Building Indicators
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  1. The role of metrics
    1. Metrics communicate what the Board will be watching, and invite the ED (and staff) to watch for the same things. So make sure they are the main things you want watched!
      1. A metric selected to satisfy casual interest or tradition will be read as a serious concern
    2. And metrics should warn the Board ahead of time of dangerous situations; look for leading indicators rather than lagging indicators
      1. For example, you might require cash-on-hand no less than 3 month's operating requirements. If that metric drops below the acceptable level it could be an early warning of cash flow problems.
    3. Metrics can trigger Board involvement, so there is always the danger of distracting the Board from its long-term agenda
    4. The metrics will be the sole basis for evaluation of the ED, since the performance of the organization is the performance of the ED
    5. Metrics help to further articulate objectives
      1. The concept of ‘morale’ is elaborated by the survey used to measure it
    6. You build confidence in the policies through monitoring data.
  2. Some DO's and DONT's for writing metrics
    1. Define a set of metrics that contains all and only those things essential to success
      DON'T decide on each metric separately.
    2. Focus on results and outcomes
      DON'T ask about events and processes
      1. For example, one organization wanted to expand their corporate support base, so the iniital metric was to require the ED to make 3 presentations per month to potential corporate donors. The net effect was to release the ED from any accountability for achieving the outcome. If he did 3 presentations/month he had met the requirement. The revised metric was to require no less than 15% of the total income to be from corporate donors. Now the ED had to explore all manner of strategies to achieve the outcome, which is exactly what you'd want from the ED!
    3. Gather data to support decision making
      DON'T gather data to satisfy curiosity, fulfill traditional expectations, or "just because"
      1. A good test for a metric is to ask "If this metric were to fall too low, what actions would we consider taking?" If you can't imagine a possible answer, the metric may be off center from your real concern.
    4. Focus on elements of the Ends Polcies and Executive Limitations
      DON'T include whatever measures people think would be interesting, or whatever indicators "most" Boards would require
    5. Provide clear defintions of 'good' and 'bad' for each indicator
      DON'T collect the data first and then figure out what would be 'good' or 'bad' later
      1. Remember that a metric can be "too high" as well as "too low". For example, it's easy to imagine being too far in debt, but an organization with zero debt is also an organization avoiding reasonable risk. Clearly morale scores can easily be "too low", but if employees are averaging 7 on a 1-to-7 scale, maybe the ED needs to push people a little harder.
    6. Collect data only as often as you would consider making changes
      DON'T require reports monthly, just because you always have
  3. Expect that the monitoring system will need some adjustment.
    1. Overtime, it will shrink down to a minimal set, but the Board will probably want to start out looking at more data than it will need in the long run.
    2. Some metrics will be so tightly correlated that they are redundant and one can be dropped.
  4. When a metric fails
    1. A metric that falls out of bounds is worthy of discussion, but the Board should not immediately assume that something has gone horribly wrong. "Cash on hand" could dip below a minimum value because of a temporary, unanticipated expense that is not likely to repeat. The level of corporate support might drop below the desired level because a single, big donor was acquired and their community support budget was usurped. While such events are unfortunate, they reflect the vagaries of market realities, not a fundamental flaw in the ED's leadership.
    2. A situation that prompts a downturn in a metric may surface a needed revision. For example, if a key corporate donor is lost, that may highlight the need for diversity in the corporate donor base. A new metric might require that no more than 30% of the corporate donations come from any single source.
    3. A metric outside of its allowable range should prompt a fairly standard discussion between the ED and the Board
      1. What are the circumstances around the shortfall? What else should we know about the situation?
      2. What is your plan for recovery?
        1. When would you expect the metric will be back in compliance?
        2. What early indicators would tell you the recovery plan was working? Or not?
      3. Can the Board be of any help in that recovery plan?
        This should be a negotiation. The Board may want to insert themselves into the plan over the ED's objections. Ideally, however, the role of the Board will be arrived at through mutual agreement rather than unilateral authority.
  5. Presenting metrics data in the Board meeting
    1. The format of the report should be easy to scan.
    2. Don't let curiosity turn the metrics report into a general review; the ideal case is that the Chair announces "All metrics are within range, so we'll move on to the next item on our agenda".
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