This value creation metrics article will explore the techniques used to determine and express the VALUE that your unique Business Aviation operating organization creates for your corporation or host enterprise.
Value Creation Metrics, expressed in four levels, are essential tools for everyone who hopes to achieve a position of personal and professional leadership in today’s hyper-competitive marketplace. Knowing, embracing and being fluent in the language of business leadership at the senior level is no longer optional.
Let’s get started with developing your working-level knowledge in this critically important area.
The Principles of Value Creation Metrics
We will start with that big, fat manila folder submitted monthly and stuffed with numbers nobody understands or cares about. This is your Level I Metrics.
Then we’ll review the two intermediate levels: Activity-based metrics (Level II) and Predictive metrics (Level III).
And we’ll progress to Level IV Metrics: How business aviation delivers quantifiable value to the parent company or host organization.
Self-Assessment
What is your self-assessment of your Business Aviation operation’s prowess with regard to Metrics? Where do you truly rank?
Business Aviation organizations can experiment with and master each of the four levels of Value Creation Metrics. It takes some hard work, but it is achievable and the performance rewards are significant.
Before we focus on Metrics, we must appreciate that the aviation unit should be well aligned with the parent company or host organization in terms of its Vision, Mission, Values and Core Competencies.
Once the Aviation Unit and the Host Organization are well aligned, we can then understand and appreciate the critical importance of cascading the most salient attributes down into the Flight Department through clear Vision and Mission Statements, then translating them into measures of Value Creation for the host organization
You have undoubtedly heard the term, “Metrics.” But, do you really know what it means? More importantly, can Metrics add to your success as a Business Aviation Professional? The short answer to the last question is a resounding, “YES”!
The effective use of Metrics can literally transform your operating results. Organizations that were once considered marginal can become peak performers in less than a year. And the same is true for employees. It’s real …. It’s exciting ….. It’s energizing. And, it’s possible for YOU to achieve the same dramatic results. Best of all, this tool is disarmingly simple, yet so effective.
Effective Performance Metrics are a Leadership Tool for your organization. Be careful not to confuse Leadership with Management. In our view, People get Led, Things get managed.
Again, what exactly is a metric?
Metrics are used to gauge some quantifiable aspect of performance. Properly utilized, they help us correct poor performance. Importantly, Metrics can also actually PREDICT future results. This is critically important as will be discussed shortly.
Where did the concept of metrics come from? Actually, metrics started with the Ancient Chinese warriors, centuries ago. But, in relatively modern times, credit goes to The Northrop Corporation where “The Hawthorne Effect” was first observed.
Simply put, Northrop discovered that “What Gets Measured, Gets Improved,” and, “Measure What Matters Most.” When employed together, these two “laws” produce powerful results. So, for historical purposes, that’s the origin of the Effective Performance Metrics concept.
It’s so elegantly simple. “What Gets Measured, Gets Improved.” And “Measure What Matters Most“.
Examples of Metrics
A thermometer produces the metric of temperature, giving us only the “current state.” No history. No future. Just the temperature “right now.”
However, we can add some additional weather instruments that are producing different measurements, or metrics—a barometer, an anemometer, then an image of a beautiful sky.
Given this information, what would be your answer to a request for your perception of forecast accuracy?
In reality, the only thing we know is “what is” at this moment in time. Are these really metrics? Yes, no doubt about it, they certainly are. Perhaps you’re beginning to wonder how useful they might be. If you are wondering, CONGRATULATIONS!
Because metrics (without context) are just data. Unfortunately, they are not “informative”, but that’s where most of us begin when starting to work with metrics.
So, where would you start to develop your Effective Performance Metrics reporting package? If you need some assistance getting started or get bogged down along the way, please contact us. This area is one of our distinctive competencies.
Is your organization starting with Level I Metrics??
You remember—”Give me a number, any number!” Virtually all of us start with Level I Metrics. Let’s be honest. This first metrics level is really just “RANDOM DATA“. We scramble around to find some numbers, any numbers. And, in fact, we believe, the more numbers the better! We try to have them look as complex and convoluted as possible. What do they all really mean? Who Knows! And, you hope that you don’t get a lot of questions.
