Q 700. In many organizations, the teams' focus gradually shifts from 'Manage by Metric' to 'Manage the Metric'. Explain the concept of Manage the Metric. Elaborate on how does it impact customer satisfaction and business growth. Are there any ways to prevent this from happening?

 

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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.

 

 

 

 

 

"Manage by Metric" refers to the practice of using few specific metrics which organizations believes to be right for their business to guide management decisions and actions. In this process organizations generally identify the Key Performance Indicators ( KPI) to track and monitor the performance month on month or at a defined frequency.  Through this organizations make informed decisions and drive improvements.

"Manage the Metric" focuses on the metrics performance only, to ensure accurate, relevant, and proper alignment with the strategic objectives. This includes the regular review and adjustment of metrics to reflect changes in the business environment or strategic direction.

Metrics are generally used to influence Customer Satisfaction, as on a decided frequency we report the metrics to our customers. Organizations generally focusing on KPI to realign the business strategies to meet customer satisfaction, loyalty & goodwill. Metrics like Customer Satisfaction Score (CSAT) provide valuable insights into customer perceptions, allowing companies to adjust their services and products to better meet customer needs. This data-driven management can lead to improved service quality, increased customer retention, and ultimately, sustainable business growth. Implementing these metrics strategically ensures that customer-centricity remains at the forefront of business operations, driving competitive advantage and profitability.

“Managing the Metric” refers to a situation when teams are preoccupied with the KPI themselves than finding out the proper metric that needs to be represented. In this shift there is a chance to inflate the metrices which out improving the underlying root causes. This may have some impact on  the Customer Satisfaction ( CSAT).

To prevent this organizations can involve employees at strategic level to use multiple metrices to provide a balance view & gamify performance with some incentives or awards. It could be a team approach. However, we need to ensure that the manipulation is prohibited and to make it possible , employees can be sensitized with different training, teaser etc.  

On several occasions due to the overemphasis on the output and not the causes, requirement of more holistic approach and to encourage a balanced decision making makes the organization to focus on 'Manage the Metric'. This shift helps the companies avoid the pitfalls of the short term thinking leading the organization to make more informed decisions and overall growth. 

 

Let me explain this concept by sharing an example of Accounts payable metric - Invoice Processing Time 

 

Considering this approach AP department not only focuses on reducing the invoice processing time instead they also get involved in deeper understanding what exactly drives the metrics and take an holistic view of the entire process. This might result into identifying factors such as Manual data entries done, approval on hold basically delay in the internal approvals, error while invoice processing such as incorrect amount or data inputted in the system. 
With the help of the above points identified, it helps the team to find a solution in order to correct and 
improvise by getting the automation done instead of manual entries, streamline approvals by including TAT on each aspect and automated validations checks to avoid error.
Hence by managing the metric not only aims AP department to improve on the speed of the invoice processing but also  helps improvising on the accuracy and compliance.

 

Below are few points to explain impact on the customer and business growth - 
Customer - 
1. In case of delayed payments to suppliers, it may lead to delayed shipments and shortages which may lead to suppliers holding back the product and customers expericieng delay in receipt of order 
2. Since suppliers are the key partners for delivering product on time, if the payments are not done as per the timeline may result into impacting the relationship with the supplier
Business - 
1. Well managed efficient processes contribute to overall companies reputation in the market leading to increased companies creditability
2. By efficiently managing the AP process will lead to cost savings. It directly contributes to the business 
stability and smooth operations

 

Here are some ways to prevent the negative impact - 

1. Drive and invest in Automation - Automation tools need to be implemented to reduce the processing time without impacting the accuracy 
2. Maintaining good relationship with the supplier - Proactive collaboration and regular check ins with 
the suppliers will encourage better communications and issue resolution 
3. Setting realistic target - To maintain the high supplier satisfaction score, AP team should be given 
specific target by combining the speed and accuracy together.

 

To conclude by balancing speed with accuracy and smooth operations, managing the metric  
contributes to both customer satisfaction and business growth. Also the preventive strategies such as automation and balanced targets helps mitigate the risks on time.

The concept of "Manage the Metric" refers to the practice of focusing solely on achieving a specific metric which might be a key KPI for influential stakeholders. This comes at the cost of not considering holistic views and might impact negatively on projects and organization. This can lead to unintended outcomes and even result in customer dissatisfaction and hamper the business growth.

