- Target outcomes that are poorly defined and not integrated throughout the organization.
- Focusing only on the lagging measures (outcomes) rather than the leading activities that create those outcomes. These leading activities are very tangible. They can be built into job descriptions and selected for. They can be trained, measured, and managed.
Results come from relentlessly executing a few critical leading activities consistently. Do you know what those are?
Improving your project cash flow metric is a great place to start.
The Four Disciplines of Execution (4DX) describes a great format for setting a goal (target, key result, etc.)
Move [_____] from [X] to [Y] by [date].
4DX defines this as a Wildly Important Goal (WIG).
Who - The A Method for Hiring describes these as outcomes at the job level and has a wide range of tools that support the book from a job scorecard through the focused interview and reference interviews. See how both Brad Smart (Topgrading) and Geoff Smart (Who) have adapted some of their techniques given today's talent market: Unicorns and the Growing Contractor.
You will find the basic principle of clearly defining and communicating expected outcomes all throughout history including what the military describes as Commander's Intent.
KEY RESULT (Desired Outcome): Move our Project Cash Metric from 0.87 to 1.1 by the end of the year.
For a $50M contractor operating at a 20% gross margin, this improvement would free up about $2.3M in cash.
Doing the analysis to effectively set this goal and communicate it is incredibly difficult. Defining a cascading set of outcome-based metrics throughout the organization including as key results in job descriptions that are aligned at all four layers from strategic choices through your talent value stream (TVS) is the next step and 10X harder.
For truly scalable and sustainable results, you must define the leading activities that have the most impact on the desired outcome. Integrating these through the job descriptions including your management systems is another 10X more difficult which is why so few contractors break through to the higher stages of growth.
The second discipline of 4DX is to Act on the Lead Measures: Identify and influence the key actions that will drive success toward the Wildly Important Goals. Lead measures are predictive and can be directly affected by the team, in contrast to lag measures, which can only be seen after the fact.
LEADING ACTIVITIES (Creating the Outcome) Examples for Improving the Cash Metric
- Negotiate favorable change, billing, retention, and payment terms with the customer.
- Load the Schedule of Values (SOV) and “Sell” it to the customer within 10 days of award.
- Get all open changes approved by billing cut-off.
- Progress bill at least monthly targeting 1.2X projected earned revenue for the first 80%.
- Get pre-approval from customer’s project team for changes, quantities, materials, and billed amounts before billing is sent to the accounting team.
- Verify all compliance documents are “OK” with the customer within 5 days of billing sent.
- Verify approval and no problems with the billing 10 days prior to the due-date.
- Follow-up on past-due items at least every 15 days.
As you can see, these are all very tangible tasks that can have tools and procedures developed around. They can all be trained - nearly everyone has the capability to do any one of these. Even the standard procedures and operating rhythms for managing this work including quality control (right outcomes), quality assurance (right process), and exceptions is very tangible.
- What is your current cash metric?
- What could it be?
- If it were held at that level consistently, how much cash would that free up?
All businesses have faced this challenge throughout history as they have scaled. There is no single prescriptive tool that will work for every contractor. Study what other companies have done and how the body of knowledge has evolved over time and then develop systems that work for you.
Below are some resources that are all interrelated going back to the 1950’s:
- Management By Objectives (MBO) / Management By Results (MBR): Peter Drucker’s original codification of these principles.
- Objectives and Key Results (OKR): A disciplined quarterly process including stretch goals cascading from the company level through individuals.
- 4 Disciplines of Execution (4DX): Continued building upon the body of knowledge by the team at Franklin-Covey.
- Focus on the Wildly Important Goals (WIGs): Concentrate on a limited number of ambitious yet achievable goals that are crucial to the organization's success, ensuring not to be overwhelmed by trying to accomplish too much at once.
- Act on the Lead Measures: Identify and influence the key actions that will drive success toward the Wildly Important Goals. Lead measures are predictive and can be directly affected by the team, in contrast to lag measures, which can only be seen after the fact.
- Keep a Compelling Scoreboard: Design a simple, visible way for team members to track progress on lead measures and the achievement of the Wildly Important Goals. This helps to create a sense of competition and ownership.
- Create a Cadence of Accountability: Establish regular check-ins (usually weekly) where team members commit to specific actions that will move the lead measures and report on the commitments made in the previous meeting. This ensures sustained, disciplined effort towards the goals.
For maximum impact it’s important to develop an integrated system that works for your company. It must tie together everything from your strategy through your individual functional area business plans all the way into job descriptions, individual performance feedback, and the interviewing process for new team members.