Well, that title should upset a few people – particularly the folks in finance that love their spreadsheets more than they do their children. Don’t get me wrong… I like the idea of measuring things so you know where you stand. My problem is the way in which some organizations execute their metrics.
Performance metrics often provide an excellent illustration of how a really good idea can be made difficult and useless by poor implementation. It’s a lot like watching your favourite sports franchise consistently snatch defeat out of the jaws of victory.
Usually it goes down like this: someone in some position of authority will read the first fifteen pages of a book about measurement. Without reading the following 250 pages, he concludes that his organization needs to get everyone on the measurement bandwagon. Then he strikes a committee, or hires a consultant to go forth and make this happen.
Fast forward in time six months, and a significant portion of everyone’s work week becomes dedicated to counting the number of paper clips they have consumed since last week, and calculating the annual impact of that paper clip consumption. They then have a meeting to discuss how to reduce paper clip consumption, thereby reducing annual operating costs by $48.50, or roughly 1/100th the cost of the first meeting about paper clip consumption.
OK… that might be a bit harsh. But here are some actual examples of performance metrics gone horribly wrong:
- The technology company that measured sales success exclusively on dollar volume at the end of each quarter. THE RESULT: A whole bunch of clients went somewhere else because they were tired of being sold things they really didn’t need.
- The grocery retailer that measured check-stand effectiveness by calculating the frequency of cashiers using customers’ names. THE RESULT: the customers went to stores where they measure how much time was spent waiting in line – something the customer actually cares about.
- The restaurant owner that attempted to reduce cost by reducing the number of paper napkins provided to each customer. THE RESULT: I don’t know… probably sticky fingers and dirty tables – this one just seemed really silly to me
- The lumber manufacturer that measured how much fibre it recovered from each log, as opposed to how much money they made on different dimensions of lumber. THE RESULT: Very few wood-chips, but a yard full of garden stakes that no one would buy (and a whole bunch of trees unnecessarily harvested)
Some people will tell you all that matters at the end of the day is how much money you make. Not true – if you focus exclusively on this, you are in a never-ending cycle of sub-optimized decisions that forbid any long term success. Most obviously, if you ignore safety while focusing exclusively on how much money is make, it is only a matter of time before you injure or kill someone, which beside being ethically reprehensible, is very expensive.
Here’s the bottom line about measurement: The great thing about measuring performance is that people will adjust their behaviours to affect the outcome of the measure. Unfortunately, the really scary thing about measuring performance is that people will adjust their behaviours to affect the outcome of the measure.
So measurement (like other recreational drugs) should be used cautiously and in moderation. Second, you should never have only one number you are tracking. And finally, you need to understand why numbers are trending the way they are, as opposed to (over)reacting to one data point.
Let’s be careful out there.