When Metrics Undermine Your Business
Companies that work hard on their strategies and carefully monitor their progress often run into spectacular trouble.
Why It Happens
People have a behavioral tendency—known as surrogation—to confuse what’s being measured with the metric being used.
How to Fix It
To reduce the risk of surrogation, make sure that the people executing your strategy had a role in formulating it, don’t link incentives too tightly to strategy metrics, and use multiple metrics to assess performance.
Tying performance metrics to strategy has become an accepted best practice over the past few decades. Strategy is abstract by definition, but metrics give strategy form, allowing our minds to grasp it more readily. With metrics, Ford Motor Company’s onetime strategy “Quality is job one” could be translated into Six Sigma performance standards. Apple’s “Think different” and Samsung’s “Create the future” could be linked to the amount of sales from new products. If strategy is the blueprint for building an organization, metrics are the concrete, wood, drywall, and bricks.