“Llamas are up 5% this quarter, while 22% of people have chosen blue instead of red year-to-date.” So what? Do I care if llamas are up? Is that a good or a bad thing? Is there a goal associated with whether red or blue is chosen? Why do these things matter?
Too many compliance departments track metrics because they think they are supposed to. Managers, the C-Suite and the Board are used to getting metrics from other departments, so they assume they’re appropriate from Compliance as well. But many metrics tracked by compliance programs don’t inform the business about anything. And because of that, tracking them isn’t useful.
A New Series
We’re creating a new series of blogs on metrics that matter. We’ll be delving into examples of metrics being used by the most forward-thinking companies in the world. We’ll also be examining how to use metrics effectively to understand the trends in your business and in your program. Lastly, we’ll be giving lots of examples for you to choose from so you can bring your metrics to the next level.
What is a Metric?
Management consulting guru Peter F. Drucker said, “What gets measured improves.” A metric is simply a measurement. If you can measure it, it can be a metric. Compliance departments typically use metrics to monitor and audit the state of the program. They can also be used to drive efficiency and identify areas for improvement. Ideally, they should provide critical data to show whether Key Performance Indicators (KPI) are being met.
Good Metrics vs. Bad Metrics
Good metrics provide important information. They can tell you whether your program is effective. They can help you to prove that your program is adding value to the business. They can also tell you whether your program is improving over time.
Bad metrics don’t provide any of this information. Creating and reporting on bad metrics has two disadvantages. Number one – it probably takes a long time to collect the information, which is time you’ve wasted at work. Number two – management isn’t getting anything out of the metrics, so they won’t pay attention to them. What’s worse – management may think you’re not adding value because your metrics don’t show effectiveness, efficiency, or positive change in the organization.
We’re Not Confident
A recent survey by Deloitte found that 30% of companies are not attempting to measure the effectiveness of their programs at all. Of the 70% that are – only one-third are confident that they are using the right methods.
The Department of Justice’s Framework for an Effective Compliance Program poses several questions. For instance:
Has the company measured the effectiveness of training?
How has the company collected, analyzed, and used information from its reporting mechanism?
Has the effectiveness of outsourced processes been assessed?
How has the company assessed whether these policies and procedures have been effectively implemented?
It’s easy to understand how commonly-tracked metrics can fail to answer these questions. For instance:
If the metrics you’re tracking aren’t helping you to answer these questions, it’s time to move on to next-level metrics.
Our series is going to focus on what we’re calling Next-level Metrics. Next-level metrics are meant to go deeper than the basic metrics. They’re meant to help you answer the most important question: SO WHAT? Your metrics should always be able to answer the question SO WHAT? Let’s say that 96% of your employees finally finished the Code of Conduct training. So what? Does that mean the training was effective? Does that mean they enjoyed it? Does that mean they learned anything? If “what gets measured improves,” then it matters that what you measure gives clear answers to the most important questions.
Next-level metrics have four things in common. They are:
The metric should be easy to comprehend. If it takes a great deal of explanation, and the why isn’t obvious, keep going. Work harder to get to the root question, because a good metric will help you to answer it.
We all have roadblocks and weak spots in our company. Some compliance officers don’t have the buy-in of management. Some can’t get the HR department to help out. Some are one-woman compliance departments when the company needs a team of five. And some of compliance programs – okay, almost all compliance program – don’t have a large enough budget.
It’s important when choosing metrics to only choose those for which we can regularly and easily get the information. Choosing a metrics that requires you to rely on information from others can be dangerous. If you must get help in gathering the information, make sure you get the commitment from the gatherer before adopting the metric.
Connected to a goal
Metrics should always be tied to a goal or KPI. If you can’t tie a metric to a goal or KPI, is it really showing you anything? You need to know what you’re shooting for.
Let’s take our llama example from the beginning. Is a 5% increase in llamas a good thing? If you knew that the company wants to hit 18% this year, then the metric is useful because it measures how close you are to the goal. You must define why this metric matters, and then give it context by explaining what it is showing.
Repeatable over time
Metrics should tell the story of your program. You should be able to report on the same metrics year-on-year so that you can see how your program is progressing (or regressing). That doesn’t mean you don’t adopt new metrics. It means that if you do, you tie them to previously-used metrics to create a through-line in your story.
Where we go from here
Over the next few weeks we’ll dig into the details of Next-level Metrics with lots of examples. But remember – no matter what the metric, it should meet all of the parameters outlined above. By choosing metrics that matter, you’ll make your program more efficient and effective.