“Tell me how you measure me and I’ll tell you how I’ll behave” – Dr. Eliyahu Goldratt
Are you measuring outputs or outcomes? Are you collating activities or discovering sources of value? Regardless of your answer, those being measured will adjust and optimize their behavior accordingly. Put another way, game theory works.
The game can be many things, so I won’t produce for you a fool’s choice. The choice is not only between optimizing outputs OR outcomes; however, it does seem true to me that we tend to lean heavily to one side or another. If you wonder on which side you fall, ask yourself these diagnostic questions:
- Which is more important to get right: efficiency or effectiveness?
- Is it more important to construct a system that tracks all employee’s activities or one that ensures each has a clear understanding of how their work brings value to the organization and gives them responsibility over those outcomes?
- Is it more important to construct a system that exposes bad actors or enables the good ones?
- Is it more important to measure employee compliance with directed actions or construct an environment in which they are accountable to make their own?
The options on the left represent output thinking and the options on the right represent outcome thinking. At best measuring output tells you what’s going on; it does not tell you why or if you are succeeding. For your trouble you accomplish the following:
- Remove focus from producing value
- Stifle creativity
- Derail self-organization by limiting self-determination
- Set the expectation that those in the system are not trusted to behave well. Beware the Pygmalion Effect
- Optimize locally
- Introduce several forms of waste e.g. building the wrong thing (overproduction), unnecessarily complex solutions, extraneous cognitive load, psychological distress
- Chase off your best and brightest.
How you measure yourself and others will change your and their behavior. Game theory works. Make sure you construct the right game.
What games will you construct?