Leadership and culture

Moving beyond the metrics mindset

Published on May 03, 2021

Metrics-driven management presents myopic, isolated views of your complex, interdependent business. That’s the key problem revealed in a recent CXOTalk conversation between host Michael Krigsman and Zoho CEO Sridhar Vembu. The key solution? You won’t cure your metrics myopia with a better metric. The cure lies in moving beyond metrics and managing by your values.

That’s not standard business advice, but Vembu isn’t a standard CEO, which helps to explain other provocative statements he made during the CXOTalk episode, including:

  • A metrics-driven culture sucks the soul out of a company.
  • Metrics give us the illusion that we are in control. We have to give up that illusion.
  • Metrics become a constant treadmill, this metric obsession where you hate your job.

Krigsman didn’t dismiss those comments out of hand, in part because Zoho is a bona fide enterprise success. Despite his metrics aversion, Vembu has led the privately-held software company to become a global player with almost 10,000 employees, nearly 500,000 customer organizations, zero debt, and a 25-year history of profitability. So he’s clearly onto something.

Yet more than once during their 45-minute conversation, Krigman, a veteran industry analyst, was clearly hesitant if not taken aback. Presumably, his CXOTalk audience was, too. But as we’ll see below, the criticism of conventional metric wisdom isn’t solely based on a one-off business success. It’s based on the recognition that the whole is greater than the sum of its parts and that a holistic management approach is needed to manage the whole business.

The metrics mainstream
First, let’s be clear on what we mean by “metrics” and “metrics-driven.” Metrics are measures that quantify a process or a characteristic of process performance. In business, metrics track the performance of processes in IT, HR, operations, finance, marketing, production, and other areas. Metrics-driven management prioritizes select metrics when making decisions and, if taken to the extreme, makes decisions based on those metrics alone while ignoring other concerns, including overall business impact.

Conventional wisdom holds that “what gets measured gets managed” and “if you can’t measure it, you can’t manage it.” Managing by metrics is taken for granted as the path to business success, so the practice dominates organizations at every level, from the C-suite to the front line. That dominance is reinforced by the daunting array of individual metrics, metrics-based management models, and metrics-savvy managers and consultants.

Yet the more metrics-focused a company becomes, the more easily it misses the big picture. Metrics measure aspects of the company, not the company as a whole. Adding more metrics lets you measure more aspects, but the company itself remains overlooked. Although business processes can be isolated, they don’t work in isolation. Those processes work together as parts of an integrated, interdependent whole.

Downstream problems with metrics
By ignoring the business and focusing on its constituent processes, metrics-driven management creates problems that reverberate throughout the company. Here’s what tends to happen under metrics-driven management:

People game the metrics. Once you set a particular metric, it tends to become the end that justifies the means and introduces unintended consequences that must also be managed with metrics. For instance, you set a metric to double website traffic every six months. Traffic doubles but the quality of the traffic is poor. Then you set a metric to improve traffic quality. Quality improves but the money spent to improve it is excessive. Then you set metrics to rein in spending. The number of metrics grows as new ones are added to counter the unintended consequences of those previously set.

Sometimes, metrics are gamed at the expense of other metrics, as above. Other times, they’re gamed at the expense of the business overall. For instance, an IT manager told to cut costs by 10% hits that mark but might achieve the savings by procuring lower-quality hardware, which winds up increasing downtime, reducing quality of service, and driving customers to the competition. Or a salesperson with a quota to meet might sell products or services to customers don’t need them, upsetting and alienating those customers to the point that they no longer do business with the company.

Metrics misrepresent the health of the business. Your dashboard may show that you’re hitting your numbers, but it won’t show the health of your employees. The people who make your company run may feel increasingly alienated, uninspired, and mistrustful as they work to hit their numbers. You won’t see those intangibles on a dashboard, but they have a profound impact on the company’s internal health.

External health may suffer, too, as metrics are met but markets evolve and demand for your product or service disappears. The emphasis on immediate results leaves companies unprepared for the future, and unable to look ahead and anticipate demand and opportunities in the future. Likewise, they don’t imagine what products or services would better serve their customers today, in the present.

Moving beyond the metrics-driven mindset
When you see the metrics mindset as a problem, you’re ready to move beyond it. If you’re still on the fence—if you think the problems will be solved when you find the “right” metric—you may want to consider Peter Drucker’s position on metrics.

Drucker is the business management icon often cited as the man who originally said, “If you can’t measure, you can’t manage it.” But he never actually said that. Drucker recognized the value of metrics, but he never held them to be the end-all, be-all of management.

Likewise, Tom Peters, the famously measurement-minded business management titan, emphasized that “the qualitative aspects of business” play an important role in business success. And W. Edward Deming, the architect of Japan’s industrial transformation after World War II, had a healthy respect for data and metrics. But he also said, “It is wrong to suppose that if you can’t measure it, you can’t manage it—a costly myth.

Managing your business as a whole requires a set of values that drive decisions—values that apply to the entire company, not just a subset of its processes. The values themselves don’t arise overnight. This is not a quick fix. Discovering values is a long-term effort that takes time and demands dedication.

Moreover, values-driven management does not work on a piecemeal basis, acting in alignment with your company’s values one day and acting in opposition to them the next. That creates the same kinds of conflicts experienced under metric-driven management.

As Zoho’s Vembu advised, “We are to weave together our values and our business activities together in a tapestry…It’s all linked together, a single woven fabric. You cannot separate the threads.”

And that’s the point: Your business is not a collection of atomistic processes, a pile of individual threads. It’s an integrated, interconnected entity—a tapestry. It should be managed that way.

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