Early in my career while flying the F-14 Tomcat for the U.S. Navy, it was critically important for me to see the overall big picture and have a thorough understanding of what was taking place both inside and outside my aircraft.
I needed to continually scan the gauges and radar displays inside the cockpit, watch for other aircraft and listen to the chatter on radios to fully understand what was going on around me. I needed that situational awareness to be effective and safely do my job.
As my career progressed and I transitioned out of the cockpit, I found that you needed to have that same situational awareness in business. You needed to see and understand the big picture, and just like in the cockpit, you needed to keep scanning the gauges in order to have that situational awareness.
In business we attain that situational awareness through scanning a series of performance metrics. So, what is a business metric?
Simply put, a metric is a measurement that is linked to the organizational vision and strategy and is used to track progress toward those objectives. Many organizations do this strictly through the financials, but these month-end “After Action Reports” do not highlight what is actually taking place behind those financials and fall short of providing that overall situational awareness.
Without a set of defined metrics behind the financials, the organization can easily find itself in a “holding pattern,” going round and round, getting nowhere while expending a large amount of fuel in the process.
To be effective, metrics – or gauges – should cover all aspects of the business. I recommend the Balanced Scorecard system that provides a simple, easy-to-read, one-page summary with the metrics separated into four distinct areas. As an example, a set of metrics for a manufacturing business might include:
Financial: Sales, margins, profit, cash, orders, backlog
Customer: On-time delivery, past-due orders, warranty returns
Internal processes: Quality, overtime, supplier performance
Investment: Training, additional employees, capital improvements.
Let’s also keep in mind that we cannot afford to keep our eyes focused on only one metric. We need to constantly scan all the gauges/metrics and understand the relationships between them in order to keep that heightened level of situational awareness.
Let’s take a look at it from the cockpit: If my altimeter shows that my altitude is high, to address the situation, I need to lower my nose and adjust power. I recognized the discrepancy, understood the “cause and effect” and made the correction.
In business it’s the same principle. If a metric is not performing, then we need to understand why, make the necessary adjustments and bring it back in line. In both arenas, we need to understand the metric interactions, make informed decisions and take effective actions, or, from a fighter pilot’s perspective, not fire blindly.
Metrics that have historically been problematic should be scanned regularly. In the cockpit, if one of the aircraft engines has a history of running hot, then I’m going to keep a close eye on the engine temperatures. In business, if I know that a critical supplier routinely delivers late, then just like in the cockpit, I’m going to pay a little more attention to that metric.
The rule is, just because it’s OK right now, doesn’t mean it’s going to be OK later. We need to proactively scan all the metrics for unwanted variation, keeping that situational awareness as we take the necessary actions.
How’s your business situational awareness? Do your financials tell the complete story? Are you getting surprised with poor month-end results? Is cash falling short and if so, do you see the big picture and understand why?
If not, then start now by taking control of the aircraft and make the investment in developing and tracking your business metrics to improve your situational awareness.
You don’t have to be a fighter pilot to improve and accelerate the performance of your business, but it sure doesn’t hurt to think like one.