CHARACTERIZATION OF METRICS BY PURPOSE

Metrics used in organizations can be further characterized by which aspect of the organization is being measured. These aspects generally relate to the efficiency, effectiveness, or health of the organization.

Efficiency measures are by far the most common types of measures found in organizations. A few examples are:

•Are we doing things right?

•What is the return on our investment?

•What is the productivity?

Another bit of measurement wisdom says, “What gets measured gets done.” Most evaluation and reward systems are based on efficiency measures.

Too often, efficiency measures overshadow good effectiveness measures. Effectiveness is doing the right thing. For example, the right thing might be minimizing inventory or minimizing the number of set-ups in a production line. Set-ups take time and efficiency is measured as units produced per unit time; therefore, it is efficient to produce a minimum number of units each time a set-up is made and it is not effective if most of those units go to inventory. Great care must be taken in measurement program design to avoid what Peter Drucker calls “bifurcation of sub-unit interest groups” or the creation of interests within individual sub-units counter to the organization’s interests. Goldratt and Cox illustrate this clearly, using an example where “making the numbers” spawned by well-meant but ultimately counterproductive factory and equipment utilization metrics and goals helped the cost accounting performance, but detracted from the company’s overall performance. Fortunately, Goldratt explains how to avoid these types of problems with his Theory of Constraints tools.

The third category, health, has only recently been elevated to high importance. The health of an organization or part of an organization describes the ability of the organization to repeat and learn from past performance and improve present and future performance. This concept is also often called resilience. Senge discusses the traditional four management disciplines—planning, organizing, staffing, and controlling—and then outlines the need for measuring the organization’s ability to learn or become a learning organization.

The converging of three major trends—the globalization of the economy, general economic volatility, and the decrease in the size of the workforce’s growth—has made it incumbent on organizations to do more with less in a manner that ensures that they will be able to perform in the future. The success of a project is minimal if the team all leaves when the project is finished. Sustaining success is difficult, especially in current times of “brain drain”—when key talent and skill are easily recruited away. Health metrics monitor this aspect of organizational concern.

When looking at existing measurement programs, it is often tempting to identify a fourth category: trivial pursuit. There are surprising numbers of measures and metrics that relate meaningless or incorrect information, but continue for the reason that “it has always been done this way.” It should be noted that the name of this category is misleading, since these types of measures are rarely trivial with respect to their cost or their impact.