Why, what and how to measure?
Author: Vladimir Kelava
Measurement helps the organization establish a baseline figure of where they are at a single point in time and it gives them the ability to identify any change in the future. It also plays a crucial role in translating business strategy into results. Still, the problem is that the way people measure performance in organizations is often simply wrong.
Most people have no idea how to get good measurements. They run the organisation blindly, measuring very little or almost nothing, and still in the end they are surprised when they end up in an unwanted situation. Paving the way to success depends on the company’s ability to be well-informed about its own condition. This knowledge is achieved by developing and using effective metrics.
If we have data, let’s look at the data. If all we have are opinions, let’s go with mine.– Jim Barksdale
You’ve probably been in a situation at some point where no data was being tracked and it was hard to tell if you were on the right path. For this reason, it was hard to know if you were getting more efficient as you went along. In such a situation, opinions play a major role in decision-making, and usually those decisions are made by HIPPO (the Highest-Paid Person’s Opinion).
Decision-making which is based on little or no data is unfortunately widespread in organizations. Making decisions not based on information is very risky and usually results in poor outcomes. Through the decision-making process, organizations can achieve unimaginable results, so it is very important to make decisions based on the right information, instead of just following your intuition or going with opinions.
The most important reason why organizations should use metrics is to drive improvement and to focus people and resources on what’s important. Good metrics will help you make decisions, drive performance, provide focus and drive strategy and direction of the organization. Ultimately, metrics should help organizations see where they’ve been, where they’re going, whether something’s wrong, and when the set goals have been reached.
Vanity Metrics. They might make you feel good, but they don’t offer clear guidance for what to do.– Eric Ries
So which metrics matter and how to choose them? The only metrics that organizations should invest energy in collecting are those that help them make decisions and drive improvement. Unfortunately, a majority of data available in off-the-shelf analytics packages is useless because it offers little in the way of actionable value. It might make people in the organization feel good, thinking – “Look at us being busy!” or “We’re going fast!” but it doesn’t offer clear guidelines for what to do. Such data is called vanity metrics because it makes organizations look good and offers nothing more than a false sense that they are moving in the right direction. Vanity metrics don’t help organizations improve, and as we’ve said before, one of the main reasons to have metrics is to help organization’s drive improvement.
If you have a piece of data on which you cannot act, it’s a vanity metric… A good metric changes the way you behave.
This is by far the most important criterion for a metric: what will you do differently based on changes in the metric?– Lean Analytics, Alistair Croll and Benjamin Yoskovitz
There is no silver bullet when it comes to measurements.
The best we can do is follow some guidelines or even rules. Management 3.0 offers twelve rules of good metrics. These rules should serve as a guide and they should help organizations establish a culture where people see measurements as a way to learn and improve, and to create an environment where all workers participate in the measurement ecosystem.
Rule 1 – Measure for a Purpose
You must always understand why you are doing the measuring. The metric is not a goal in itself. Never forget that it’s just a means to an end. It all starts with why. We should measure things in order to make a decision toward the purpose.
Rule 2 – Shrink the Unknown
A metric is just a surrogate for what you really want to know. Always try to reduce the size of what is still unknown. We should measure from multiple perspectives and not jump to conclusions.
Rule 3 – Seek to Improve
Don’t only measure things that will make you look good. There is plenty of data around, but you must focus on what enables you to do better work. Not all metrics are useful; use the ones that help you learn and improve.
Rule 4 – Delight all Stakeholders
Your work depends on others, and others depend on you. Never optimize for just one stakeholder. Instead, measure your work from multiple perspectives. Everything depends on everything; don’t focus on just one client’s goal.
Rule 5 – Distrust All Numbers
Observers usually influence their own metrics, and they suffer from all kinds of biases. Have a healthy, skeptical attitude towards any reported numbers. The observer effect and the biases in human minds make metrics very suspicious.
Rule 6 – Set Imprecise Targets
When people have targets, they have an inclination to focus on the targets instead of the real purpose. Avoid this tendency by keeping your targets vague. Give direction to support the goal, and don’t focus on one precise end-point.
Rule 7 – Own Your Metrics
Everyone is responsible for their own work, and metrics help us improve that work. Therefore, everyone should be responsible for their own metrics. Everyone should measure for themselves; don’t measure someone else.
Rule 8 – Don’t Connect Metrics to Rewards
Rewards often kill intrinsic motivation and lead to dysfunctional behaviors in organizations. Don’t incentivize people to do the work they should like doing.
Rules 9 – Promote Values and Transparency
Human beings are smart and able to game any system. To prevent gaming, be transparent about values, intentions, and the metrics everyone is using. Shared values and transparency reduce people’s desire to game the system.
Rule 10 – Visualize and Humanize
Numbers tend to dehumanize everything. Replace digits with colors and pictures, and keep the measurements close to where the actual work is being done. Give metrics meaning by connecting them to real work and people.
Rule 11 – Measure Early and Often
Most people don’t measure often enough. Measure sooner and faster to prevent risks and problems from growing too big for you to handle. Measurements fail when you don’t measure soon and often enough.
Rule 12 – Try Something Else
It’s rarely a good idea to do the same things over and over. The environment changes all the time. The same should apply to how and what you measure. Don’t let metrics get stale; keep experimenting with different metrics.
Measurement can be easy, fun, and motivating, and it’s one of the most important activities for any organization. What gets measured gets managed, and what gets managed gets done. Join us at the Management 3.0 workshop if you want to learn more about The Twelve Rules for Metrics and how they can help you to create a healthy Metrics Ecosystem. You will also have the opportunity to hear and learn how all this connects to OKRs practice.