In my experience…ROA is sleeper metric #1
Updated: May 9, 2019
There are many ways organizations measure return. Usually it’s based on something spent, used or earned like investment, assets, equity, resources, revenue, etc. Those are popular inputs given their standardized status and applicability across organizations and industries. The challenge is deciding which to use and for what purpose. Sometimes we have no choice and must use those required in our industry for reporting purposes. Other times we use those that showcase, in the best possible way, the return we want people to focus on.
Typical ‘Return on x’ metrics are used to project expected results as well as communicate actual results. That said, there are other return-based metrics that aren’t as common but are just as important. I call these ‘sleeper’ metrics. Sleeper metrics are those that measure value-building capabilities and have the potential to significantly impact the ability of an organization to maximize return. Generally, they’re related to internally-facing activity, not widely known to external stakeholders.
In my experience, Return on Alignment (ROA) is sleeper metric #1.
Return on Alignment
I looked but couldn’t find an industry standard for measuring alignment, even though varying levels of alignment exist within every organization. So, like any entrepreneurial consultant would, I developed an algorithm and assessment that I now use across all my clients. The value in measuring alignment, or more importantly the lack of alignment, is two-fold. First, leaders learn where misalignment exists. Second, they understand the degree to which that misalignment exists.
In organizations large and small there is always misalignment, which is entirely natural and expected. The question is, what does leadership do about it? Do they acknowledge it as a reality and look for ways to address it, or do they deny that it exists despite all signs to the contrary? The answer is, it depends on the leader(s). In large organizations I’ve had leaders acknowledge misalignment but then say they’re resigned to the fact that it’s not possible to achieve alignment. This isn’t true of course, but unfortunately the perception is understandable because alignment isn’t commonly addressed. In small organizations I’ve had leaders tell me they know when misalignment happens and address it immediately so they don’t need to measure it. This is also not true, despite best efforts, because people are not robots that only do and think what they’re told.
My observation has been that many leaders welcome an assessment of alignment. They’ve either tried “everything else” to address organizational issues or they’re comfortable enough in their position, regardless of the state of the organization, that they welcome the opportunity take a new view of the landscape.
The value people and teams bring to an organization is diversity. Diversity of experience, talents, abilities and opinions. That reality guarantees misalignment. Misalignment within teams and between teams. The biggest risk is when it exists at the very top, in the senior leadership team. If misalignment is significant at the senior leader-level, it’s magnified further down in the organization.
When alignment exists, there’s understanding and agreement on the path forward, sometimes referred to as the alignment between strategy and execution. When alignment is lacking or less than optimal there are forces working against each other resulting in inefficiencies detrimental to the organization.
The ease and speed with which lack of alignment can be identified surprises some leaders. One of my favorite things to do is review a ‘Map of Misalignment’ with leaders after we assess their team(s). Not because of the negativity that could be inferred from it, rather because of the previously unrealized opportunity and roadmap it provides. There’s almost always a sigh of relief that means, “Now I / we know where to focus time and resources to address this”. It’s especially powerful when benchmarking alignment over time and / or between organizations in the same industry. Leaders love metrics, trending and comparisons.
The good news is misalignment is very addressable. Leaders must recognize that effort is required to ensure alignment within and between teams. I read somewhere that you can’t manage what you don’t measure. In this case, measuring alignment is crucial to determining the value of the return to be gained by improving it.
Special thanks to Kevin Evans, who showed me how to align people on a team around common objectives and succeed, and to Greg Boswell, whose ability to align people and teams across an organization makes him invaluable.