Are You Measuring the Wrong Things?

Domain: Strategy - Estimated reading time: 3 minutes

The popular phrase "what gets measured gets managed" is common, but not very helpful.

While that phrase is often true, it also means that we sometimes measure, and therefore find ourselves managing things of little importance.

We've become so adept at measuring things that we've stopped being truly thoughtful about it.

I've seen many organizations measuring things that truly did not matter simply because it felt like they should be measuring it or it was easy to do so.

Today, I'm going to highlight various types of metrics along with some common pitfalls I've seen leaders fall into.

Leading vs. lagging

A good place to start is understanding the difference between leading indicators and lagging indicators. Both serve a purpose and how you use them is going to be highly contextual.

Leading indicators are metrics that predict a future outcome. Their advantage is that they are proactive; however, it can be easy to fall into the trap of measuring the wrong leading indicators that ultimately yield little value.

Lagging indicators are reflective. They capture actual results and success of past actions. However, by their very nature, they are reactive. This means you don't know that results are unfavorable until it has already happened.

They both have their advantages and disadvantages. Where they work well is when leaders use them in combination.

Results from lagging indicators should give you an idea of how accurate and relevant your leading indicators are. When you've reached that point, you can start leaning on the leading indicators while still using the lagging metrics to confirm predictions.

Inputs, outputs & outcomes

Similar to leading and lagging indicators, it can also be helpful to think about inputs, outputs and outcomes. Inputs being the resources you put into a process, outputs being the product or services you generate using those resources and outcomes being the results or actual value delivered through the process.

The mistake a lot of teams make is to focus too much on outputs and not enough on outcomes. This occurs because outcomes tend to be the hardest piece to both predict and control. Instead of measuring how effective a process is, leaders default to measuring efficiency, which is almost always an output, not an outcome.

However, outcomes are the most meaningful of these three measures. For example, your organization can manufacture a high volume of quality products at a relatively low cost but if nobody purchases those products than the outcomes (and process) are meaningless.

Take the time to find and deliver on the right outcomes first and then work backwards to improve on your inputs and outputs.

Vanity metrics

These are easy to track metrics that look good but don't serve the core mission.

A great way to test this is to ask yourself: "What happens to the actual business when results for a specific metric are poor?" If the answer is nothing, that's a sign your business doesn’t care as much about those results as the reporting suggests.

Impacts to the actual business are key here. Meaning, does it impact external considerations like customer satisfaction, financial results, market position, etc. I've seen scenarios where a department head gets scrutiny from their boss over a vanity metric simply because they didn't want to be on the senior leader's "radar for the wrong reasons". The department head admitted that the metric wasn’t critical but demanded the team work on improving the number in order to not draw attention.

We can certainly argue that our department head and their boss should have made a case for a different metric, but sometimes those "should's" are not the reality we live in.

For any metric for which you have control, ensure that the metrics directly align to the outcomes, objectives and values that the company prioritizes above all else. This often means that it is impacting conditions outside of the organization.

Thank you for reading. My hope is always that you've found something helpful and easy to implement. If you have feedback, suggestions or questions, please reply to this email.

If you are interested in exploring one-on-one coaching to transform your leadership, email me at [email protected] and we’ll coordinate a free, one-hour discovery session.

This week’s action items:

1. Pull all of the reportable metrics your team uses.

2. Classify each of them according to the frameworks above so that you have a clear picture of how your organization is thinking about measurable results.

3. Prioritize those metrics that are tied to meaningful outcomes outside of the business.

4. Stop tracking metrics that fail this test or document why you're keeping them.