Scorekeeping including metrics, scoreboards, and scorecards are a key component to the management systems that enable contractors to execute their strategic market choices and develop talent. Contractors rarely lose sight of the importance of getting work and doing work, but sometimes the scorekeeping falls short due to one or more of the following:
- Level of Detail (LoD)
- Data Collection
Let's unpack each of these further including some examples where applicable:
Scorekeeping has not kept pace with the growth of the company including the changes to leadership focus, market strategies including geographies, project types, and scopes along with the added layers of management, increased specialization of job roles, organizational structure, and management systems.
Scorekeeping is no longer in alignment with the operating rhythm of the projects, business, and talent development. This may include having too much of a lag to be actionable, too frequent resulting in overload, or too inconsistent. There are many factors that can require a change in timing, such as the workforce dynamics having less experienced crews compounded by field supervision also being spread too thin.
The scorecards used for individual contributors and managers are not tightly aligned with the key results in their job descriptions.
- This problem gets worse if the key results in job descriptions are not aligned up and down the organization as well as horizontally with peers.
- The problem becomes exponentially worse if performance evaluations are done off those misaligned key results in the job descriptions.
This is the construction equivalent of trying to build a project from poorly coordinated construction documents (CDs). There will be lots of RFIs, changes, schedule delays and cost overruns, plus lower morale of the project team and likely safety and quality issues caused by excessive rework under pressure.
The scorekeeping measures things over which individuals and teams have little or no direct control. With career and company growth, accountability progressively increases while direct control decreases. Job role expectations, scorekeeping, and performance evaluations must take this into consideration and be aligned.
For the key results expected of a job role, plot them on two dimensions:
- Impact on the outcomes for the business - ranked from highest to lowest.
- Degree of control - ranked from highest to lowest.
This simple analysis can be done with Post-It notes and in a group discussing the differences between how different people perceive impact and control. This is both how you prioritize the metrics to focus on while aligning the team and developing more of an internal locus of control.
“I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.” - Bruce Lee
It is easy to continue adding metrics – even if 100% of them are good, it can still cause overload and confusion for the person trying to interpret, decide, and act upon them. Know that this also changes with growth trajectory.
We’ve seen contractors who have run very optimized but low-growth businesses that use dozens of metrics on their scorecards because the team has had the time together to deeply learn and deliberately practice.
That seems like a great foundation to grow from, but the challenge is that during more rapid growth, new people joining the team struggle to prioritize and become overloaded. Always make sure that your metrics are prioritized around what is at the intersection of greatest impact and greatest control by job role.
LEVEL OF DETAIL
The feedback is not at the right level of detail to drive effective decisions including corrective action. For example, it may be too consolidated like a pie-chart of quality issues without the drill-down to specific incidents and timelines required for the manager-once-removed (MOR) to appropriately follow-up including root-cause analysis (RCA) if appropriate.
The information may not show trends over time to see if the general problem is getting better or worse. Look at any metric and ask:
- What decision do I want made by which role based on this information and by when?
- What decisions do I want made by their manager and by when?
A great example is improving task productivity in the field. It is very likely that you will see more of a productivity gain on your high-frequency tasks from spending a few days observing the work and doing a detailed time-study than you would gain by putting in a production tracking system. Ideally, you will do both - the detailed time study will help you set your standards, share lessons learned, and develop standard escalation processes quickly. The production tracking system will allow you to keep things on track through effective management and make continuous improvements.
The targets for each metric on the scorecards and scoreboards are not aligned with the business model and strategy. Just like an estimate, all the individual parts of a contracting business must add up together to make the whole work.
Those targets must be S.M.A.R.T. – Specific, Measurable, Achievable, Relevant (to the overall performance) with someone directly Responsible for hitting that target, and Time bound.
It’s also important to know that higher (or lower) is not always better so targets and the associated management system (see below) must be set appropriately.
For example, target average weekly PPC (Percent Planned Complete) should not be 100% but closer to 85% though that seems counterintuitive.
There is also a point of diminishing returns for some processes where the incremental gains you receive for getting 1% closer to perfection costs more than the incidental rework or slightly lower quality standard. This is a balance. Don't let perfection get in the way of progress and don't let good enough be the enemy of great. Always do the math.
Integrating targets is easier when a contractor is in the earlier stages of growth and the owner/founder deeply understands everything. They may keep it mostly in their heads, but it is a complex and functioning business model. With scale and succession, this gets progressively more difficult.
Not factoring in the expected range of variability for a target number and not adjusting this range over time with the evolution of the business, process, and tools.
A business is like an engine. With tighter tolerances, the engine will use less oil while producing more power with less fuel. However, the tolerances cannot go to zero or the engine will not function. There is also a huge cost to finer levels of tolerances in the machining which has to be balanced with the cost of slightly increased oil and fuel usage. We know the math when it comes to equipment fleets. We must bring that same discipline to the business.
Most scores have an expected target, such as a production rate. Variability is one of the three "Enemies of Lean" and the objective of your processes is to limit variability but there is frequently a point of diminishing returns or the incentive to game the system.
For example, in the ideal world you would want "Zero Fade" on your Work-in-Progress (WIP) meaning that projects come in, at, or above the original estimated budget.
In the real world, there will be variability so the only way to achieve this is to sandbag the setup of the original budget which only gives the appearance of control. It actually hides many of the opportunities for improvement.
Variability ranges are also valuable parts of management systems (see below) as they indicate when the manager, manager-once-removed (MOR), or higher should get involved.
