About fifteen years ago I had the privilege to sit in on an executive leadership training session for a major corporation. During this session, corporate leaders discussed various issues their company was having. Most of these discussions centered on stories; anecdotes that represented issues the company faced. One story in particular stuck with me…
A well-known fried chicken chain restaurant was being inspected by their corporate efficiency team. The goal was to improve operations at all of their outlets in order to maximize profits. This seems reasonable as making money is usually the goal of such places.
The corporate team brought with them hundreds of metrics designed to identify and minimize all the little inefficiencies that creep into such operations and nibble away at profit. The local store in question was doing pretty well. They were “green” on most of the major metrics and had very few “red” ratings. One of these red categories, though, was costing them quite a bit: they were throwing out too much chicken. Health codes, of course, limit how long chicken can sit on the rack before it loses its serviceability and must be disposed of.
This local store was leading the region in thrown out chicken, an obvious hit to the bottom line. Something must be done! The corporate inspectors chided the local manager and left him with instructions to fix that metric. They would be back in 60 days to check on him.
Two months later they were back. Focused primarily on reinspecting those red areas on the previous visit, the corporate team honed in on the thrown-out-chicken metric. They were impressed with the improvement in this area. In fact, this store had gone from being the worst in the region to being one of the best across the entire enterprise. This was impressive improvement in just two months! The inspectors nodded approvingly, smiling as they considered this young manager in a new light.
After the glowing pats on the back wound down, one of the inspectors happen to ask the latest corporate hero how everything else was going. “Well, to tell the truth we have been so focused on fixing our red areas that some of the other things have slipped a bit,” he said. “Really?” came the reply. “Like what?”
“Well, our overall sales have suffered. Actually quite dramatically,” admitted the manager. “You see, to fix the metric you had us focus on, we quit cooking chicken in advance and just waited until customers ordered it. When we told them it would be 15-20 minutes for their meal a lot of them left and went to the roast beef place next door.”
Metrics are a funny thing. They can drive behavior in strange ways, often unintended. And before anyone tells me that the above story could never happen, just take a look at the kinds of things the military has done with metrics over the past 15 years overseas. Poorly conceived metrics have elicited all sorts of dysfunctional behavior. I watched many otherwise intelligent leaders chase metrics like “dollars spent in Afghan districts” without any real regard to the overarching effects that money was having on the strategic mission. We, in effect, measured out ability to write checks and award contracts at the expense of measuring how we might actually win the conflict.
One of the challenges is determining if you have a bad metric or if you are just using them wrong. Keeping track of wasted food or measuring the performance of your contracting office aren’t bad things to keep an eye on. What’s messed up is when you attribute too much importance to these things at the expense of the overall goal, or when the metric becomes the purpose.
Metrics are necessary to help managers and leaders see themselves and see their organization, but they also change how people do their jobs. Most leaders have heard the old saying (oft attributed to Peter Drucker) that “what gets measured is what gets done.” Sadly, this is far too true. And when you measure the wrong things (or the right things in the wrong way) the wrong things can get prioritized over more important things. Ignoring that most systems have interrelated variables, focusing on one metric at the expense of others can have disastrous consequences.
When leaders make a decision based on singular metrics, they are making a causal statement about how their system functions. They are saying, in effect, that this one factor matters more than anything else. They are saying that throwing out chicken is the primary factor in reduced profits. They lose site of the other metrics (like overall sales, cost per unit, etc.) that factor into the overall goal.
I recognize that the example is simplistic… yet I see dozens of examples of this kind of thinking at the enterprise level every year. The larger your corporation and the more metrics you have, the likelier you are to be engaged in metric-driven dysfunction.
Leaders at every level should invest the time to figure out which metrics matter and which ones don’t, and how their metrics relate to each other. When employees or leaders focus on singular metrics or blindly go about their business with the sole purpose of changing the color on a PowerPoint chart from red to green, you have lost the metrics battle and are in danger of driving your customers next door for roast beef.