New Metrics for New Questions Nobody Else is Asking

One of the most powerful acts of leadership is asking questions.

To be competent to deal with an ever-accelerating velocity of change, agile leaders need to act from a mindset of inquiry. Uncertainty is a more accurate reflection of the realities we face than past experience. This is known as resting in the "Don't know mind."

Bill Joiner has characterized today's leaders as evolving through three dominant stages, based on his extensive research on adult development in complex environments. These stages represent what you could call an epistemological evolution, if you're looking for a $5 word. It's an evolution in the basic question of "How does a leader know what should be done?"

A traditional, and still fairly dominant style is what he terms the Expert Leader. These folks are followed by others because of their authority and expertise. They've been around the block a few times. In a relatively stable environment, this approach works. Past experience is a reasonable guide to the future.

Achiever leaders are more focused on strategy and results. They understand outcome thinking (the foundation of #okrs) and respect a wider range of stakeholder points of view, rather than their own expertise.

The most nimble and successful leaders we see emerging in todays VUCA environment are Catalyst leaders. Catalyst leaders articulate an inspiring vision, yet make a practice of questioning their underlying assumptions (about their customers, competitors and internal capabilities, among other strategic factors) and seek a diversity of stakeholder observations to improve quality and de-risk decisions.

Catalyst leader excel at asking powerful questions, questions they themselves don't know the answers to.

Which brings us to the subject of performance metrics, be they called Key Performance Metrics, Objectives and Key Results, or something else.

In most industries, there is a widely accepted set of health metrics that everyone measures. These typically have a causal relationship with revenue and profitability. In a SaaS firm, it might be Annual Recurring Revenue (ARR). In a hotel, it might be net revenue per room or average nightly occupancy. For online retailers, it might be conversion rates.

Having spent years working with strategic performance metrics, both for #balancedscorecard and #okrs design projects, one observation I've made is this:

The easiest things to measure are generally the least useful for progress, and the most powerful metrics can be the most difficult to measure.

Why is that? We tend to want to measure the easy things to measure, and shy away from the hard ones.

This is why the most powerful KPIs or Key Results have to be outcomes. It's easy to say "We're going to do X" and measure if you got that done. That's an output. Easy to measure, and so what?

The "so what" is the outcome. A big, stretchy outcome is a question that does not yet have an answer. That feels kind of uncomfortable, doesn't it? That's why they're called "stretch targets." Measure What Matters by John Doerr is full of examples of outrageously stretchy goals envisioned by visionary leaders, requiring collective engagement to tackle enormously gnarly, complex issues. In many cases, the outcomes were simple, but no one knew yet how to get there.

As Einstein said "Not everything that can be counted counts and not everything that counts can be counted."

A classic example I hear proposed by many clients is "Customer Satisfaction." You can ask customers if they are satisfied, and they'll tell you. But that says nothing about competitive value. I may tell you I like the ice cream cone you just sold me, so I'm satisfied. But if someone starts selling a better ice cream cone down the street, you could lose me as a customer without my ever being dissatisfied. That shows that you're asking the wrong question.

If you're running a SaaS company in a crowded market (let's just say #okrsoftware for example), and you focus your efforts on ARR, and every other SaaS company is doing the same thing, then so what? Your investors may care a lot about that, but ARR is a lagging indicator of something you're doing right (or wrong). In order to actually deliver on ARR, the real questions to ask are:

What offer do we need to be making that we believe will deliver superior ARR?

And what unique set of competencies, systems, processes, technologies, customer and supplier relationships, or something else we haven't thought of yet, will enable that?

Those are harder questions to answer. And require a systems thinking approach that engages a lot of functions in the organization.

In a rapidly changing environment, the Expert leader doesn't have a ready answer based on what worked ten years ago. Even two years ago. The Achiever leader charges to the finish line, but without a narrative that actually engages the organization, believing that success comes from pushing harder.

The Catalyst leader will communicate a big question and hold that question rather than grasping immediately for the answer.

Sounds risky, and very counter-intuitive to the expert mind. After all, aren't you paid to have the answers? Where will the answer come from?

Living in a powerful question changes who we are as observers of the world. That "Don't Know Mind" makes us more open to creative possibilities that come zinging in from outside our usual area of expertise. That could take the form of a front line employee's observation about customer issues, show up while out for a long walk, or come from watching team behavior in the NBA finals.

How you choose to measure a desired outcome is an act of competitive differentiation.

Don't ask ChatGPT for a metric. That means somebody else already tried it, or that ChatGPT just made something up by rearranging popular words.

Don't go searching for a library of OKRs for something to copy and paste. The process of questioning the "known" is a generative act, not an imitative one.

One of your most valuable intangible assets could be a proprietary measure or measures, unique to your organization, that galvanize action and innovation.

The scarcest resource today is not other people's examples. It's creative imagination, powered by somewhat uncomfortable questions, strong engagement, and collective intelligence from team members.