Impact on Customer Satisfaction:

• Customer Service: A company might prioritize reducing the Cost Per Transaction paid to the vendor by reducing average handle time (AHT) for a Trust and Safety operations which typically involves a lot of research and understanding to take accurate final decisions on the data which is exposed to the public (Example Maps, Social Media content moderation etc.,). However, this could lead to potential Public Relations escalations and impact the company image publicly.

• Harmful Public Data: If employees are pressured to comprise the essential steps for reducing AHT, this may lead to polarized customer reviews which don’t accurately reflect the true customer/end user sentiment (Example paid user reviews and views).

• Unintended consequences: When a metric is over-emphasised, it can create unintended consequences. For instance, a company might incentivize users to promote underperforming business without considering the potential for fraudulent or unethical behaviours.

• Decreased trust: If customers perceive that a company is primarily focused on meeting metrics rather than providing value, it can erode trust and loyalty and might benefit competitors.

Impact on Business Growth:

• Limited innovation: An excessive focus on metrics can stifle innovation and creativity. Companies may be reluctant to take risks or experiment with new ideas if they are solely focused on achieving specific targets.

• Employee Productivity: Overemphasizing productivity metrics can demotivate employees, leading to burnout, lower morale, and decreased innovation—all of which can hinder long-term growth.

• Missed opportunities: By focusing too narrowly on a single metric, companies may miss out on other important growth opportunities. For example, a company that prioritizes cost reduction might neglect investing in customer acquisition or product development.

Preventing Manage the Metric:

• Holistic approach: Instead of focusing solely on a single metric, it is important to consider the broader context and the impact on the overall business. This requires a holistic approach that takes into account various factors such as customer satisfaction, employee morale, and long-term sustainability.

• Balanced scorecard: A balanced scorecard is a strategic management tool that provides a comprehensive overview of a company's performance by measuring it across four perspectives: financial, customer, internal processes, and learning and growth.

• Define Meaningful Metrics: Ensure that the metrics you track are truly aligned with the desired outcomes (e.g., customer satisfaction, growth, quality). Avoid metrics that can be easily gamed or that don’t reflect holistic performance.

• Balance Quantitative and Qualitative Measures: Use a mix of quantitative metrics (e.g., response times, NPS scores) and qualitative insights (e.g., customer feedback, employee sentiment) to get a fuller picture of performance.

• Avoid Over-reliance on Single Metrics: Relying on one or two key metrics can lead to tunnel vision. Instead, create a balanced scorecard of various indicators that measure success across multiple dimensions (e.g., customer satisfaction, operational efficiency, innovation).

By avoiding the pitfalls of "Manage the Metric," companies can foster a more sustainable and customer-centric approach to business, leading to long-term growth and success.

 

In the context of organizational management, the concept of "Manage the Metric" refers to a shift in focus from simply tracking and monitoring metrics to actively managing and influencing those metrics to achieve desired outcomes. Instead of passively observing metrics as indicators of performance, organizations that "Manage the Metric" take proactive steps to drive improvements and optimize their performance based on the metrics they track.

 

When organizations adopt a "Manage the Metric" approach, they recognize that metrics are not just measurements of past performance but also powerful tools for driving future success. They use metrics as a means to identify areas for improvement, set targets, and align their efforts towards achieving specific goals. This approach involves analyzing the metrics, identifying trends and patterns, and taking action to address any issues or opportunities that arise.

 

Managing the metric can have a significant impact on customer satisfaction and business growth. By actively managing metrics, organizations can identify and address customer pain points, improve product or service quality, and enhance the overall customer experience. For example, if a company tracks customer satisfaction scores and identifies a decline in ratings, they can take proactive steps to investigate the root causes, implement corrective actions, and monitor the impact of those actions on customer satisfaction.

 

Similarly, managing the metric can drive business growth by enabling organizations to identify and capitalize on opportunities for improvement. By closely monitoring key performance indicators (KPIs) related to revenue, market share, or customer acquisition, organizations can identify areas where they can optimize their strategies, allocate resources more effectively, and make data-driven decisions to drive growth.

