. How are they doing more with less? Accelerating performance improvement is unsustainable if it’s accomplished by throwing more and more effort and resources at it. Part of the key is learning to get better at accelerating value creation—otherwise you could just get widespread burnout.

[At Amazon] we’re willing to plant seeds, let them grow—and we’re very stubborn. We say we’re stubborn on vision and flexible on details.

—Jeff Bezos, 2011 letter to Amazon shareholders

Tackle trade-offs

In times of uncertainty and rapid change, one of the greatest risks is distraction. Workgroups constantly make trade-offs: between short-term demands and long-term expectations, between learning and efficiency, between better and cheaper, and so on. On the road to accelerated performance improvement, workgroups may have to make trade-offs that run contrary to the short-term mind-set ingrained in many organizations. While most companies are willing to sacrifice long-term economic value for short-term earnings, a short-term mind-set can distract a workgroup into activities that deliver a quick performance bump but don’t help the group get on the path for higher performance in the long term and may even send it in the wrong direction.

Workgroups looking to accelerate performance should think both short and long. The group has to act in the short term, often addressing a challenge over a short, or very short, time frame. At the same time, the workgroup itself may continue, possibly with a varying subset of members, over a longer period of time, pursuing the same shared outcome across changing conditions. At the organizational level, companies such as Amazon and Netflix have successfully accelerated their performance by focusing on two extreme horizons: Where/what do we need to be in 10+ years? And what two or three initiatives can we take in the next 6–12 months to accelerate toward that goal? The long-term focus helped Netflix see past the significant drop in stock price the company initially experienced when it shifted to streaming services.¹⁰ While workgroups might not operate in such a long time frame, this type of two-horizon approach is a useful model for more informed trade-offs: It allows workgroups to iterate between where they are now, where they want to go in the future, and what types of actions can address the immediate demands of the present in a way that puts them on the right path toward significantly better long-term performance. Use the long term to aim high, focus efforts, and create opportunity to learn from successes and failures. Use the short term to test assumptions and increase learning.

Some actions result in short-term gains and generate momentum. Some make a long-term impact. Ideally, a workgroup will take pragmatic actions, delivering value and learning in the short term and building the foundations for longer-term learning and value creation aligned with the long-term objective. Thinking on the extreme long-term horizon can have an added benefit of encouraging the workgroup to think in a space that others are not yet thinking about. This practice allows workgroups to use information and learnings from quick actions to adjust the long-term objective and challenge themselves: Is the most important thing still the important thing?

Returning to the Royal Caribbean example, being in the top echelon of energy-efficient ships is one objective alongside others such as improving guest satisfaction. These long-term objectives help the workgroup prioritize initiatives and opportunities that come its way, helping it look beyond just the savings that can be built into the ship design. Instead, members also look at opportunities to experiment with different partnerships, on-board experiences, and refurbishments a few years down the line to include innovations that don’t yet exist.¹¹

Finally, even for those who nod their heads and recognize some truth in the idea that we are moving from a world of scalable efficiency to scalable learning, chasing efficiency can be a hard habit to break. Efficiency as a goal and a value is so baked into most of our organizational structures—even those that are incredibly inefficient—that workgroups may default to favoring efficiency as a performance objective and will put time and resources to the activities that gain measurable improvements in efficiency. Efficiency tends to be particularly compelling because it lends itself to measurement. But workgroups that want to get better, faster, over time may have to consciously emphasize effectiveness over efficiency. Mistakes, while the enemy of efficiency, can be the fuel for learning how to be more effective. This shifts the emphasis away from performance in the moment and away from ad-hoc measures of success. Paradoxically, it is through focusing on improving performance over time that groups can get better at addressing ad-hoc needs.

This isn’t to say that efficiency doesn’t matter. The answer to accelerating performance cannot be simply to work harder and harder. No amount of commitment to a shared outcome will prevent eventual burnout if the workgroup doesn’t also become more efficient at creating value. The difference is that it is efficiency in the service of value creation.

Trade-offs are part of a workgroup’s reality, and a whole group should be engaged in them to make better decisions, avoiding the trap of splitting the group. For example, when part of a group focuses on short-term solutions while others look at long-term goals, each can venture too far down its own rabbit hole, missing opportunities and changing context, and creating an environment in which people talk past one another and become artificially invested in one side or the other.¹² The tensions between trade-offs create friction, even if the group doesn’t encourage factions. Making distinctions between temporary challenges and enduring problems, nice-to-haves and need-to-haves, big problems and acute ones, can help workgroups better understand what the issue is before deciding what to do about, making the trade-offs, and tensions easier to navigate.