Review by Will Phillips

Measurement has contributed to better business understanding since the rise of the middle class trading merchant in Europe in the 15th century. The merchant with warehouses, ships at seas, and multiple employees could not directly oversee the business. Double entry accounting gave insights that enabled him to better manage the business. Thus it was that the single most important internal driving force for organizations—it goals, purpose, and mission—was supplemented by a second driver-measurable financial performance towards those goals. From the 15th century until the late 1980's measurable performance meant financial performance. For the publicly held business it meant financial performance, i.e. profits this quarter or this year, at best. For nonprofits in the latter half of the 20th century it meant no deficits.

Many complained that managing for the numbers did not consider the whole picture-what about the people? Particularly those who worked in the business. The neglect of the people side led to the formation of separate organizations which assessed and managed for the people. These were called unions.

Somewhere in the mid century new industries caught on to this and began to measure people issues-largely through morale surveys. As corporations measured, they became aware of the people impact and managed differently. Many got good financials and high marks on morale.

By the 1980's it became clear that good numbers and good morale do not necessarily a good corporation make. Too many good number, good morale companies fell flat on their faces. The pinnacle of this was IBM's one-year loss of nine billion dollars.

Non profits only lately joining the balanced budget crowd have clearly realized that simply making your numbers is not enough. A profitable museum (positive fund balance in the non profit lingo) is not necessarily a good museum. Yet the heavy influx of corporate types on non profit boards has driven the priority of fiscal stability home.

And now we even have foundations which refuse to consider a proposal for support unless the institution has been fiscally sound for the last few years. We all realize that solvency is necessary, but not sufficient. Just like breathing is necessary for life, but there is more to life than just breathing.

During the 70's and 80's the corporate world suffered. It was not paying attention to something. Middle managers were being laid off at the rate of 8,000 per day for every working day for a decade and a half. What was wrong? I believe that an over emphasis on the short term numbers was wrong, along with an under emphasis on learning how to change and adapt to the changing external world.

Corporations began talking about customer satisfaction and loyalty, re-engineering their core operations and reinventing their business models. The pace of change accelerated and, for survival, the rate of internal learning had to keep pace. And thus emerged in popular business literature the balanced score card. Robert Kaplan's early articles in the 90's in the Harvard Business Review were like a coming out party for strategic measurement.

Of course, thoughtful presidents of privately held businesses already knew about such things. They did not live under the gun of quarterly profit plans and could reinvest in longer term initiatives. Not all did, but it was and is much more common to see a better long term short term balance in the privately held sector than the public sector.

These trends slowly migrated into the non profit world with the usual five to ten year lag. Bullseye cites powerful evidence that corporations with full measurement systems out perform those that don't by about one hundred percent. Organizations with a balanced measurment system also report that there last major change effort was ninety-seven percent successful vs. non measurement companies that reported only fifty-five percent success.

The authors suggest six key areas of measurement: financial, people, market, operations, environment and partners. These are a good start. For an alternative view see Qm²'s article: Keeping Score.

The authors provide several useful comparisons between the culture and the leadership in measurement driven vs. non measurement driven organizations. These tools form a useful self diagnosis to identify areas of change, in addition to building a better measurement system. Thus the authors recognize that building a better measurement system is itself inadequate to build a better organization.

There seems to be widespread agreement that every organization has a set of Strategic Design Elements. These include: Direction (Vision, Mission, Goals, Strategies), Structure, Staffing, Systems (these are the strategic measurement systems this book focuses on), Support (the process of allocating resources e.g. budgeting), Sanctions (rewards and recognition), and finally Spirit or culture. All seven of these elements give broad direction to the organization. Ideally they align. Sometimes each element is consciously designed. More often each just grows up over time in response to issues which arise. In this latter situation a lack of alignment creates a tactically driven organization which is not focused strategically.

The book also covers six criteria for good measures and five principlels for setting performance targets. Once measures and targets are established strategically, they need to cascade down to departmental and individuals performance measures. To do this requires that the organization carefully think through its model. In other words if a strategic goal is customer loyalty, you must identify what creates loyalty. This chain of events must link individual behavior into the chain.

Most organizations are not that clear on their model. The drivers and links are often hypotheses at best and politically correct theories at worst. Measurement enables you to test these conjectures and build a solid model.

This cascading process avoids the pitfalls of creating a management bureaucracy like Management By Objectives did in the 70's. By focusing on only a handful of key areas to measure, the process is simplified. It is like playing a team sport where the score tells who wins and every player understands how he or she contributes to the score. Once this is done we can play the game hard.

The authors emphasizes the need for a champion for each measurement area. In their minds a champion inspires and recruits support, anticipates problems and actively supports the measurement process.

Bullseye presents a seventeen step process to build a strong measurement system based on the concepts outlined above. This process is difficult to follow. It seems forced and poorly integrated. This is a worthwhile book. But you will have to invest by thinking through what really makes sense for your organization to measure and how to do it.

Qm² is currently acting as a clearing house for museums which are exploring strategic measurement. We are also avaliable to present conference programs in this area.