What’s Your Magic Number?

Organizations usually have just a few leading indicators -- sometimes a single number -- that will predict success or identify problems.
August 1, 2012
By John M. Bernard  |  Contributor
Senior fellow, Governing Institute

The nature of organizational work is that certain work really matters, and if we do that work well, other areas of our work also will benefit. What we measure is what we manage, so finding the right measures to drive the right behavior is among the most important work leaders do.

In working with the leadership teams of state agencies in Oregon and Washington over the past few years, it has become obvious to me that certain numbers, measures or other indicators really drive or predict others.

For the Washington States Department of Retirement Systems, which manages retirement programs for most governmental entities in the state, the most important driver is the accuracy of member data. When the data is accurate (for such items as compensation and years of service), many other things then go smoothly. But when the data is inaccurate, it means extra work, confusion, delays and, in the worst case, the risk of a member making a retirement decision based on erroneous information.

By the time a worker retires, all discrepancies have to be resolved. And, the cleanup of old inaccuracies can create a significant challenge in getting those benefits rolling. "We rely on the data we get from 1,300-plus public employers in the state," explains DRS Deputy Director Marcie Frost, "but we must do everything in our power to make sure the data we receive is accurate and complete."

While member accuracy is key for DRS, the Oregon Youth Authority has its own special number: the percentage of youth who have been in the corrections agency's custody who have a positive mentor outside of incarceration. Because external mentors dramatically reduce the odds that a young man or woman released from the penal system will end up back behind bars, finding good mentors is key for youth to become productive, law-abiding citizens.

Of course, this "magic number" phenomenon is hardly unique to government. As Frederick F. Reichheld wrote in the Harvard Business Review, a company's revenue growth could be predicted by a single measure.

"It turned out that a single survey question can, in fact, serve as a useful predictor of growth," wrote Reichheld. "But that question isn't about customer satisfaction or even loyalty — at least in so many words. Rather, it's about customers' willingness to recommend a product or service to someone else. In fact, in most of the industries that I studied, the percentage of customers who were enthusiastic enough to refer a friend or colleague — perhaps the strongest sign of customer loyalty — correlated directly with differences in growth rates among competitors."

For a leader, the lesson these examples hold is that most organizations have a handful of numbers that need to be carefully watched and even more carefully managed. Understanding these predictive indicators creates focus on managing what matters most and reduces the surprises that all leaders dread.