Level II Metrics, commonly known as activity-based metrics, are the most common Metrics. They express what we have done or what we are doing right now. We are commonly looking in the “rear view mirror” at past activity. Common Level II Metrics include flight hours, miles flown, fuel consumed, number of passengers transported, delays incurred and so forth.
As an example, “Our fleet operated 350 hours last month.” For this and each of the Activity Based Metrics that you identify, the following question must be answered:
“Why do these metrics matter?” To quote a tough curmudgeon ……….. “So What?”
Activity Based Metrics must be relevant. They must tell a story, either individually or collectively. They must get us to a conclusion that drives action.
Given that we are all operating at very high speed within Business Aviation, focusing intently on our “rear view mirror” (i.e., what happened?) might be a little career-limiting!
Don’t we really want to be looking ahead at where we’re going or perhaps even predicting where we are likely to be in a few short months?
Of course we would! And ……. that’s what Level III Metrics enable us to do. These are called “Predictive Metrics.”. They show Trends which help us to understand the end result that we are going to achieve based on our current Action Plan. These forward-looking metrics are one of the most important keys to any organization’s future success. Thus, they are the equivalent of your HUD’s Trend Vector!
The really powerful aspect of Predictive Metrics is that if the Trends are not pointing in the right direction, you have time to change your Action Plan and still achieve the desired operating result…while there’s still an opportunity to do so.
Level III Metrics need to proliferate throughout the aviation organization and be monitored on a consistent basis. What do Predictive Metrics look like?
They enable you to shape your future performance. They allow you to recognize unfavorable trends and take action so that you are never left in the dust wondering …………. “What the heck happened???”
Keep Dr. Einstein’s quote in mind. Yes, that’s the E=MC2 guy.“If you continue to do what you have always done and are expecting a different outcome, that is the classic definition of insanity.”
Many organizations think that Predictive Metrics are the final destination. However, there’s actually one more step of sophistication to be made.
Level IV Metrics, otherwise known as Value Creation Metrics are the Zenith level that best-in-class business aviation organizations are trying to achieve. They require your organization to have progressed through and thoroughly understand Levels I, II and III before attempting Level IV.
Value Creation Metrics
These metrics clearly and irrefutably illustrate how you and your organization are MEASURABLY IMPROVING your firm’s or organization’s Operating Results. Think about it in term of Improved Operating Results.
Isn’t this why your firm has employed you in the first place? In reality, this is what your host organization is “buying” from you and your organization.
Value Creation Metrics require you to take a different tack. You have to view things differently. These metrics focus on Results rather than Activities. Remember that sage adage—”Performance is the only thing that counts, everything else is conversation”.
Here’s the bottom line for you and your organization.
Value creation:
- is the gateway to increased profitability.
- is the ultimate scorecard.
- what business aviation must demonstrate each and every day for your corporation or host organization.
- is business aviation’s reason for being a part of the parent company or host organization. It’s really just that simple.
Does that feel a little foreign or strange to you? Never heard anyone actually talking about quantifying Value Creation in this manner?
Defining Level IV Metrics has made a significant DIFFERENCE in the organizations that we advise. In fact, in many instances, it’s been transformative. And we are not overstating the case.
Take some time to think through where you and your organization are on the metrics maturity ladder. Be brutally honest.
In reality, only a few organizations have totally mastery of Level IV Metrics. But the best organizations are on the fast track towards achieving that goal. Even if your business aviation organization is “not totally there”, everyone in your organization, to a person, should be making very significant progress and the pace should be pace accelerating!
Let there be no doubt, this is very, very hard work. It requires leadership. It requires honesty. It requires accountability. And, it requires everyone who is “On Your Bus to be in the Correct Seat,” to paraphrase a theme from “Good To Great” by Jim Collins.
This is a very rigorous PROCESS and nothing happens by chance. Even though the journey is long and sometimes difficult, the rewards along the way are numerous.
Meaningful Performance Metrics are absolutely necessary for your success and that of the organization you lead!
We hope that you are challenged, thinking, wondering and solving the puzzle as to how you’ll achieve Level IV Value Creation Metrics. Especially given the hyper operating speed of today’s business aviation environment.
We would very much enjoy speaking with you and learning of both your successes as well as your challenges. Give us a call (+865.357.5077) or send us an e-mail. We wish you the best in your journey towards Level IV Metrics.