The weird world of Quantum Theory may seem like a strange place to start when talking about business metrics. In quantum theory, an object like a particle or an atom that adheres to quantum rules doesn’t have any reality until it is measured. The act of measurement or even observation is the thing that creates the reality. Erwin Schrödinger famously explained this paradox by creating the analogy of a cat in a box. You had to assume the cat was both simultaneously dead and alive until the observation created the reality.
Business metrics act in a similar way. In the absence of measurement, both the behaviours you want from your business, and the ones you don’t want are happening simultaneously. However, the mere act of observing, even if you take no other action has the power to change reality. Although it would be cool if this was because of some bizarre law of quantum theory, the reality is that it’s a result of human behaviour. People act differently if they know their actions are being observed.
Which is why we need to think carefully about business metrics. As soon as it’s known that something is being observed, people will change their behaviour to adapt to it, but not always in the way you want or expect. Take budget airlines for example. Yes, their service is awful and they’ll charge you for sneezing, but they’ll always tell you that they are leaders in fundamental metrics that people care about in air travel, such as being on time. To prove that they are on time they measure things like the time it took to board.
Now, I’m sure that there are incentives or penalties within their businesses to ensure that boarding does happen on time, but people are resourceful (you could read that as ‘sneaky’), we always find ways to adapt to new challenges. If you’ve ever wondered why you’ve been asked to board, only to be held in the stairwell or airbridge, it’s because someone has a target to board passengers on time. That person doesn’t much care if there’s no actual plane to get on to, and they don’t much care that the passengers must now stand in hot stairwell for half an hour waiting for their plane to turn up. They’ve ticked their box and have done their job.
The law of unintended consequences is always a pitfall in defining the right business performance metrics. Even when you’re trying to measure the right thing and drive the right behaviour, often it produces an outcome you don’t want. Which is why it’s important to deliberately introduce tension between your metrics. For every key metric, you should have a checking metric in place to ensure that it hasn’t produced a poor outcome. Yes, this does mean that sometimes you’re asking your people to do two opposite things, but that tension will drive balance in their behaviour. Yes, it does also mean that you’ll start off with more metrics than you ideally want, but over time you can whittle these down to the ones that really make a difference.
The important thing is to keep an eye on the business outcomes you want to drive. It’s very easy to get lost in the metrics and lose sight of the business goals you’re trying to drive. It might be the case that the business goals of budget airlines aren’t really much concerned about customer satisfaction, and they don’t really care about you standing in a stairwell. That’s just what we have to accept if we want to fly to an airport within 100 miles of where we actually want to be for pocket change. But at least it shows us what is really important when it comes to travel. Your business is (hopefully) different. You will have clear ideas of how you want your business to perform, and consequently how you want your people to act to make it a reality. By ensuring there is balance and tension in your metrics you can manage the conflicting priorities of the business to achieve the best outcome.
Finally, no matter how well you plan your metrics, there is no substitute for observing how they’re playing out in real life. Go and take a look at what’s really happening out there. Look at it from your customer’s perspectives and see if your cat is indeed alive or dead.
Comments