Operational Performance is More Than Just Operations

One thing you’ve probably noticed as a long-time reader of this blog was a lack of coverage of Aberdeen Research for the past year or so. To be honest, I haven’t been that thrilled with the work coming out of Aberdeen since the Harte-Hanks acquisition, which culminated a year long departure of some of the best talent in the Analyst world, including practice leaders Tim Minahan (who is now CMO of Ariba), Sudy Bharadwaj (who is now CMO of Informance), and Vance Checketts (who is now COO of Mozy) and Beth Enslow (who is now SVP of Supply Chain Risk Management at Marsh), one of the visionaries behind proper Supply Chain Finance. (Of course, to be fair, I should point out that the departures likely had more to do with the former CEO than the looming acquisition by Harte-Hanks.)

I had pretty much planned to continue ignoring Aberdeen, until I stumbled upon a rather lengthy article in Intelligent Enterprise that claimed to define what sets best-in-class companies apart from an operational performance perspective (and that set me off). Basically, as far as I’m concerned, although they still draw useful conclusions about the forest, they are still lost in the trees.

According to the article, which starts off by noting that best-in-class companies succeed by finding the right key performance metrics and tying day-to-day decisions to larger corporate goals, best-in-class performance can be defined based on the following four metrics:

  • Customer Satisfaction
    percent year-over-year change in customer satisfaction
  • Customer Issue Resolution Capability
    percent year-over-year change in the speed with which customer issues are resolved
  • Conversion of Inquiries to Sales Leads
    percent year-over-year change in the rate at which inquiries are converted to leads
  • Sales Forecast-to-Plan Performance
    percent year-over-year change in the accuracy of sales forecast-to-plan measurement

What?!? Although customer satisfaction is key to customer retention, since only monopolies tend to be able to get away with lousy customer service, and although sales are the life-blood of the company, as they are often the only thing Wall Street cares about, there’s a lot more to performance than just today’s customer satisfaction and sales metrics! For starters, there’s innovation and drive.

But I understand why Aberdeen is ignoring these critical factors, among others. How do you measure innovation … whose impact goes far beyond simply sales of an end product and marketshare into mind-share, brand, and influence on overall corporate culture. And how do you capture drive, which is more than just the hours you clock but how much of yourself you put into succeeding in each and every one of those hours on … and off … the job. Certainly not as easy as you can come up with a check-the-box metric on customer satisfaction (which I personnally don’t believe is as simple to measure as “are you satisfied“, but it looks like I’m alone in that view) or a forecast-to-plan metric, which is easily calculated as dollars forecasted vs. dollars sold (which is actually pretty useless given the dark, damp places most companies blindly pull forecasts from).

But how can you say you’re performing if you’re not constantly trying to innovate? Unless you have a (partial) monopoly, in today’s marketplace, you’re dead in a year or two if you’re not continually improving your product or service offerings (or both). And if your employees don’t care about their jobs, how much effort are they going to put into quality and making a product that truly satisfies the customer and, moreover, what’s to stop your best employees from exiting en-masse the next time your competitor goes on a big recruitment drive and offers them all a 10% raise? I’m sorry, but customer satisfaction and sales conversions alone don’t define best-in-class … not even close!