The Challenges of Measuring, or How Long Do We Have To Do This?
This week we’ve been delving into a common occurrence. It happens in roughly this order. No measures are in place, data is collected, measures are put in place, the measurement shows improvement, the major point of pivot is occurring, there is much celebration, the measurement continues to improve but the results stops where it’s at. Progress is halted.
How does that happen?!?
When you move from not paying attention to a metric to rapturously focusing on a metric the measurement begins to move. That’s a good thing, right?
Of course. What starts to happen, the behavior we need to be prepared for, is that the initial gains that come from measuring that metric begin to drift downward and over time can even disappear.
I have a great example of this phenomenon: sales compensation plans.
The best sales people are obsessed with maximizing their compensation plans. Knowing that, we’d spend hours and hours trying to figure out what behaviors we needed to get the results we desired. More new accounts? Put a bonus in. Increased retention? Incent the renewal. We tried just about everything.
It all worked.
Sure, there were times where some sales people couldn’t take the change and bolted, but the vast majority of them went through a cycle like this:
It’s like dealing with a death or something. Denial, Anger, Bargaining, Depression, Acceptance. . .but that Acceptance was followed by Thriving. All it took was one sales person moving from “I can’t believe they changed it” to “I can make a lot of money if I just do this. . .” Then it was game on!
It’s no different with your business pivot points. Want to reduce expenses in the next 3 quarters? Start by getting a handle on expenses today. Figure out where you want to be. Then push those measures out to the staff. It takes a few weeks of communication but someone will move into “Acceptance” and you’ll have a winner. A new way to get the same results without spending as much to achieve them. Then other ideas follow. A year later, you’re sitting on the change you wanted and chances are it was dramatic.
Then the drift happens. Even though the bi-weekly reports keep showing up, the push is no longer there and the gains disappear.
This phenomenon was noted in the effect of lighting changes known as the Hawthorne Effect. (read about that here: Observation Bias) Basically, just knowing you’re being watched or studied alters your behavior.
I know, you’re thinking “So what the hell do I do with this information?”
You measure more. You incent the changes you want to make. You plan for the obsolescence of the gains you’ll get from that incentive and measurement.
Simple, but not easy.
Good stuff.