 

 

 

To prevent the shift from "Manage by Metric" to "Manage the Metric" from negatively impacting customer satisfaction and business growth, organizations can consider the following approaches:

 

Balanced approach: While it is important to actively manage metrics, organizations should also ensure that they do not become overly fixated on a single metric or set of metrics. It is crucial to maintain a balanced view and consider a range of metrics that provide a comprehensive understanding of performance.

Customer-centricity: Organizations should prioritize customer satisfaction and align their metrics with customer-centric goals. By focusing on metrics that directly impact customer experience and incorporating customer feedback into performance measurement, organizations can ensure that their efforts are aligned with customer needs and expectations.

Continuous improvement: Organizations should view metrics as a means for continuous improvement rather than static targets. By regularly reviewing and analyzing metrics, organizations can identify areas for improvement, implement changes, and monitor the impact of those changes on performance.

Employee engagement: Engaged employees play a crucial role in driving performance and achieving desired metrics. Organizations should foster a culture of ownership and accountability, where employees are empowered to actively contribute to improving metrics and are recognized for their efforts.

Regular communication and feedback: Transparent communication and feedback loops are essential to ensure that metrics are effectively managed. Regularly sharing performance data, discussing trends, and seeking input from employees and customers can help identify potential issues and opportunities for improvement.

 

By adopting these approaches, organizations can strike a balance between managing metrics and focusing on customer satisfaction and business growth, ensuring that the shift to "Manage the Metric" is beneficial rather than detrimental.

Manage by Metric:

We use Key performance indicators to check the efficiency of the processes. This is something through which we can understand the process performance and think in a direction to drive continuous improvements in any industry such as Finance, manufacturing, Insurance etc. Also we can add these metrics in the excel or Power BI dashboard through which we can easily track the Profit, Rejection, Productivity etc.

 

Manage the Metric:

When we are particularly set a priority to improve a single metric to achieve a target. It gives us a short term relief but in long term there are hardly any benefit of focusing in any individual Metric. I can write a relevant example here, If we are taking more and more business from the clients, just to show our organization leadership that we have reached the target of having 'X' number of clients in this year. That's fine a short term relief to leadership. However, if we are not able to match the monthly Finished goods requirement for them. Then its a flop in CSAT numbers, no long term benefit here.

 

How can we prevent to shift from 'Mange the Metric' to 'Manage by Metric':

 

Training programs: Business should focus on giving proactive trainings to everyone unbiasedly which results in metrics improvement 

Giving  priority to both qualitative and quantitative numbers:  Organizations should focus on quality and quantity at the same time  to improve CSAT, Product quality and long term growth.

 

Metrics Audit in Process: There should be audit mechanism to check whether the projects selection by Continuous improvement team is done by keeping a close tap on metric current status or not.

 

Incorporate the Customer feedback in Metrics tracking sheet: As and when we got the dump downloaded from the tool pertaining to Customer feedback, add those number in Metric sheet to track the trend of metrics.

 

Reward the Team who contributed in improving the metrics : Recognise and give incentives to core team members so that people can critically think and watch from the lenses of improvement so that process outcome should be First Time Right . This attitude helps rigorously to improve the metrics.

 

 

 

 

 

Management by Metrics is an approach that emphasizes the use of specific, quantifiable metrics to guide decisions, measure performance, or manage people and processes within an organization. The approach is rooted in the belief that “what gets measured, gets managed”.

 

Originally, the “Management by Metric” approach was about using metrics as a tool to guide decision-making, identify areas of improvement and track progress, but when the focus shifts to ‘Managing the Metric”, the emphasis moves away from the actual performance or quality, and towards ensuring that the numbers in the reports look good.

 

“Manage the metric”, as a concept arises when an organization’s focus shifts from genuinely improving processes, services or products based on meaningful metrics to simply manipulating or tweaking the metrics to present enhanced results. This shift or transition can lead to a cycle where organizations become overly fixated on the metrics, often at the expense of broader strategic objectives and customer satisfaction.

 

Impact on Customer Satisfaction

When an organization’s focus shifts to “Manage the metric”, the focus shifts from providing and generating genuine value, to ensuring that the performance numbers look good often resulting in shortcuts or superficial fixes that can damage customer experience. In this approach as the metrics are prioritized over meaningful outcomes, they risk losing sight of customer needs. For example, a customer service team’s performance is judged solely on the number of calls handled per hour. Due to this, the team might just rush through the interactions without truly resolving customer issues, but rather employing quick temporary fixes. This might make the metrics look good, but the customer is left unsatisfied. This eventually erodes customer loyalty and trust over time, which is crucial for long-term success.

