Fundamentals: Metrics and Rewards
|"Not everything that counts can be counted, and not everything that can be counted counts."|
It's far better for a reward system to be comprehensive than to be precise. Anything less than a comprehensive system of metrics will induce suboptimization -- winning at the chosen metrics while neglecting other critical goals.
The role of metrics in transformations is often overstated. The saying, "If you want to fix it, measure it," applies to incremental change -- fine tuning an organization -- but not to transformation change. In fact, the opposite is generally the case. Tight metrics make people less open to significant changes, and more focused on maintaining the known status quo so that they can more easily make their numbers.
Rewards are the consequences (positive and negative) associated with those metrics, including the incentives for improving performance. The primary purpose of rewards (consequences) is to amplify the power of the metrics. Thus, rewards are important to a transformation process only when people don't care how well they're doing.