Let’s say you are a manager. One of your many tasks is to decide how best to spend a million dollars. Maybe a morale event to Hawaii for your team? That would be fun. Or maybe approve that operations project to streamline your company’s billing process. That sounds like it should result in a better return than the Hawaii thing. But how will you know? How can you be certain that project delivers the promised benefits?

One option is to carefully supervise the process every step of the way, review each decision and ensure that the team has a detailed plan with concrete, specific deliverables. The problem is, that sounds like it will take a lot of time and you have other things that demand your attention. Besides, that sounds like a lot of micro-management.

Another option is to set some boundaries for scope, schedule and budget. But even if the team hits all of them as promised, can you still be sure that this was a better idea than a strategy planning session at a beach resort?

A better approach is to get clear about the business results that you want to improve and figure out how to measure them. Cycle time, defect rates and other cost metrics are convenient places to start. Even better, think about how your project might impact revenue, customer satisfaction, loyalty or advocacy. How about reducing operational risk, increasing corporate or regulatory compliance? Maybe technical quality or agility is what you are really aiming for.

Whatever it is, start by getting a sense of what your current performance is. If you don’t have solid numbers, go with your best guess, or ask someone who you think has a good sense of it. Then ask what a reasonable improvement might be. Is it 9%, 90% or more like 900%?

Maybe taking the measure of what really matters is too difficult. Try using a proxy measure, that is, measuring something that is correlated to what you care about, but is easier to measure. For example, it might be hard to measure customer satisfaction directly, but you might be able to measure repeat visits, if you are willing to assume that they are both linked together.

This approach has two major advantages over more conventional approaches to managing projects. First, having clear, outcome-oriented measures of project success allows you to make better decisions about what projects to fund and to judge the likelihood of success even before the project is complete. Second, it allows the team greater latitude to optimize their work as they learn new things over the course of the project. Establishing common goals drives better collaboration and creates room for the team to innovate and make better decisions.

Establishing the right measures matters. Next year: Hawaii.

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