What gets measured gets done-some unintended consequences from poorly designed metrics

Whether as students, employees, business persons or investors; we are measured by, and measure others by, metrics. The standard rationale for that is to use a standardized way to be more ‘objective’. But wrongly designed metrics have unintended consequences 

• ·         Research/Industry Interface/Foreign experience/Perception being given weightage in B-school rankings encourages colleges to encourage creation of poor quality research, invite industry personnel to ‘sell their company’ on campus under guise of industry interface and market the foreign student exchange as a fun trip instead of an educational experience.
• ·         The expectation to beat the street consensus EPS was a factor pressuring CEOs/CFOs to cook the books and focus on that metric, to the exclusion of cash flows, profits etc
• ·         Customer service has been given lip service in Indian service organizations(so ironic that the same outsourcing companies who win rave reviews from foreign clients do not seem giving a damm for their Indian clients), and now the regulators(IRDA/SEBI/RBI) have had to step in. If the investors/regulators/’Best Company Rankings’ had taken this factor into account earlier, surely there would have been some improvements.

So how to get it right? Like everything else in life, this is an art. But some get it right, by aligning the metrics to its strategy. For instance, the premier engineering conglomerate L&T has expressed its intention to divest some subsidiaries by 2015. Hence, the compensation plan of its top executives adjust the reported profits to exclude any divestment gains/losses, which are not wholly decided by them.

Takeaway:- List the Critical Success Factors, find the performance measures needed to address them, and then numerically express those measures as KPIs. And then you MAY begin to get it right.