“You manage what you measure” is axiomatic in business ownership. “Employees respect what you inspect.” Understanding performance and productivity by comparing it against past performance, industry norms or internal benchmarks is useful, but measuring something doesn’t mean that you are managing it.
As a basketball fan, I’ve been fascinated by the rise of metadata analysis in the NBA. last year a few teams subjected all their game film to computerized dissection. This year all teams are doing it. Measurements of a player’s performance have grown far beyond points, rebounds and assists.
Game films are now broken down to calculate the speed with which a player brings the ball up the court, how many times he made a pass that led to a pass counted as an assist, how often an opponent penetrated inside and decided not to take a shot because of the defender in front of him, the number of defensive assignments missed, and scores of other indicators that were traditionally characterized as intangibles.
Does converting intangible factors into statistics make them actionable? I guess there are some coaching opportunities, as with the missed defensive assignments, but other seem to be data collection for its own sake. Passed up interior shots, for instance. How many factors did the offensive player consider in his split second of decision making? Did he see an open man? Was a better play developing? Did the defensive player have help? Was the shooter typically comfortable with that spot on the floor?
You can’t coach an employee based on numbers that may or may not indicate a performance issue. Statisticians are fond of saying that congruence doesn’t indicate causality. Just because event B happens after action A does not necessarily mean that the action created the event.
In business, the danger of over-measuring is the temptation to act on specious information. Regional magazines are fond of publishing “best doctor” lists; but measuring outcomes isn’t necessarily an accurate approach. As one cardio-thoracic surgeon in New York pointed out, his practice was focused on taking patients referred by other surgeons who felt a specific surgery was too difficult to handle themselves. Not surprisingly, they all scored well above him in the number of successful outcomes, and he was far down the list of “best” in his field.
Measuring the percentage of leads closed by a salesperson is clearly a worthwhile exercise. Trying to refine that by weighing the initial quality of leads, tenure in the position, or lag time for submitting sales reports doesn’t product actionable data. It just builds potential excuses for not closing sales.
In my most recent book, Hunting in a Farmer’s World (link below), I argue against entrepreneurs trying to run their businesses strictly by the numbers. A few Key Performance Indicators or Flash Reports are usually sufficient to make major decisions. The numbers you review regularly should tell you if something isn’t going well. They are not supposed to tell you exactly what the fix is. Too much reliance on a boatload of data will cause you to discount your instincts. With Hunters, instincts are more important than statistics.
My new book, Hunting in a Farmer’s World: Celebrating the Mind of an 
Entrepreneur, is now available in paperback, hardcover and Kindle. It is an ownership book, not a management book. Please click on the link above to see what business owners think of it.
I would agree that putting too much credence into deep numbers analysis is counter-productive. Mark Twain’s quote that, “There are three kinds of lies. Lies, damned lies and statistics.”, comes to mind.
However, over time analytics can indicate trends in employees. One who consistently performs below other employees in whatever KPIs are being measured, needs remedial action. Trends can indicate employees who have a propensity for too much, or too little, risk. And so on. . . .
While it is no substitute for management, experience or intuition, there is a role for analytics.
David Basri
http://www.pointent.com
You assertion that “you manage what you measure” maybe accurate in the extreme of over measuring and producing an avalanche of data that hide the reality of a situation but “you can’t manage what you don’t measure” seems to be a bigger problem with small businesses.
Yes. The quantitative stuff that’s easy to measure is often not the important qualitative stuff to measure.
When you measure something in your business…you’ll probably get the behavior you expect, and then some…
• Is the measurement of “sales time with customer” getting higher sales? Lower sales? Or, more sales of easier-to-sell stuff?
• Is the measurement of “customer service time,” driving faster service, or more errors and irritated customers?
• Is the measurement of ancillary sales creating an erosion of the core brand?
• Is the measurement of errors, increasing the inspection costs of a process?
• Is the measurement of an already low “bad debt” cost driving policies hurting customer relations?
Measurement of stuff in your business can be good. Just be careful about what you measure, and how it’s implemented. Be sure to ask…
• What’s the goal?
• How much will it cost to measure it?
• How will it help the customer and the sale?
• And, what will be the unintended consequences?
Excellent response, Joel. Measuring the impact of measuring is a sensible first step. Too often we put in “controls” without sufficient thought to whether we will be controlling the right thing.