Many people have heard of Mitch Daniels, former two-term governor of Indiana and now president of Purdue University. Republicans were pushing him to run for president for a while, primarily because of the “miracle” he wrought in his state. He turned a $600 million budget deficit into a multibillion-dollar budget surplus, cut property taxes, and improved services across the state. You may not agree with all of his tactics, and Indiana is still a struggling state in many ways, but the improvement in performance cannot be denied.
His leadership helped transform agencies such as the Department of Corrections, the Department of Child Services, and the Department of Motor Vehicles from the worst performers in the country (compared with other states) to national award winners. In interviews and a book, “Keeping the Republic,” Governor Daniels describes how he and his team instituted a management by measurement approach. This included creating performance metrics for every agency aligned with the most important goals, such as reducing the number of child deaths or vehicular deaths, or increasing the number of jobs in the state. He linked budgets to improvement on metrics: If agencies dramatically improved their metrics, they were asked to reduce their costs by a smaller percentage; pay and promotions were linked to job performance metrics; and so on.
In fact, Governor Daniels had on his desk a dashboard of twenty-five key metrics updated weekly, and that dashboard was posted on the government’s website for all citizens to see.
Here’s an example of the difference the metrics and dashboard made in terms of real-time oversight. In his book Leadocracy, Earl Goode – Governor Daniels’ chief of staff and former president of GTE Information Services, which merged into the new company Verizon in 2000 – told this story: “One of our cabinet members was recruited to a much larger state than ours…He was back for a visit a couple of months later, and I asked him how it was going. ‘One thing is really different,’ he said. ‘When I did something in my agency you guys knew about it within twenty-four hours. Now, it might be three years before they know what I’ve done.’”
CEOs need to create a culture in which goals and metrics are linked to business success and progress is consistently measured. The entire organization must know that the CEO will constantly hold everyone to a high standard. Like Daniels’ dashboard, the metrics should be visible to everyone who can impact those metrics. This lets employees in every department understand how they as a group are being measured and to understand the key drivers of success for other departments. It also puts even more pressure on leaders to respond when performance falls off and the metrics start to slip.