The Harvard Business Review in September last year published an article on Strategy Data Surrogacy. In English, that means that businesses become so focussed on the measurement of stuff we sort of call KPI’s, rather than making sure that we do the things that really make the business a success.
Let me give you an example. The recent Royal Commission (no, the other one…I know it’s hard to keep track of them all, but I mean the banking one…) highlighted a financial institution that had a strategy of wanting to encourage customers to try their other products, hoping to increase their cross channel take up of products. In itself, a reasonable goal and could be argued to be in both the business and customers interests. By setting up measures and easily measured metrics of performance staff then set about achieving their metrics…by signing up customers to other channels of product without their knowledge. Additional fees (and subsequent prosecutions for the organisation) followed.
So what went wrong? Surely they knew they shouldn’t do that. Surely they understood the purpose of the strategy…
Well, no.
Two questions I use with clients could have helped here.
- What assumptions must hold true for this to work?
That is easy. We assume that people know not to just chase the number (don’t just follow the bouncing ball in your process) and make sure that the process does the right thing. We assume that if something isn’t right that there will be the right checks and balances to catch things.
- Do those assumptions hold true here and now?
Not so easy, and often overlooked (even by my fellow process professionals!). Assumptions made…so must be good! It’s a bit like managing a risk by writing it on a risk register and actually doing nothing else!
I once worked with an organisation who had “KPI’s” that were essentially:
- Increase profit and
- Do less of the stuff that provides profit
These kind of got lost amongst the other 43 (that was the real number) KPI’s. I’ll leave the soapbox speech about KPI’s for another time, but if the measure doesn’t cause people to run around yelling if not hit it’s probably not Key to your Performance! I’m guessing also that there aren’t really 45 things that your business is balanced on either.
The term for what happened with the financial organisation is “perverse outcome”. This is common when we blindly follow the metric and not the intention.
The experience to challenge the metrics and make sure that you get not just the right measure but the right outcome comes from years of work, not from attending a seminar on benefits.
If you still think those $$ a day consultants who could have helped are expensive, it might be worth comparing with the fines for not doing this that the Royal Commission handed out, and see whether you’re still measuring the value of their day rates the right way!
