Metrics

Metrics gauge how people are doing.

There are three types of metrics:

• Organizationwide

  Organizationwide metrics tell people how well the whole organization is performing.

  They can be used to build concern for the state of the organization and motivate a desire for change (if they raise concerns), as well as celebrate successes (if they show progress).

  But they're not good for guiding individual behaviors, because people can't directly affect the metric.

  It would be unfair to connect them to individuals' performance appraisals. That would hold people accountable for things they can't control. There are far better ways to align individuals with organizational goals.

  How people can be empowered and aligned....

• Job-specific performance appraisals

  Job-specific metrics include, but are certainly not limited to, annual performance appraisals.

  Annual reviews are not the best way to impact performance. Imagine the oversimplified case of a machine operator who reads a dial and controls a knob. When the dial indicates that the machine is drifting out of tolerance, he adjusts the knob. Now imagine that the dial is moved to the supervisor's office, and the supervisor tells the operator how he did at the end of each year. What are the odds of a quality product? Zero!

  THe primary reason performance appraisals are considered an important metric is their connection to rewards (e.g., bonuses and promotions).

  In the spirit of empowerment and managing people by results, performance appraisals should focus strictly on outcomes, not processes. Metrics of how well people follow processes are disempowering; they force people to do assigned tasks rather than apply their knowledge and creativity to attaining the intended results. They encourage people to "go through the motions," whether or not those motions accomplish anything.

  In the business-within-a-business paradigm, managers are measured as entrepreneurs. Specific performance metrics include:

  • Customers' satisfaction

  • Market share

  • Competitive cost and quality benchmarks

  • The viability of their long-term business strategies

  • Break-even or profit targets (but not budget variances)

• Job-specific dashboards

  Metrics have the greatest impact on results when they're delivered to the people doing the work (not their supervisors), in time for them to adjust their behaviors.

  Direct and timely feedback loops, termed "in-process" metrics (as opposed to after-the-fact evaluations), are a tool staff can use to optimize their day-to-day work.

  While performance appraisals should be limited to outcomes, dashboards should include whatever people need to perform better, both processes and outcomes.

  Just as the dashboard on a car is different than the dashboard on an airplane, job-specific dashboards should be tailored to the unique requirements of each job. They should include whatever people feel they need to do a better job.

"Not everything that counts can be counted, and not everything that can be counted counts."

Albert Einstein

Metrics are not always quantitative. In practice, we often find that the more interesting the concept, the less tangible the metric.

Benchmarks

People must have targets against which to judge the metrics. If your supervisor gives you a grade of 8, is that good or bad? You can't know until you know whether higher is better or worse, and whether that was 8 out of 10 or out of 100.

Thus, the metrics subsystem includes benchmarks, i.e., target levels for metrics. Benchmarks are the "green range" on the dial, defining what "good" means on a specific metric.

If benchmarks compare you to other organizations, they should be limited to outcomes, not processes or "best practices." Other companies' solutions to familiar symptoms may work well for them, but may fail to address the root causes of your problems. Indeed, mimicking others can create as many problems as it solves if their solutions don't fit into your environment.

Benchmarks should define the ideal, not just what others have achieved. Targets phrased in terms like "as good as others" constrain people's vision to other companies' current levels of performance. They certainly won't lead to thinking creatively about what's possible or to leap-frogging the competition.