Customer satisfaction
Customer Satisfaction can be both a leading and a lagging indicator. It's leading, because it informs us how likely our next move will grow our business - and it's lagging, because it tells us how well we did in the past.
We can measure it asynchronously with tools like the Net Promoter Score or observing Google ratings. Softer metrics include customer interviews. Modern, technological means include A/B tests, conversion and resubscription rates.
Regardless of which of these you measure: if you see this indicator going down, you're most likely doing something wrong.
A proper change initiative relies on being able to track user satisfaction in some way and use that to inspect and adapt accordingly.
Employee happiness
Employee happiness is a pretty strong leading indicator for potential success: happy staff tend to do everything in their power to help the company succeed, because they like being part of this success. In reverse, unhappy staff are a leading indicator for many other problems that only become visible once they hit.
I'm not a huge fan of employee morale surveys, as depending on the organizational culture, it's weaponized against management, so people always give scores of 100% and bolt for the door at the next opportunity.
The minimum you can do is measure staff attrition - if your attrition rates are above industry, you're doing something wrong. If you're significantly below, you're probably doing something right.
At a more detailed level, it does indeed help to look at factors like psychological flow, change fatigue, diversity and compensation fairness, although we need to be careful that these are used as indicators for inspection and adaptation, not as the next management KPI to be gamed.
Throughput rate
Throughput rate is a leading indicator for capability and capacity: when you know your throughput rate and the amount of work ahead, you can well predict what happens when.
The effectiveness of an organization can be tracked by looking at end-to-end throughput rates of the core value streams. Some examples are the duration from lead to conversion, from demand to delivery, or from order to cash.
Take a look at queues, lack of priority, overburdened employees and unavailable resources. By tweaking these levers, throughput rate can often be doubled or more, without any additional effort or expense.
Although it may seem counter-intuitive: the key is not to get people to "work harder," it is to eliminate wait time by having some people do less work. For that, we must understand where wait time accumulates and why it does so.
Financial Throughput
The proof in the pudding is financial throughput, a lagging indicator. Be wary - it can't be measured by department, and it can't be measured by unit. It also can't be measured exclusively by looking at the cost sheet and the amount of work done.
Financial throughput is the one key metric that determines business success: it's the rate at which we're earning money!
We have two significant levers for financial throughput: speeding up the rate at which we turn investment into returns, and reducing the size of the investments such as to bind less capital. Ultimately, combining both of these is the sweet spot.
How to improve
Customer and Employee satisfaction
These metrics depend mainly on the managerial system of the company: how goals are set, how people are treated. Usually, there's a strong correlation: happy employees make customers happy, and happy customers give positive feedback to employees.
Deming noted in his 14 points that management must work to "remove barriers that rob people of their right to pride of workmanship."
Transparency is one factor, getting out of the way is another. Removing policies that reduce people's ability to do the right thing is yet another. A management committed to quality, that is, fixing things that lead to poor outcomes, is vital here.
And, of course, the ultimate key here is letting people own their process.
Throughput rate
This third metric depends on flow efficiency.
Note that "flow efficiency" is not "resource efficiency:" A process where people and/or resources operate without slack is usually dysfunctional and will falter at the slightest hiccup. Process flow requires resilience.
Queues are a universal killer of throughput rate, so avoid queues wherever and whenever possible.
In software engineering, process efficiency is mainly determined by engineering practice: Software Craftsmanship and Continuous Delivery (CD). The prior requires people to know how to develop software using the most appropriate techniques, such as Clean Code practice. The latter requires some tooling, a product architected for CD, a high commitment to quality as well as policies and practices consistent with the intent of CD.
Financial Throughput
The final metric depends on how aligned decision-makers are with their customer base and their organization.
While financial throughput relies on the organization's operative throughput rate, we have to look at which things affect our financial throughput and enable our organization to do more of these - and quicker. And in many cases, that means doing less of the things that have sub-optimal financial throughput. For example, eliminating "failure demand." (work that's only required because something else went wrong.) Or "null objectives." (targets which do not affect these four metrics.)
And how about Agile Frameworks?
Nowhere does this article mention a specific "Agile Framework." This is not an oversight - frameworks are irrelevant, or potentially even harmful, in the discussion of business relevant metrics. They could be a tool in the solution space. That depends on where we come from and which challenges we face.
For example, if we're challenged on engineering practice - we can't solve that with Scrum or SAFe. Likewise, if we have customer satisfaction issues: Kanban doesn't even consider the topic.
Not even "Agile" is either a relevant means, nor a relevant outcome. Working "Agile" is merely one possible approach that tends to be consistent with these metrics. Where agile values, principles, practices and mindset help us improve on these metrics, they are valuable. But when that is not the case, they aren't worth pursuing.
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