There is no shortage of advice coming from analysts, consultants, vendors and everyone else these days no enterprise effort should go forward without being measured. Key performance indicators help identify how the business is performing, and operational metrics determine how systems are performing.
All is helpful, of course. But sometimes, managers can go overboard with the metrics, ignoring common-sense management.
A couple of years ago, I heard an industry speaker outline how to measure the success of IT programs. Essentially, he urged IT executives not to go too crazy with detailed metrics as they relate to return on investment — sometimes, just-good-enough measurements may help guide the effort.
Accordingly, David Kellogg, writing in the Enterprise Irregulars site,
Dysfunctional compensation plans: Compensation plans often do not keep up with where organizations need to go. This will skew managers’ and employees’ decisions.
Poor metric selection. An example cited by Kellogg consists of counting leads instead of actual resulting sales.
Lack of leading indicators. “Most managers are more comfortable with solid lagging indicators than they are with squishier leading indicators. While leading indicators require a great deal of thought to get right, you must include them in your key metrics, lest you create a company of backwards-looking managers.”
Poorly-defined metrics. These tend not to be taken seriously, since they may unfairly reward or penalize people and departments. Metrics must be based on clearly-defined variables.
Self-fulfilling metrics. “These are potential leading metrics where management losses sight of the point and accidentally makes their value a self-fulfilling prophecy.”
Blind benchmarking. The strategic mistake that managers make in benchmarking is that they try to converge blindly to the industry average,” Kellogg says. “Benchmarks should be tools of understanding, not instruments of oppression.”
Conflicting metrics. There may be many sources of metrics, which provide contrary pictures of the business. For example, business bookings may be up, but revenues may be down. Which is the right metric? “This requires a deep understanding of the metrics you use and the courage to confront two conflicting rules of conventional wisdom in so doing.
Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.
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