How An Obsession with Metrics Is

Killing Your Company

Three ways to overthrow the tyranny of metrics.
Alexander Van Caeneghem and Jean-Marie Bequevort, Contributors
Felix Fox, an ambitious car salesman in the post-financial meltdown society where
valuable resources are scarce, looks enviously at people who are personally quoted on
the human stock exchange. The evolution of their stock the value of their life is
being tracked on a continuous basis with a rate watch. Initially, when Felix becomes
quoted (hes in urgent need of money), he enjoys the thrill until he starts to fall apart
under the transparent tyranny of the metrics.
Felix Fox, as you might have guessed, does not exist: he is a comic book character in
the French sci-fi series Human Stock Exchange. But the storyline is not as far-fetched as
it seems. In fact, there are some analogies with managers lives in todays organizations.
The quest for financial performance and the pressure to measure can corrode
organizational cultures, narrow the focus of leadership, reduce intrinsic motivation, and
support unethical behavior. Swamped with metrics, people typically either find creative
ways of coping, or simply disengage from the process altogether. Lets look at three
real-life cases we have seen as management consultants.
Case #1: Surviving the torture
In a fast-growing service start-up, we witnessed the implementation of a data-driven
culture, along the lines of what famous technology CEOs were glorifying in the media.
The regional business managers had to log on to a business review call at 2 p.m. every
Tuesday, where they were interrogated by their bosses and colleagues on the drivers
of financial and operational (under)performance.
A finance leader had ambitiously thought, Through metrics we can push people to
systematically identify opportunities and focus on the right things. But soon the
managers were spending all of Monday and Tuesday morning going through piles of
numbers in the (vain) hope of surviving the torture and getting away unscathed. Being
able to scroll up and down efficiently through almost 50 (!) metrics and looking good on
the call became more important than actually improving business performance. The
results were disastrous. Attrition exploded, the stock price collapsed, and a manager
moaned, This place is a sweatshop.
Case #2: Hello, mum?
In the Belgian branch of an international software company, the sales cycle was
measured by metrics on call time, number of new accounts, revenue, margin, and
pipeline. When the initially rapid growth started to slow, the local finance director had
analysts examine the data. They detected a clear correlation between call time and
revenue: every hour on the phone brought in 4500 of revenue. All we need to do is

have them call more and add a component to the scorecard, the finance director
boasted.
This led to the quarterly sales bonus of the internal sales reps being linked to a key
performance indicator of, at least, three hours daily spent on calls. A new trend
emerged: call time went up significantly but revenue growth was inexistent. Amid
the general confusion, a senior rep confessed, How can I call three hours every day? I
only have so many accounts. When asked what he was doing on the phone, he
admitted: I call my mother, a friend, or the speaking clock.
Case 3: Manu-facturing
An Eastern European industrial group had built a state-of-the-art performance
management system in its production facility. The initial setup was changed after only a
few months, because measurement not only increased the drive to perform above
standards, but also fostered a silo mentality. People refused to perform work that was
not directly related to their own performance objectives. Sorry, NMO Not My
Objective became a retort when turning away work. By including an objective that
reached beyond individual performance objectives the extent to which people helped
others to reach their performance objectives they managed to break that trend.
However, the new metric turned out to be hard to quantify and subsequently implement.
The performance management system was dealt a fatal blow when finance management
admitted they couldnt consolidate the different objectives: they made sense
individually, but didnt tie in with each other. It became clear that the results were
doctored. Do you honestly think finance understands what we are doing? one
production manager was quoted as saying. When the graph fails to indicate my good
results, I lend it the hand it so desperately needs.
The Good Metric
Listing the potential downsides is easy. Metrics are subject to unintended consequences
and manipulation, as people tend to act on the expected impact; they risk promoting
tunnel vision; they can provide the illusion of control, while many things are barely
controllable; they are prone to disregarding what cant easily be measured, while most
things are not as simple as we hope; and humans behave unpredictably. Most
importantly, metrics can make people lose track of what really matters.
Nonetheless, many companies measure many things. In fact, management trends like
Peter Druckers Management by Objectives in the 1950s and Kaplan and Nortons
Balanced Scorecard in the 1990s were built on the idea that whatever gets measured,
will actually get done. Setting well-defined and well-chosen objectives will improve
employees performance. By tracking progress and showing the impact of what people
do on what they want or need to achieve, measurement can indeed facilitate things
getting done if you dont try to measure too much.
More importantly, good metrics can provide a useful lens for examining how managers
handle the complexity associated with running a business. By looking at the way
managers use metrics, we can assess their ability to focus on a sound strategy, the way

they deal with people, and their care and attention when testing and validating new
business ideas. Here are three ways to use metrics in a useful way.
# 1: Reduce complexity.
A corporate dashboard or scorecard that focuses on too many metrics is doomed to fail
and will demotivate people. Such a framework should help managers to focus on
strategy execution after all nobody can focus on 50 metrics or goals. Five critical
metrics will cater for success.
Avoid purely internal financial metrics like revenue, earning per share, or return on
capital, but focus on tangible enablers of corporate performance. People will connect to
a net promoter score, the percentage of sales coming from new products, the number of
active users, or the percentage of out-of-stock products. These aspects determine the
long-term success of the company.
# 2: Engage employees.
A major source of corporate disengagement, potentially leading to a miserable job is
rooted in the inability of people to link their own contribution to the bigger picture.
Rather than replicating a standard corporate dashboard at every layer of the
organization, ask each team to come up with maximum three team-level metrics that
they believe will contribute to achieving the five goals set at corporate level and have
them comment on that contribution. Each team can build and track different metrics
standardization or the imposition of formats is irrelevant. The aim is to use the
correct data, and to have people align with the broader corporate goals, assimilate them,
and take ownership. Assuming you have the right people on the bus, they will care
about things use that penchant.
# 3: Drive innovation.
Whatever you do, do not tie metrics to bonus payments. Also, do not use metrics to
assess, judge. or punish people, but rather to experiment with the impact of new ideas.
Thats the mindset behind A/B testing, as is being used by new tech companies: let
people try a new idea, a new process, or a new control in a tiny part of the business and
establish a metric to track the impact and a timeline. If its a success, push it forward
and expand; if not, pull the plug, dont blame anyone, and let people explore new ideas.
Metrics can be a great learning tool. The ultimate judge of the idea is the metric, not
politics or hierarchy.
Avoid the Metric-ocracy
Where can it all go wrong? Well its not in data or measuring, but managing and
making decisions based on the wrong observations or only on quantitative observations,
while ignoring all the rest: theres the rub. And beware: the worst is yet to come.
Beyond the quantified self and people analytics, the quantified workplace is emerging.
However, the image of the metric-ocracy, the subordination of people to a quantitative
imperative, has little sustainable appeal, as it arises. Real progress is a more nuanced
narrative thats yet to be written. The future belongs to those who manage to use the

new technology instruments and reduce management complexity, liberate peoples

talents, and, ultimately, focus on what really matters.
Alexander Van Caeneghem and Jean-Marie Bequevort are practice leaders in
complexity reduction at management consultancy TriFinance in Belgium.