With a measure of caution
Key ratios have attracted widespread attention. Being able to measure and quantify various phenomena is today’s credo. Dr Mauléon is halfway through a research project financed by the Swedish Research Council for Health, Working Life and Welfare (Forte) on the use of management systems and key ratios to structure and monitor organisations. Management systems may be defined as documented processes and procedures intended to assure that organisations achieve their objectives.
Important to define key ratios
Key ratios and measurements come with a lot of pitfalls. One vital variable to measure is whether the management team is aware of what it needs to know and why. The next step is for management to think about the best way of finding out what it wants to know. Speaking with employees involved in the areas that management is interested in monitoring may be a smart move at this point.
“The most daunting challenge is finding a way of making sure that you are measuring what you need and want to,” Dr Mauléon says. “Key ratios demand clear, unambiguous definitions.”
About the project
In autumn 2013, Forte granted more than SEK 200 million for a research project entitled, ”Use of Management Systems and Key Ratios for Organisation and Monitoring: A Study of How They Are Interpreted and Implemented in Practice with Consequences for Individuals, Organisations and Society,” directed by Christina Mauléon, a researcher and senior lecturer in business administration at the University of Borås. The purpose of the project is to raise awareness about the challenges and difficulties associated with running organisations based on management systems and key ratios in order to achieve targeted results.
Sometimes there’s not so much to discuss – for example a business may need to comply with certain monthly emission standards. All you have to do is monitor a specific number. But take a situation where an organisation wants to quantify its level of “visible leadership” – then you are faced with a much more difficult task.
There’s no way of getting there unless you first talk about the purpose of visible leadership. The measurement itself is simply a means, not an end in itself. If you don’t proceed from that kind of understanding, the key ratio may play a cosmetic role only. This is a common trap that an organisation falls into when trying to please an authority.
Employees need to understand
One conclusion Dr Mauléon has drawn from the organisations she has studied is that not only management but the employees who perform a measurement must understand the background and underlying needs that are being addressed. Correct, uniform implementation is impossible otherwise. She has also observed that commitment and cooperation are much greater in connection with in-house developed than externally imposed (by authorities, etc.) key ratios.
“External demands require that management clearly communicate the purpose of the effort,” Dr Mauléon says.
Key ratios are useful only to the extent that a satisfactory range of values can be determined. Dr Mauléon gives the example of sick leave due to a workplace accident, a parameter associated with safety requirements and cultural assumptions.
“I have seen that particular key ratio reported as red, orange and green simultaneously because each regulatory agency had set its own limit and the organisation had set another one.”
In her opinion, both the organisation and the agencies should question the purpose of the measurement and think about other potential repercussions, including how in-house acceptance of key ratios will be affected.
“The less acceptance, the greater the safety risk,” Dr Mauléon says. “The very attempt to boost safety may be counterproductive in practice.”
Measurements instil confidence
Figures and measurements may very well lend credibility to an organisation, but key ratios can easily turn into an end in itself that circumvents the original intention.
Things to keep in mind when performing measurements:
Clarify the purpose
What do you want to measure? Why? What are we actually measuring is a reasonable question to ask throughout the process.
Present and explain key ratios
Only if key ratios are clearly explained to the employees who will be obtaining them can measurements be performed in a systematic, uniform manner. Listen to the viewpoints of your employees about key ratios and how they are being generated.
Keep track of key ratios
Better to rely on a few well-considered key ratios than many carelessly defined ones. Keep them up to date. Think about how ratios interact with and affect each other.
Dr Mauléon recalls a UK hospital that set a goal of making sure that emergency room doctors saw patients within four minutes of arrival. The results were too good to be true. The target was met for virtually every patient. The key ratio was as green as could be.
But a closer look revealed that the ambulance drivers had acquired the habit of waiting outside until a doctor was available.
“It was a disaster from the point of view of patients,” Dr Mauléon says.
Or how about the boss who decided to inspect his organisation 15 times a month? He figured out that he could streamline the process by performing all the inspections on the same day.
Such behaviour reflects a number of different factors, but the most important thing to realise is that it can compromise other measurement processes,” Dr Mauléon says. “If an organisation carried this approach to its logical extreme, it might reach its annual emission limits by the end of January, which would pose a deadly threat to both life and the environment.”
Need to think and reflect
Ongoing analysis of key ratios – as well as reviewing their interaction with each other and the targets set by the organisation – can avoid unnecessary, erroneous or misconstrued parameters.
“My study has found that organisations frequently do not take the time to analyse and reflect about key ratios, or explore them in an in-depth manner,” Dr Mauléon says. “That is highly unfortunate given that ratios must continually be revitalised and updated. They provide real benefits in day-to-day activities, not simply as abstract data in a management system.”
Dr Mauléon’s conducts research “on the ground” with the intention of helping the organisations she examines. Her hope is that she can encourage serious thinking about the purpose of key ratios and the adoption of more measurement and monitoring systems regardless of the type of organisation.
“The basic imperative as far as I am concerned is to shine light on the issue and discuss the social, organisational and individual applications of various types of measurements.”
Text: Helena Lindh
Photo: Suss Wilén