The Delay Effect in the Management of Performance Indicators

Has it ever happened to you that you were watching a soccer game on TV near the stadium and heard the crowd roar because of a goal, even before the player kicked the ball?

You know what I’m talking about! One of the most annoying things for those who watched the Brazilian national team in the last World Cup was this delay. It is an old problem that hasn’t been solved yet. I attribute this to the fact that the vast majority of people don’t notice it, except during big events.

Those who watch the game with one TV tuned to a local station and another to a cable channel will notice a difference of a few seconds. And those who watch something on TV that can also be seen live (from a window) know what I’m talking about, too.

This delay, which translates into Portuguese, as “atraso”, is the time it takes for the transmitted data to travel through space from Earth to the satellite and back again. Each leg of the trip to and from the base takes up to a quarter of a second. If the transmission is sent to the whole country, the signal still needs to make another round trip to arrive at all the little screens, adding to the delay.

But we didn’t come here to deal with satellite broadcasts (there are better-qualified people, even though I was trained as an electrician, who can talk about it!).

Our goal is to address the delay effect in the management of business performance indicators.

In business performance management I use the term “delay effect” to refer to the time it takes for an action to have an effect and set off the company’s performance indicators. That is, it is the elapsed time between the adoption of an action, perhaps the result of an Action Plan or FCA (Fact-Cause-Action), and the repercussion of this action on the performance indicators.

Why is it be important to understand the delay effect on indicators at monthly managerial evaluations (MMEs) or critical performance analysis meetings, (CPAMs)?

For three fundamental reasons.

First, ignorance of, or a failure to understand the meaning of, the delay effect can lead to exaggerated expectations about the time required for an action to positively impact the company’s performance and, consequently, be registered by the indicators. This can lead to frustration.

Second, this may lead to the false impression that the action was misguided, for not producing the expected results. This can lead to a premature cessation of the action. It may not be clear that the problem may not lie in the action itself, but in the time it takes for results to be seen.

Third, it can lead to inconsistencies in the definition of goals, be they too small or too ambitious, which, if not achieved, can cloud leadership perception of the work done by the team. As I wrote in the DG on goal setting, goals that set the bar too low discourage people. They give the impression that leadership does not trust and expects little from the team. The same happens with overly ambitious goals. People often begin to “fade” in the face of unreachable targets.

In general, actions focused on aspects that involve people — motivation, work environment, customer satisfaction, community satisfaction, company image, market share, sales — and are affected by numerous factors, many of which are external and out of company control, tend to have slightly longer delays. Operational actions — in industrial and service processes and in the financial area — may have slightly shorter delays.

Therefore, understanding the delay can provide managers with more accurate estimates of the time needed for the effects of initiatives to appear and help them better cope with the understandable anxiety of shareholders for better performance.

Another benefit of studying the delay effect in the management of indicators is the possibility of a more judicious setting and projecting of goals out to the following months and year even.

So how does one calculate the delay?

Unlike with engineering and telecommunications systems, there is no mathematical formula.

The delay depends on the indicator being analyzed, the action taken, the level of teams’ engagement in the implementation of the action, market reactions, and the economic and competitive environments.

A good way to estimate the delay is to analyze each indicator’s indices over time, so it is very important to record performance information in an indicator panel, showing past actions and how long they took to show effects.

I usually say, referring to Brazilian education, that as soon as our society starts to take education seriously, and not just pay lip service to it, it will take 30 or 40 years for the effects to be seen.

Was I clear in my explanation of the “delay effect” and its repercussion in the management of business performance?

One warning: don’t give into the urge to use the delay effect as an excuse to justify inappropriate actions, without the commitment of the team, that will never produce the desired effects.

Until next time!

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