Example: Wells-Fargo Fake Accounts Scandal: During the early 2010’s, Wells Fargo implemented an aggressive sales strategy, to push employees to open new accounts for customers. As the targets were high and unrealistic, millions of fake bank and credit card accounts were created by the employees, without the customers' consent.  While the number of new accounts grew, many customers weren’t aware that multiple accounts existed in their name, only to find out once the charges showed in their account. This scandal caused enormous harm to customer trust and Wells Fargo was fined heavily, losing thousands of customers who felt exploited and deceived. 

 

Impact on Business Growth

The growth of a business is heavily reliant on delivering consistent value to their customers. When quality is sacrificed for the sake of hitting metrics, it can have a detrimental effect on the company’s overall trajectory. If teams are only concerned about hitting the targets without a focus on actual performance, the quality of products or services can decline, leading to high customer churn rates, negative reviews and damaged reputation, all of which stifle growth.

Example:Blockbuster’s Failure and Netflix’s Rise: With a focus on revenue metrics tied to in-store rentals and late fees, blockbuster ignored the shift towards digital content. At one point, when Netflix approached them to sell the business, Blockbuster declined, focusing on its traditional video-rental model and improving the underlying metrics. In contrast, Netflix prioritized innovation and convenience, leading to its rise as a streaming powerhouse.

 

Preventing the shift to “Manage the Metric”

1.      Define Clear Metrics: The first step to prevent a shift to “Manage the Metric” is defining clear, relevant, attainable and measurable metrics in alignment with the organization’s goals and objectives. These metrics should align with strategic objectives and provide insights into customer value rather than just operational efficiency.

2.     Use Outcome-Based Metrics: Shifting from output-focused metrics eg: number of calls answered, to outcome-based metrics such as customer satisfaction scores or retention rates, helps ensure that the focus remains on delivering value rather than merely meeting targets.

3.     Drive a Culture of Continuous Improvement: Build a culture where employees are encouraged to question metrics and suggest improvements. This can help prevent an overreliance on metrics and also boost employee engagement driving a culture of continuous improvement. At PLS, Improvement Ideas’ generation is part of the performance criteria where employees get a few points on ideas generated and more points on ideas implemented; a total of 10% of performance criteria is based on this.

4.     Regularly Review Metrics: Establish an annual or a biennial audit and review of the metrics to assess their effectiveness and relevance in the changing business environment. As the needs of the businesses evolve, so should the metrics used to measure success ensuring that metrics are aligned with the organizations goals and customer expectations.

 

In conclusion, while metrics are essential for tracking progress and guiding decision-making, the shift from "Manage by Metric" to "Manage the Metric" can impact customer satisfaction and business growth. While superficial achievement of metrics may provide short-term wins, but it can result in customer dissatisfaction, damaged reputations, and missed opportunities for long-term growth. To prevent this, organizations must define clear, outcome-based metrics aligned with strategic goals, regularly review these metrics, and build a culture of continuous improvement. By focusing on delivering real value to customers, rather than just meeting numerical targets, businesses can ensure sustained growth and customer loyalty. Balancing the need for measurable outcomes with genuine performance improvements is key to avoiding the pitfalls of "Managing the Metric."

 Manage by Metric , not Manage the Metric


Many times, teams are overly focused on Key performance indicators and forget the underlying goal that these goals represent. This situation leads to narrow and sort tern approach where the primary objective is to Hit numbers, and sometimes it is on the expense of organizational Goal, customer satisfaction, and sustainable growth.


Impact on customer satisfaction and business goals
 

• Short term goals on long term losses
• Neglect the customer needs
• Stifled innovations, which has not impact on business goal.
• Misaligned priorities, etc.

Preventive measures

To prevent such situation of managed by metric
- Use balance scorecard which has mix of financial and non-financial metric
- Some metric should be defined such that they can reflect direct customer satisfaction and experience.

- Regular review of metric so all metric are aligned with the organizational goal.
- Create a culture to appreciate values which drive long term growth.

 

 

Happy learning...

Very interesting answers from all as I guess we all can relate to this question at a certain level

 

It was a tough decision to make, so I chose the easy way out  There are 2 winners for this question - Rohit and Akkul.