Metrics Don’t Equal Strategy

“If it matters, it should be measured” and variations of that concept have been popular in business literature for years. On one hand, it makes sense. Metrics, financials, profit and loss, and ROI are all important for the running of a business. However, is an over-reliance on these metrics and the power of the excel spreadsheet undermining your business? Michael Harris recently asked this question in the September-October edition of the Harvard Business Review. All too frequently, measurement is confused for strategy and then companies find themselves in trouble. Just ask Wells Fargo. Their now infamous cross-selling and stretch goals pushed employees to open over $3.5 million in a non-customer approved accounts. The primary issue was that they never really had a growth strategy, only growth metrics. The irony highlighted in the article is that their over-reliance and love affair with metrics annihilated their long-term relationships.

Harris refers to the tendency to replace the original intent of the strategy with a convenient metric as surrogation. He identifies four important considerations to guard against surrogation and truly focus on your strategic intent. First is understanding that humans have a neurological and psychological predisposition to replace abstract concepts (a strategy) with concrete examples (a metric). Next, the more you involve people in strategy development (rather than driving down from the C-Suite) the more they can see the connection of important measurement points. Third, stop tying compensation to metric-based targets. In pay-for-performance systems, people lose sight of the original strategic intent and instead find the most direct path to the measurement influencing their paycheck (think Wells Fargo). Finally, no single metric fully captures a strategy. Identify multiple measure points at multiple points along the way to get a more complete picture of your true progress towards strategy attainment.