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The Problem with Measurement – How KPIs can Send You Backwards

July 18, 2007

in Management

Some trivia for your day. Did you know that humans have the same number of genes as mice, a few more than worms and nearly half as many as a rice plant? And that they are pretty much the same genes? Such are the findings of recent genetic research. We can all learn something from the way this research is heading.

The mapping of the human genome (our “recipe”, as science writer Matt Ridley puts it) was completed in 2003. It has been for geneticists what the World Wide Web was for the rest of us: a gargantuan gush of new information. It has left gene science drinking from the proverbial fire hose.

In the last decade or so, most businesses have been similarly drenched in data and its offspring, the KPI (key performance indicator). Data collection and reporting looked like being the holy grail of business accountability. ‘Management by numbers’ was only a sip away. All we had to do was measure everything and everyone.

For the most part, however, there is more drowning than drinking going on. There is plenty of data. But it is frequently inaccessible in any usable form. KPIs and other measures are often misunderstood, misused or ignored.

The situation in genetics is similar in concept but different in execution. There’s a good lesson here for management.

Superficially, having a complete genome map provides the opportunity to cure and prevent all genetic diseases. Another ‘holy grail’. But the scientists are hesitating before diving into their newly flooded lake. A key to success is focus on relationships and relevance.

In terms of relationships, it is understood that information alone is not enough. The genome ‘recipe’ is only the start because one-to-one links between a disease and a specific gene are rare. So a lot of new research is being directed towards improved understanding of how genes interact with each other. That is, their relationships.

In business this is often overlooked. KPIs often assume an independent, one-to-one link between the measure and its related behaviour. But such simple relationships are also rare. Where relationships exist but aren’t taken account of, their KPIs end up being meaningless at best, counter-productive at worst.

An example is the opposing relationship between average call duration and customer satisfaction in a call centre.

In the second case, genetic screening of a great many diseases is now theoretically possible. But it wouldn’t necessarily be relevant. There isn’t much point knowing you are vulnerable to an obscure disease unless something can be done with that information. A cure or a management strategy, for instance. So screening research targets those diseases where knowledge can be turned into active treatment or prevention.

Again, business measurement often misses this point. Many KPIs represent desired outcomes. They ignore the ability of the people being measured to deliver those outcomes. A string of such KPIs becomes a wishlist which is, in practical terms, irrelevant. As these irrelevant measures pile up, they are ultimately ignored or worked around.

The old saying is that “you manage what you measure” and it’s true that some measurement is essential. But measuring too much, or the wrong stuff, is a guaranteed way to add unnecessary complexity to your role. It’s certainly not the way to make the most of your valuable genes or those of your staff.

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