The holy grail of value is often considered to be how we measure it. Too often value is asserted as if talent alone makes a difference. In this post I want to focus on the hard reality that talent alone is never enough. A difference has to be made and we must be able to describe how we can measure and articulate the value of that difference.
In a post like this describing how to measure value will seem necessarily simplistic, but I ask you to please consider the steps I describe and how they might apply to your world. Your world will be more complex than the examples I share, however I have never yet worked with a team that could not describe its value with certainty and confidence.
The key to this work is your clarity of purpose. There is no point having a purpose that does not envisage some aspect of change, and any change described sufficiently well can be measured. To measure a change we need to know the starting point and the end point or at least the direction of travel. As purpose is the key, it follows that if it is hard to measure value, it is very likely that the purpose will lack sufficient clarity. Leaders must be sure of their purpose before they embark on trying to measure their success.
That is the hypothesis, so let me spend a little time testing it for you by taking three different examples. While this series of posts on leadership is about leadership generally, as my work is predominantly with lawyers I will share examples about legal teams. The concepts however apply more widely as you will see. Each example below has been stripped back to offer a simple case study perspective, but each example is also real and has been delivered by teams we have worked with:
“My purpose is to improve our operational efficiency by 20% inside 12 months.”
The first requirement is to assess efficiency as it is currently.
Let us suppose this is a legal team in a large multi-national business. Activity analysis reveals the team manage 100 contract negotiations at any one time. The average length of a negotiation is three months (file opening to file closing). The cost of the team (annual aggregate salary plus add-ons) is £2m. The feedback from business colleagues is that they are 6 out of 10 satisfied with the service and their biggest concern is the length of the negotiation. The team’s biggest concern is getting signed contracts back from the business.
We can assume, hypothetically, that all contracts have the same value. In reality of course that is unlikely to be the case and will result in other opportunities to create efficiency based on risk and value profiles. In the scenario suggested however there are at least 5 points to make that can contribute to this particular efficiency challenge.
“My purpose is to make a verifiable £5m cost saving on our P&L”
Savings can be achieved in a number of ways (see the first example above for one type of saving). In this example however I want to focus on savings that leverage a broader, often unseen contribution.
Most leaders know when good judgement has made a difference, but if that difference was to avoid something worse from happening (for example, settling a case that might be lost) is it possible to ascribe a value to that event in any meaningful way?
If it was a one-off event I think it falls under the category of that’s your job. Ordinarily, in my view, this is not something to measure or celebrate. However what is worth noting is whether over time you have influenced a sustainable year-on-year reduction in costs.
This requires data and trends analysis. Compliance training is now a fully fledged business cost – whether it is in-house Health and Safety briefings, or induction training or training to meet specific new obligations for example in relation to Anti-Bribery and Corruption or Data Security.
As with the first example it is important to establish a baseline. Across the organisation what has been the cost of non-compliance with regulatory requirements in the last three years? Consider, for example, court sanctions (and related costs), regulatory fines (and related costs), days lost through employee injury, management costs related to internal investigations, external legal and consultancy fees on reports and advice, and the cost of training to date.
Take three years in turn and consider the aggregate cost, the elements that make up the total, the trends revealed and start to make some judgements.
In one team we worked with the cost of training in a broad range of compliance related matters on an annual basis was in excess of £2m and yet the cost of non-compliance had a steady upward trend. Was the training effectively stopping a bad situation from being even worse? Or was the training not terribly effective?
The leader sampled a cross section of the trained employees – what had they learned? What behaviours had changed? What difference had been made? From a small sample the results did not encourage. The training had ticked a box, but could not be said to have made a material difference.
The leader made a case to create a new pilot training programme that would set out, very specifically, to alter certain behaviours and to measure the impact of the training to see that behaviours had actually changed. In addition the leader set up a feedback loop so that those attending the new programme contributed to an ongoing redesign of the training.
The ambition was not to train everyone in the same way, but to create a number of compliance champions who would help monitor compliance and be a constructive resource for other colleagues on how best to comply. Teams were then incentivised to demonstrate their compliance as part of their annual performance plans.
The results were significantly improved and if extrapolated would result in the need for fewer training days (an annualised saving of £600k), fewer investigations (saving approximately £250k), and an external fees reduction over past years (of £300k).
By capturing the data and undertaking a straightforward trends analysis the leader had achieved an annual saving of approximately £1.15m. The following year there were no reportable failures, no investigations, no fines, the P&L improved as a result by more than £4m.
The investment needed was minimal, but the impact was a verifiable saving of £5m and the leader’s purpose had been fulfilled.
“My purpose is to measurably improve the well-being of my team”
In the span of a career that will last decades and in the certain knowledge that one in four adults will at some point suffer from a diagnosable mental health issue, literally every leader can expect to face circumstances when colleagues are ill or at the very least inappropriately stressed at work.
It is possible to create a financial measure (around the cost of absence etc) but in essence this needs soft measures to be credible and the best measure is the perception of your colleagues, individually and collectively. Your baseline might be a simple on-line survey or a more sophisticated well-being audit. Whatever you choose to establish your baseline it is the responsibility of every leader to ensure they understand the well-being of their colleagues and in particular to be aware of any warning signs. Leaders must do all they can to ensure the workplace is neither causing nor exacerbating well-being issues.
The ten recommendations I set out below are somewhat generic, but they are recommendations that I believe should be in place for ALL teams regardless of size, sector, geography or experience.
The survey or audit that created your baseline should then be repeated periodically. The differences then revealed are your measures to demonstrate that you are fulfilling your purpose.
Take care. Paul
