This is the first of several posts on a qualitative metric, return on management (ROM), that can be used to assess if your firm’s strategy implementation is on track.

Why is it that a large percentage of the most reasonable, analysis-driven, implementable strategies never make it from concept to reality? The answer lies with managers themselves, or more specifically, with how managers direct their energy. Managerial energy is the most scarce resource of a firm as Robert Simons and Antonio Davila describe in a great article on the subject in Jan-Feb 1998 issue of the HBR. The authors argue that the classical business ratios for measuring a firm’s financial performance- return on equity, return on assets, return on sales, etc., may be useful but that none is designed to reflect strategy implementation.

Some will argue that the fruits of good strategy implementation will bear out in the financials, and be captured by the classical business ratios eventually. Eventually. That is the key time frame here because strategy is for long-term and waiting for the classical ratios to reflect strategy execution is not optimal. Plus the ratios do not give us a measure for payback from a firm’s scarcest resource: manager’s time and energy.

ROM is a rough estimate and not an exact percentage. It is expressed like other business ratios by an equation in which the output is directional, i.e., it is maximized by a high numerator and a low denominator:

(Productive organization energy released)/(Management time and attention invested)

By using the ratio, managers can calculate if their ROM is high, medium or low. The art is in knowing which congruence relations help to maximize the productivity of a firm. Earlier, I wrote about the Tushman and O’Reilly congruence-based testing methodology and that a firm’s achievement of vision stems from alignment of the following relations: strategy, task, people and culture. If managerial energy is misdirected or diffused over too many opportunities or if dissipated along any of the congruence relations, then even the best strategies stand little chance of being translated into real value.

Alignment among congruence relations is key to ensuring that this scarce resource that managerial energy is, gets directed to the right projects. Of course, it is not as easy as it sounds and in the high intensity competitive environment of today, it is extremely challenging to keep managerial focus straight and narrow. This is where the ROM metric comes in. It indicates how well managers have chosen among alternative paths of action to deploy resources optimally.

It answers the question: “Are you getting the maximum payback from every hour of the day that you invest in implementing your business’s strategy?”. The successful business entity will strive to have its managers focus on specific, crystal-clear strategic priorities only for the amount of time it takes to get results. The world is teeming with business opportunities but there are only so many hours in a day and only so many managers to go around. A high-ROM manager knows that firms thrive when their leaders, and those who work for them, are disciplined in their use of time and resources of the firm.

ROM helps measure clarity of purpose that transforms the firm’s energy into productive energy and takes strategy from inception to market.