Wednesday, February 23, 2011

Improvising on Drucker: Measure What Matters

Peter Drucker famously gave us the quote, “what gets measured, gets managed”. That is precisely why companies must carefully plan what they measure. Measure the wrong thing and you will soon have a company with poor performance but very successful individuals performing their best.

Michael Hammer’s (co-author of Reengineering the Corporation) new book, “Faster, Cheaper, Better” now officially lists the seven sins of (performance) measurement. This book is really about lists – there are 9 levers for changing how work gets done, there are 7 principles of process design, there are 5 key values for a process culture, and so on. There is all kinds of advice – some practical, some philosophical, but I liked the following list of seven sins of measurement the best. Here is a quick summary, but you can read a more comprehensive report in this article from Strategy+Business magazine.

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  1. Vanity. Don’t measure what you know will make you look good and that has no other relevance to the business.
  2. Provincialism. Don’t measure the departmental efficiency, measure the efficiency of the whole business. Optimize, don’t sub-optimize!
  3. Narcissism. Measure from the customer’s point of view, not from your own!
  4. Laziness. Don’t assume you know what should ne measured, establish what is truly relevant and then measure it, not what is easy or what has always been measured. (Of course, that means you must first analyze your business to establish what is relevant).
  5. Pettiness. Don’t measure the parts, measure the efficiency of the whole – as in measure how effective the end-to-end process is, rather than measuring how effective individual parts of a process are.  
  6. Inanity. Measure what matters because metrics drive behavior. (This seems to me similar to the one above under Laziness).
  7. Frivolity. Take it seriously, if you don’t like what the numbers tell, find out why rather than ridiculing or questioning the exercise.

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© Vivek Sehgal, 2011, All Rights Reserved.

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