The scorekeeping is focused primarily on lagging measures (the outcomes) with limited focus on the leading measures which are the tangible and measurable activities that are most likely to improve the lagging measures.
This problem is compounded if the job descriptions are also primarily focused on lagging measures. This works when a contractor is at earlier stages of growth, but when you have multiple people in the same role, it is important to have standards that define both the expected outcome (lag measure), target, and tolerances (variability range), as well as the leading activities that will most impact that outcome.
You can train, certify, and manage someone to do the leading activities well. If your system is designed correctly, the combination of these leading activities done correctly and consistently will lead to the desired outcome.
You can see this in the best coaches such as John Wooden who gave what Dan Coyle described as "GPS Feedback" to his players. A 1976 study of 30 hours of video showed John Wooden providing some form of corrective feedback every 45 seconds, with over half of it simply being informational such as "drop your elbow." He also started every season with the basics of putting on your socks and tying your shoes to avoid injuries while training. You will find that as a common element across the best coaches, project leaders, and business leaders.
An example of this is targeting a cash flow metric of 1.1, which is an outcome or lagging measure. This is incredibly difficult to achieve but we have clients that are consistently in that range freeing up millions in cash flow while significantly reducing risks. There are about eight leading activities that must be done on each project, each month, and by people in several job roles that most influence the cash flow metric.
Failing to understand critical interrelationships between metrics which typically happens with growth and increased role specialization. For example, over-billings will increase your leverage ratio (debt:equity) but that is a positive thing if your working capital (current assets minus current liabilities) isn’t dropping, and the over-billings are reflected in your cash or receivables numbers.
The root of this problem is typically a lack of deep understanding of both the singular metric and, more importantly, how it relates to the whole system. This is often seen with legacy or borrowed metrics (see below).
"If you can't explain it simply, you don't understand it well enough." - Albert Einstein
- What percentage of the people in a role that are directly responsible for achieving an outcome metric can describe it simply including the lead measures?
- What percentage of their managers who are accountable for achieving an outcome metric can describe it simply, including the lead measures?
Accurate and timely data collection is the foundation of scorekeeping. It is easy for the data collection requirements to become so complex that the data is inaccurate, too slow, or the cost of the data collection exceeds the benefit.
This often shows up as a contractor grows and increasing requests are placed on the foreman for information from various departments. All the requests are wellintended, but the cumulative effect is that the foreman has less time for job planning, laying out their crews, and ensuring they are installing safely, with quality, and proactively. This impacts productivity from internal overload the same way it will be impacted externally by poorly coordinated construction drawings or difficult customers.
Any metric used in a scoreboard or on a scorecard is only a proxy for an activity. It was developed at one point in the business and used by someone to help control that activity.
- The activity is still materially critical to control, especially if it is a constraint or bottleneck.
- This metric is still the best proxy for that activity.
Jeff Bezos describes the challenge of legacy metrics and culture very well in this interview with Lex Fridman (1:24:40 - 1:33:32 nine minutes).
“Not everything that can be counted counts, and not everything that counts can be counted.” – William Bruce Cameron
In general, for contractor occupied real estate, it is better to own it. It’s the same with metrics.
Metrics, scoreboards, and scorecards borrowed from someone else can be great but be cautious because they can have all the challenges of legacy metrics except that it’s someone else’s legacy.
Consultants, accountants, software companies, industry associations, peer groups and your financial partners such as banks and sureties will have an overwhelming number of metrics. All of them are good in a given situation, team, and time.
Study what others are doing and make sure you have chosen what’s right for your business, projects, processes, and people at this time for leading them toward your vision.
With those cautionary disclaimers out of the way, some great places to look at metrics include:
Key Performance Indicators: Increasing Margin and Reducing Risk (Electri International) with most metrics applicable to any contractor.
“When the data and the anecdotes disagree, the anecdotes are usually right. And it doesn't mean you just slavishly follow the anecdotes. It means you go examine the data... It's usually that you're not measuring the right thing.” - Jeff Bezos
Know the score but listen to the players and watch the game closely, studying the differences.
Don't dogmatically stick with your scoreboard and scorecard if you are hearing and observing different things. Don't immediately change just because you hear or see something that doesn't align. Dig deeper.
“Eighty-five percent of the reasons for failure are deficiencies in systems and process rather than the employee. The role of management is to change the process rather than badgering the individuals to do better.” – W. Edwards Deming
Scores are not supported by the underlying systems including workflow, tools, procedures, training, and feedback. Those underlying systems, if followed correctly, should consistently deliver scores that are on-target and within tolerances over time. Note that systems must evolve with growth, changes to strategy, and changes to structure.
If your systems are not keeping up with your growth in one or more areas of the business, dig deeper into the person who is in the role that is responsible for designing, implementing, and managing systems with a functional area of your business, or the person who is in a role that integrates multiple functions together. Study Stratified Systems Theory (SST), understanding that it is only one dimension of talent. Make sure that the people in these roles have the right expectations, capabilities, capacity, and authority.
Scorekeeping is not integrated effectively with the role of the manager and their standard work for handling escalations, doing quality control (QC – right outcomes achieved), observing work for quality assurance (QC – right process followed), training their people, and helping develop them for future roles. Collectively, these are the “Management Systems” of a contractor and must evolve with growth forming a cadence of accountability. They are one of the five interlinked questions about strategy.
KEEPING PRESSURE ON YOUR VISION
An experienced and unbiased 3rd party can be invaluable in helping you evaluate the current state of your scorekeeping and then helping you design your future state scorekeeping in alignment with your vision.
Contact us for an outline about the development of scoreboards and scorecards that you can use with your team.