Sunday, April 25, 2010

It's not about the numbers!

When an organization is small, everyone knows what's going on. People have the full context, communication is easy, and so is evaluating performance. Everything is natural, very ad-hoc, and mostly qualitative.

When the company grows, formalism starts to impose itself.  Some evaluation forms (aka Excel files) appear, and goals and metrics are agreed upon. Still, when evaluation time arrives, everybody is very well aware that things changed since the day the goals were written, and a more qualitative approach is used once again.

When the company gets big, people don't know each other so well, and they don't have all the organization's context at the top of their heads. To make sure everybody is aligned and working for the same grand objective, metrics are put in place. Big mistake!

Don't get me wrong. Metrics are good. The problem is turning metrics into goals and evaluations. Once you do that, people will try to make the number blindly, even if they have to go against the organization's best interest. To put it a single sentence:

Metrics are tools, not goals!

As with every tool, some care must be taken with metrics. Here's a few hints to make sure your metrics are helping you:

  1. Understand the metric: Not only the formula to obtain the metric, but why are you getting the current values.
  2. Question the values: It's really easy to measure wrong. Check your numbers. Measure twice, cut once.
  3. Question the metric: Don't assume the current metric is adequate. Mistakes are made. Things change. More information is available. Be extra critical with metrics!
  4. Study the derivative: More important than the number, is the derivative. More important than knowing the current numbers, is knowing next month's.
  5. Don't trust all stats: You need a big sample of values to trust statistics. Don't trust averages and the like if the sample is small.
  6. Don't use metrics as a direction: Use them as guidance.
  7. Talk to people: Don't trust yourself to analyze the results. Talk to the people that measure. Talk to the people that affect the metric.

I'm sure the list goes on and on. What is your advice for working with metrics? Do you have any stories of metrics gone wrong?
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