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Some watchouts and potential unintended consequences

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A potential ‘shadow side’ of metrics is that once the metrics are defined, the conversation can change to focus on how well a company measures against the metric rather than understanding how the metric is helping the company execute against its strategy. They become boxes to tick or substitutes for the true goals – thereby skewing priorities and behaviour, often undermining the strategy and culture itself. This is particularly true where proxy measures are used, as it is easy to forget that a proxy is just a proxy and only captures a portion of the essence of the thing that we are actually interested in achieving. A continual risk is to hit the target but miss the point.

The best way to mitigate this risk is by creating an environment in which measures are seen as inputs into conversations and opportunities to learn from the actions taken, rather than an end in themselves. Measures therefore once chosen are used to stimulate action in pursuit of the purpose – and this includes being open to changing the measures if it is found that they are not providing the right information to guide the strategy.

This article by the FCA gives an excellent example and helps to bring out the distinction between measuring and assessing to help address what is happening: 

A measurement of ‘speak up’ [in the context of bullying] would only have told us whether or not people were speaking up; it would not have allowed us to understand why the manifest behaviour was happening or what some of the underlying, unconscious patterns and assumptions were that had been perpetuated over generations in the organisation. This then is the nuance between measuring and assessing; the first enables an ‘understanding’ of what is happening only against a pre-determined measure, whereas the second enables a holistic analysis of the underlying cultural patterns that contribute to the observed behaviour.

Ajit Menon and Allen Zimbler, Corporate culture – grasping the ungraspable 

Some practical considerations:

  • Avoiding metrics being delegated to siloed teams disconnected from the core strategy. It is important to maintain the link to key decision-makers within the business so that the information gathered can feed into and inform strategy
  • Avoiding linking incentives too tightly to metrics
  • Using multiple metrics and narrative reporting to help provide the relevant context and what is being learned from the metrics
  • Structuring discussions and reporting in a way that gives due prominence to what matters most, so that conversations are not skewed or biased to what can more easily be quantified
  • Creating an environment where non-financial metrics are considered as important as financial metrics in informing strategy and decision-taking

Some further reading: