- Posted by Richard Stringham
- On May 2, 2017
- At What Worth, Ends
Many of us working with Policy Governance have long advocated that boards should specify meaningful results in Ends policies rather than getting hung up on how to measure the results. What I hadn’t fully appreciated was how significant precise statements of meaningful results are when determining what those same results are worth. That is, until I recently came across a Harvard Business Review article by Ali Jaffer and Mona Mourshed.
The authors describe how the cost of a program in which students develop employment skills and receive job placements is more appropriately measured when set against the total number of workdays fulfilled by a cohort of students during their first 6 months of job placement:
Cost per student is good to know, but it doesn’t mean much if students don’t succeed in the workplace. Job placement matters, but a high placement rate is meaningless if the participant leaves after a week or if the job itself is temporary or doesn’t pay well.
From a Policy Governance viewpoint, this is an Ends issue, not because it is a program (programs are means, not Ends), but because the meaningful results to be achieved, who the intended recipients are, and what those results are worth are the three components of Ends policies.
But what jumped off the page at me was the remarkable shift in measuring the cost-benefit (or what in Policy Governance parlance we refer to as “worth”) when the more meaningful results are required.
To illustrate, the authors describe a program with a cost of $1000 per student resulting in 50% job placement with an average of 60 days on the job in the first six months. The cost per employed day would be $33. The second program, costing $2000 per student, but with a placement rate of 80% and participants averaging 120 days on the job would cost $21 per employment day.
In spite of the higher cost per student, you don’t need to be an economist to recognize the better cost benefit from the second program!
Now imagine the board of an organization engaged in this type of activity with the following Ends policy:
Students experience high on-the-job success rates at a justifiable cost.
Although the CEO’s measurable interpretation of such an Ends policy might be different than the approach taken by Jaffer and Mourshed, it would be difficult for the CEO to justify the use of less meaningful measures such as graduation or job placement rates to demonstrate achievement of such an Ends statement. So, by carefully crafting the Ends policies to ensure that meaningful results are required, the board has removed less ambitious and less useful measures of results for intended recipients.
In doing so, the board should expect measures of the cost against the intended results to produce much more meaningful cost-benefit metrics. Could a CEO justify $33 per employment day when $21 is achievable? Ultimately, measuring the cost of achieving those results gives much better accountability for the use of the organization’s limited resources.
~ The full HBR article by Jaffer and Mourshed in which they describe a new metric developed for the McKinsey Social Initiative youth employment program: Generation.