Digital solutions for visual performance management have seen high adoption rates across industries over the past five years as companies have sought to enhance the accuracy and speed of their decisions through improved visualisation of performance metrics and trends.
But we have found that these investments have not translated into a corresponding increase in the maturity of visual performance management as determined by McKinsey’s Operational Excellence Index, our tool for assessing the maturity of management practices within operational excellence (Exhibit 1).
These results indicate that organizations are not getting better at choosing or using these digital tools in a way that improves their performance management—despite the explosion in adoption of digital performance management due to the pandemic and remote working.
The reason? There is much more to visual performance management than adopting the latest digital solutions.
Whether you are using digital or pen-and-paper solutions, we believe that there are three key principles for designing visual performance management:
- Take a customer and process perspective to define a KPI cascade, in which metrics are clearly linked across organisational layers. This is about measuring the voice of the process (actual performance) against the voice of the customer (targets).
- Build simple visualisation that adheres to the 1-3-10 principle: take one second to know whether you are winning or losing, three seconds to identify what you are winning or losing at, and ten to determine your course of action. Performance needs to be visible at a glance.
- Conduct daily performance meetings that are based on misses of targets and are action oriented. Leaders should continuously coach one another to improve the maturity of these meetings.
Over the coming months we will publish several blog posts to unpack the second element of visual performance management—going one step deeper into the core design principles of simple visualisation and exploring when to use off-the-shelf or custom-built digital products versus pen-and-paper solutions.
We will discuss how to take a pragmatic approach in applying descriptive analytics to your operations. What skills do you need? How do you make a performance management visualisation that provides answers in the shortest time? And how do you ensure that your approach to visual performance management is a genuine indicator of high operational maturity?
Exhibit 2 offers a preview of the insights to come. This simple framing suggests that digital solutions should be used in dispersed teams, or when the maturity of visual performance management is high (meaning the team has been on the journey for a while). It also proposes that custom-built visualisation is needed for complex operations (for example, departments with multiple functions), whereas off-the-shelf solutions might be suitable in departments with a more uniform workforce.
With this simple framing, explore where your business sits in these quadrants. What is the complexity of your operations, and where are your people in terms of performance reporting maturity?
Then think about your own 1-3-10 aspect. What three measures could successfully feed your business’s 1-3-10 reporting? What and who would you need to make that happen?
Give it some thought, thanks for reading, and we’ll be back with more insights later in the year.
Simon Hinds is a consultant in McKinsey’s Melbourne office, Mads Yde Jensen is an associate partner in the Perth office, and Laleh Omalaki, an expert at QuantumBlack, a McKinsey company, is based in Sydney.