Organizational Measurement is Hard
Book Review: Robert D. Austin - Measuring and Managing Performance in Organizations
This book is filled with both humorous and chilling examples of measurement dysfunction that make the sometimes academic approach quite palatable. Dr. Austin identifies three different types of performance measurement based on the intent of the measurement - measurement for motivation, process improvement, or process coordination. It is measurement for motivation that causes the dysfunction that this book so convincingly describes.
For example, if we record the fact that 10 widgets are produced on machine A and we are comparing this against the 10 widget benchmark for bonuses, it is very likely that other perspectives like quality will suffer in the drive to make the 10 widget goal. Austin makes the point that the discovery that every time our overall performance is excellent we have produced 10 widgets does not imply that producing 10 widgets will guarantee excellent overall performance.
If we record the fact that 10 widgets are produced on machine A while only eight widgets are produced in the same time using competing technology on machine B, this is measurement for process improvement and can be very useful - provided it is limited in scope and used purely for the stated purpose.
If we record the fact that 10 widgets are produced on machine A and convey this information to the widget packaging department to ensure that enough widget cases are ready, this is measurement for process coordination, and is also potentially useful on its own.
The idea that the intent or goal of the measurement is of paramount importance is one important lesson from this book.
Austin does make some recommendations about developing effective performance measurement systems.
Understanding the costs involved with "perfect" measurements is part of the solution. Substituting a cheaper approximation for a key measurement is bound to cause problems - witness the measurement of nitrogen instead of protein in wheat gluten used in pet food. The incorrect justification for cheaper approaches is a thread surfaces in other areas - reusing financial figures as a proxy for management accounting leads to flawed descision-making emphasizing short term financial gain - reuse of software components leads to products that are hard to use.
One effective technique is using the end customer as the ultimate judge of quality and performance - the kind of approach described 10 years later in Fred Reichheld's The Ultimate Question: Driving Good Profits and True Growth
This book is filled with both humorous and chilling examples of measurement dysfunction that make the sometimes academic approach quite palatable. Dr. Austin identifies three different types of performance measurement based on the intent of the measurement - measurement for motivation, process improvement, or process coordination. It is measurement for motivation that causes the dysfunction that this book so convincingly describes.
For example, if we record the fact that 10 widgets are produced on machine A and we are comparing this against the 10 widget benchmark for bonuses, it is very likely that other perspectives like quality will suffer in the drive to make the 10 widget goal. Austin makes the point that the discovery that every time our overall performance is excellent we have produced 10 widgets does not imply that producing 10 widgets will guarantee excellent overall performance.
If we record the fact that 10 widgets are produced on machine A while only eight widgets are produced in the same time using competing technology on machine B, this is measurement for process improvement and can be very useful - provided it is limited in scope and used purely for the stated purpose.
If we record the fact that 10 widgets are produced on machine A and convey this information to the widget packaging department to ensure that enough widget cases are ready, this is measurement for process coordination, and is also potentially useful on its own.
The idea that the intent or goal of the measurement is of paramount importance is one important lesson from this book.
Austin does make some recommendations about developing effective performance measurement systems.
Understanding the costs involved with "perfect" measurements is part of the solution. Substituting a cheaper approximation for a key measurement is bound to cause problems - witness the measurement of nitrogen instead of protein in wheat gluten used in pet food. The incorrect justification for cheaper approaches is a thread surfaces in other areas - reusing financial figures as a proxy for management accounting leads to flawed descision-making emphasizing short term financial gain - reuse of software components leads to products that are hard to use.
One effective technique is using the end customer as the ultimate judge of quality and performance - the kind of approach described 10 years later in Fred Reichheld's The Ultimate Question: Driving Good Profits and True Growth
posted by Ross Morrissey at
10:02 PM
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