Leaderboard

All companies are evaluated based on the performance on some of their key metrics such as Market Share, Earnings Before Income Tax, Depreciation and Amortization), PBT (Profits Before Tax), Earnings Quarter to Quarter Growth, etc. This is a good way to evaluate and compare the performance of the organization against some standard or benchmark metrices. This is referred as Managing by Metrics. And in today's age of ultra-sensitive market dynamics and volatile market conditions aggravated by issues of bonuses/payouts of key decision makers linked to the achievement of short-term goals(humorously referred to as the Quarter-Se-Quarter-Tak attitude, punning the name of the popular Bollywood movie Qayamat Se Qayamat Tak) the key team responsible for decision making in organizations chase the numbers of such metrics by hook or crook at the detriment to the larger interest of the organizations. This is referred as Managing The Metric. This also explains the evident jump in the closing dates of every month, quarter and annual calendar of metrics like deals signed, sales no., OEE nos. etc. And dip in metrics such as Consumption of Raw Materials, Incoming Inventory, Losses, etc. The impact of this at the CSAT(customer satisfaction) and business growth is the following: - 1. Growth of dissatisfied customers In order to paint a rosy picture or a less painful picture of the current state organizations attempt to manage the metrics, organizations falsify or close customer complaints, feedbacks without addressing it properly. This would though in the short-term bring down the resolution time & pending customer complaints it would leave customers dissatisfied and damage the customer relations in the long term. 2. Risky decisions to meet targets The 2008 financial crisis started off due to the practice of US financial institutions of giving out risky loans without any due diligence in order to show growth in businesses and for fatter bonus payments. This eventually led to the closing down of many such banks. Similarly many established organizations had to close down or downsize their operations due to the mismanagement of their businesses just in order to meet business targets. Very good example of this is GE which had actually popularized the use of Six Sigma to improve their operations but later had to sell their once most profitable business. 3. Diminishing Brand Value In order to meet short term goals, many organization may peddle in nearly unlawful or outright unlawful practices. When such practices are caught they eventually lead to loss of trust amongst stakeholders and lead to diminished brand value. This can affect the good will created by the companies over decades of responsible behaviour. Thereby causing business to degrow. 4. Negative Company Culture & Unintended Consequences Once the practice of Managing the Metrics culture catches on in a single team, it very quickly spreads like wildfire across the organization with over-enthusiastic participation and competition in order to manage the metrics. So much so that it would become near impossible to actually know what is current condition of those metrics are leading to unintended consequences. This would also generate animosity amongst departments, and further worsen the organizational culture. Departments and functions would work in Silos and eventually the customer and the business suffers. 4. Kill Innovation When teams focus on managing the metrics, they will go blind to available avenues of innovation and risk obsolescence. In pursuit of managing the metrics they will lose sight of the big picture and miss opportunities of growth and loss market share. The methods to control these are: - 1. Integrated Balanced Scorecard Having a integrated balanced scorecard, would allow organizations to measure how each department and each entity would be working towards providing value to the customer. And linking those with the customers' satisfaction metrics. This would ensure that there is a coherence in the leading and lagging metrics of the organization. 2. Business Excellence Culture By instilling a business excellence culture and through participation in thorough assessment of the organization be it for internal continuous improvement culture or for challenging different Business Excellence Awards such as the CII EXIM Bank Business Excellence(Based on European Foundation of Quality Management), the Ramkrishna Bajaj National Quality Award(Based on Malcolm Baldrige National Quality Awards Framework), Deming Prize for Total Quality Management and many other more. Through such exercise they can keep themselves abreast with the changes in the industries and assess their businesses holistically. 3. Conduct regular 3rd party audits Having regular 3rd party audits beyond the statutory requirements helps in desisting the malpractice of managing the metrics as most of the metrics which are managed are those of statutory nature. 4. Comprehensive Incentive Plans Many in HR functions believe that comprehensive incentive plans are complex good-to-haves rather than must-haves and follow outdated single or limited KPI(Key Process Indicators) incentive plans. For e.g. in Sales functions even now incentives are based on Q-on-Q business growth or absolute sales figures. This incentivizes fake invoicing, inflation in some metrics at the expense of others, poaching/encroachment of team members customer segment etc. Instead of this it should make the metric comprehensive through an integrated score based on customer retention, market condition, etc. 5. Real time-automatic data acquisition By automatization of data real time the opportunities for managing the metrics can be reduced and ensure that the actual picture of the business is captured without any embellishment.