How you Measure your People Determines the Outcome
author: Lee Buttolph
I just got done reading this article from The Atlantic “The Simple Technology That Accidentally Ruined Baseball.” It really brought home a quote from Eli Goldratt of “The Goal” fame:
The article explains:
“On October 4, 2006, the Minnesota Twins hosted the Oakland Athletics in a first-round playoff game at the Metrodome. When the first pitch left Esteban Loaiza's fingers, a first-of-its-kind camera tracked the pitch’s speed, break, and location, and relayed the data points to broadcasters and online viewers. By 2008, cameras with this Pitch f/x technology were installed in every stadium, capturing 95 percent of all balls and strikes, according to Hardball Times.
Rather than deem the cameras a threat to league integrity, baseball embraced them. For years, Major League Baseball had been pressuring umpires to submit to performance standards. With the introduction of Pitch f/x, MLB finally had cameras in every stadium to umpire the umpires. In 2009, the league implemented a policy called Zone Evaluation (ZE), which tracked missed calls after each game and judged umpires by their accuracy. After ZE's first year, three senior umpires were fired for their mistakes behind the plate. Those with good performance could get promotions and earn up to $400,000.
Better incentives make better workers. As economist Edward Lazear has shown, organizations become more productive when a job well done is rewarded with extra money and dumb mistakes are punished. So we shouldn’t be surprised that, after the introduction of cameras, umpires have called the strike zone more consistently and more accurately each year since 2007, as Brian Mills explained in a brilliant paper.” (2)
Measurement can be a powerful force in an organization to align everyone to the goals of the company. But there are also things to look out for, as the Atlantic article points out. While Umpires started calling better balls and strikes the offensive part of the game has taken a hit since more strikes in the lower part of the zone were called (low strikes are harder to hit). This is called the unintended consequences effect.
Care must be taken to minimize these unintended consequences. How can that be done? One of the easiest ways is to have an offsetting or opposite metric that balances out the extremes that most people will go to if they are only measured with a single metric.
In my former company my sales people had sales targets that we shot for on a monthly basis. Well, anyone can get sales… just give the product away at a loss. So, to balance that out, I also included a margin goal. If the margin goal wasn’t hit, their bonus went down but it the margin went up their bonus went up… but only if sales increased accordingly. The kept the sales people from gouging customers and losing sales.
It is important to think through as many negative consequences as possible as you build out a metrics system, especially one that is used to pay out a bonus because Goldratt’s quote at the top has a final conclusion to it:
“Tell me how you measure me, and I will tell you how I will behave. If you measure me in an illogical way… do not complain about illogical behavior.”
(1) Goldratt, Eliyahu M. "The haystack syndrome: Sifting information from the data ocean." New York, North River (1990).