Not pandemic, but GST implications converted Amar and Bharat, two brothers, working as contract employees in a warehouse and on a toll plaza respectively, into egg-roll sellers in a neighbourhood. Their father worked at my parent’s house in Bihar and both these brothers had left Bihar in pursuit of a respectable naukri. Each of them managed to land a job for a couple of years. One got employed in a warehouse and the other one on a toll plaza. But as the GST roll out became smoother and mandatory, the boys lost their jobs and started making egg-rolls for a living.
GST eliminated the cascading nature of the pre-existing tax system like inter-state tax, road permits, VAT system etc. The implementation of GST turned the whole country into a single market. This meant the manufacturers did not have to build separate warehouses at different locations. GST rollout not only reduced concentration of warehouses in certain areas to save taxes, it also reduced toll collection in those areas as traffic reduced due to shutting down of some of these warehouses. Not pandemic, the brothers lost their jobs due to GST implications without realising what hit them.
Just around the same time, before the complete roll out of GST, investment decisions were being considered for infrastructure companies like toll roads. Big decisions, for example making investments in the warehouse company or the toll operator company are long horizon decisions. The decisions are made today for the results to come in during a decade or more. One must realise, when investors make decisions with long horizons, they calculate the risks posed at the time of decision making. Still, some large decisions fail despite being a calculated decision, like due to the impact of GST rollout. But if you look close, the failure is not of the decision but failure is of the ability to measure the progress to reach the goal after the decision was made.
Decisions, big or small, are made in the present while their impact shows in the future. More and more business heads and decision makers are focussed on the goal measures like revenue, profit numbers, so when the goal is unmet, the blame goes on the decision and not on the progress measures. Amar and Bharat, the two jobless brothers, brought my attention to the importance of right metrics to track progress for all decision makers that should not lead to any closure.
In this week’s edition for Habits for Thinking, let me introduce you to the concept of Lead Measures, measurements that are meant for keeping an eye on the progress. Lead Measures and Lag measures are defined by the authors of 4 Disciplines of Execution by Sean Covey and Chris McChesney.
“No matter what you are trying to achieve, your success will be based on two kinds of measures: Lag and Lead. Lag measures track the success of your wildly important goal. Lags are measures you spend time losing sleep over. They are things like revenue, profit, quality, and customer satisfaction. They are called lags because by the time you see them, the performance that drove them is already passed. You can’t do anything to fix them, they are history.”
“Once a team is clear about its lead measures, their view of the goal changes.”
CHRIS MCCHESNEY, CO-AUTHOR OF THE 4 DISCIPLINES OF EXECUTION
The author continues, “Lead measures track the critical activities that drive, or lead to the lag measure. They predict success of the lag measure and are influenced directly by the team. A common example of a lag measure is weight loss. Which activities or lead measures will lead to weight loss? Diet and exercise! Proper diet and exercise predict the success of weight-loss and they are activities that we can directly influence. Simple enough, but be careful. Even the smartest people fall into the trap of fixating on a lag measure that they can’t directly influence. This is because lags are easier to measure and they represent the result we ultimately want.”
Measurement is a necessity for business and personal goals. But measuring only the end result may end up in a surprise. Lead Measures in simple terms are measures to define and keep an eye on the progress. Lead measures have some characteristics that are outlined below to help you define your own set of lead measures for the goal.
1. Lead measures are predictive
Lead measures are predictive in nature so it means that if a lead measure will change, you can predict that the lag measure, or the final outcome, will eventually change too. Simply, if you are measuring weight loss and if you have changed a lead measure of how many times in the week you have exercised, it will change the end result too.
2. Lead measures are influenceable
It can be directly influenced by the team. That is, the team can make a lead measure happen without a significant dependency on another team. A team dedicated on the shop floor can improve customer satisfaction scores independently of the team in the manufacturing department.
This is easy to measure. But, lead measures can be abstract in nature too. For the toll company to predict the impact of GST in slowing down the revenue is a predictive analysis. But this cannot be a lead measure, because it is external to the company and hence cannot be influenced or controlled. What is influenceable however in this case are measurements like : Working deeply and widely on risk factors like identifying concentration of toll revenues. These will serve as lead measures. These may seem as abstract in nature, but will have an impact on the lag measures for the business.
3. Lead measures are smaller goals aligned to the bigger picture
In personal decisions like weight loss, participation in an exam, keeping an eye on lead measures is easier. Your daily diet program, your weekly fitness regime become the lead measures for weight loss. Preparing for an exam is also directly proportional to the quality and the quantity of work. That becomes the lead measure. But for an athlete, at a top level performance, lead measures are difficult. The narrower the scope of improvement, the harder to measure it. In such cases, the performance gets broken down into smaller goals and gets measured accordingly. So for example, an ace swimmer has to work on a particular angle of diving in the pool to become faster. Small, yet hard to measure goals. Lead measures can be for smaller goals, for smaller teams.
4. Lead measures can be behavioural in nature
Lead measures stand for “measure the new behaviors that will drive success on the lag measure.” like sampling free products in a bakery can serve as a lead measure to increase customer happiness. As you increase the numbers of customers who receive free samples, eventually will improve lag measures like revenue as well. Lead measures turn your attention to improving habits and behaviours you directly control in the near future that will have a positive impact on long term goals.
Measurement is not to be seen as the yardstick for productivity, it is to be seen as the enabler of right behaviours for the team to achieve the goal. Behavioural shifts take time but create a leverage that has magnificent results leading to continued success.