Dan Ariely, author of Predictably Irrational, writes in the June 2010 issue of Harvard Business Review that CEO's and employees care a lot about how they are measured and as a result do everything they can to score high on the measurement scale--whether or not it is actually tied to financial or business success of the organization. He suggests that individuals will strive to optimize their performance score on the overriding measurement metric. In other words, as a manager or business owner you get what you measure.
We see this all around us. Some organizations might covertly send a message that sales are valued above all else. Yet other companies might telegraph that short-term stock price is the ultimate measure. Commercial airline passengers might think that the overriding metric of the industry is on-time departures when it seems that pushing away from the gate on time is the only thing that matters to the airline. The drive-through customer at the burger joint who gets a bun with no patty might infer that speed is valued above accuracy or quality.
This is an important point to keep in mind. Not only can't you manage it if you can't measure it but be careful what you measure because the one metric that seems most important to the people in your organization will be the one they work hard to optimize above all others.
I believe that future managers and business leaders will be measured on their ability to communicate to their organizations the importance of setting the right metrics, showing balance in their metrics and not allowing any one single metric to solely shape the culture of the organization. Communicating the right mix of metrics and the values behind them and then subsequently balancing them to ensure long-term organizational health will be the skill set of the business leaders of tomorrow.
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