Scoreboards work better than ever in this wired world, but be careful.
Several months ago, a wellness expert strapped a Fitbit accelerometer to my wrist and told me she wanted me to walk 10,000 steps a day. I had no idea how many steps I usually walked, so I ignored the gizmo. A few weeks later, my smartphone buzzed with an unexpected email congratulating me on being only 2,318 steps shy of “my” goal.
Surprised that someone was silently tracking my (lack of) progress, I gave little thought to my near miss until a few days later when I received another email. This time, my anonymous Fitbit friend awarded me a sneaker emoji. Finding my increase in activity had been noticed somewhere, somehow, I decided to keep it up, at least a little longer. It wasn’t until I learned that my virtual cheerleader was keeping a permanent record of not only my daily steps, but also my stair climbing, resting heart rate, and sleep patterns that I began to care about the traces I was leaving for posterity.
Soon I was walking everywhere, even grabbing a flashlight to go out at night to complete my 10,000-step minimum before the midnight witching hour. When the Fitbit gods pinged with the notice that I’d walked the 990-mile length of New Zealand in five months, I began taking dietary supplements and working at getting more sleep so I could conquer entire continents.
The effect on my behavior of these stealth, no-fuss measurements has been dramatic. That so few simple data points had altered my daily activity should have been no surprise to me. I’ve experienced the power of sales quotas, worked with consultants to design key performance indicators (KPIs), and been a C-suite executive personally turning data into at-a-glance information to solve for desired business results.
The real trick has always been to figure out what to measure. Measure the wrong thing and you get the wrong outcomes.
Joel C. Peterson
Scoreboards work. They are used extensively — and never more effectively than in today’s wired world, where one can pull up information on a smartphone for real-time feedback. In some companies, turning data into information with immediate feedback metrics has been dubbed “gamification.” When routine tasks and measures can be turned into games to help employees either learn new material or become more engaged with meeting goals, it can have the same effect as my Fitbit feedback had on me.
But it didn’t take Fitbit to convince me of the power of scoreboards and the natural love people have of winning. Indeed, I’ve implemented compensation systems that reward employees for scoring points against standards. I’ve developed team awards for collaborating on achieving goals. And I’ve long observed that the power of scorecards rests on the maxim “You get what you measure.”
The real trick has always been to figure out what to measure. Measure the wrong thing and you get the wrong outcomes. Measure too much and you get nothing. Measure not enough and you suboptimize. Finding the Goldilocks zone of measurement represents the best of feedback loops.
Employing a Fitbit-like elegance, Fred Reichheld, former partner at management consulting firm Bain, developed what he dubbed the net promoter score (NPS) as the key measure of a business’s staying power and future profitability. Reichheld has customers rank their satisfaction on a scale from 1 to 10. Then he ignores the middle scores and subtracts the low scores from the high ones to yield an NPS. This single number captures the strength of customer loyalty and commitment as measured by how strongly customers would recommend a firm or a product to a family member or friend.
Reichheld argues in his 2006 book The Ultimate Question that the response to “Would you recommend us to a friend?” represents the key predictor of long-run success for any business. His NPS of loyalty can, over time, give employees something to shoot for and to celebrate as they are rewarded for moving this needle.
But such measures can also cause problems. When I recently bought a car, the salesman instructed me in hushed tones to “give me only scores of 9 or 10” when responding to the customer survey. His reason? “Anything else will hurt me.” In one company on whose board I serve, employees are doing uneconomic backflips to impress customers in order to grow their NPS. Again, their bonuses depend on increasing an NPS from 71 (already extremely high) to 75 (stratospheric).
Since I’ve become a Fitbit enthusiast, I’ve discovered that some users have likewise learned to game the Fitbit metrics. A friend told me that she had been so excited by the immediacy and specificity of the feedback that she joined a group of friends to compete online with one another. As their competition went from friendly to fierce, she admitted to strapping her wristband on her dog to increase her activity levels so she could “win.”
For my friend, winning the dashboard competition began to defeat the real purpose of promoting her fitness and health. In business, the solution to the tendency to manage dashboard wins requires a certain level of complexity and the principle of triangulation, as used for centuries in surveying and navigating.
Because businesses have three primary constituencies — customers, employees, and shareholders — they need more than Fitbit-like metrics. They need information around three areas of performance: profitability, growth, and customer delight (the latter, according to Reichheld’s studies, will drive the other two over time).
Too often, organizations measure what’s easy to measure. But giving a three-dimensional picture of success from the angles of delight, profits, and growth is key for a complete understanding of business health and to keep people from rigging the scoreboard.
According to quality guru and scholar Edwards Deming, pure information is not knowledge. Knowledge comes from having a good theory that allows us to use information to predict results. After turning data into information, we must turn information into action in order to manage results. Fitbit-like dashboards can help, but without the benefits of triangulation and a clear notion of cause and effect, we have no more likelihood of managing sustainable outcomes than my friend will have at influencing her health by strapping her Fitbit wristband to her Labrador retriever.
In business, poorly conceived and simplistic dashboards that fail to tap into the essential drivers of success will give one-dimensional pictures that risk promoting short-term quarterly results over success derived from engaged teams collaborating to achieve meaningful and sustainable results.
Worse, poorly implemented, simplistic, or short-term-only dashboards can build fear, pit one group against another, and fuel internal politics. Employees could end up discouraged at having fallen short of standards or simply ignore the point and the power of measurement.
Although I’m delighted to have the information Fitbit has given me, I realize that it is not really the point. My overall health is the point. And in managing organizations, the scorecards and metrics that drive bonuses and promotions are not the point. A business leader must assure that employees have a line of sight from their jobs to a meaningful objective that they buy into and can achieve.
Joel C. Peterson, the Robert L. Joss Consulting Professor of Management, founded Peterson Partners, a Salt Lake City–based investment firm, and is chairman of JetBlue.
NOTE CREDIT: http://www.gsb.stanford.edu/insights/power-risks-measurement-fitbit-world
