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Against metrics: how measuring performance by numbers backfires - Jerry Z Muller | Aeon Ideas

Incentivizing Leads to Gaming

The rewards of the metric performance measurement can be as a form of a monetary bonus, stocks or just an enhanced grade or designation, leading to competition among employees. This leads to many employees gaming the system to affect the bottom line of their metrics.

Example: Surgeons can refuse to treat patients having a complicated condition, as it may affect their failure rate.

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Against metrics: how measuring performance by numbers backfires - Jerry Z Muller | Aeon Ideas

Against metrics: how measuring performance by numbers backfires - Jerry Z Muller | Aeon Ideas

https://aeon.co/ideas/against-metrics-how-measuring-performance-by-numbers-backfires

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Key Ideas

Metric Fixation

Metric Fixation, an epidemic in most of the world's biggest companies is a way to measure employee performance primarily by numbers, counted, tallied, compiled and analyzed in daily, weekly or monthly intervals.

Ignoring Real Values

Metric fixation can make employees ignore the real values and goals of the company and focus on their short-term weekly or monthly goals so that they keep their jobs, get a pay raise or have their stock options out at the right time.

Millions of Hours Lost

On a macro level, metric fixation can lead to companies focussing on the quarterly report while ignoring any real R&D work, that takes years to provide any result.

Companies also suffer millions of hours of productivity loss due to employees maintaining performance records, a lot of expenses spent on recording and tracking tools, and the time it takes to read or analyze the numbers.

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Recognize our own fixation

Recognize how you measure yourself and consciously choose your metric. Also, realize that everyone has their own criteria that will not be the same as yours. 

The Peter Principle
The Peter Principle

It refers to an observation wherein people who perform well in their job gets promoted until eventually, they will reach a stage where they are incompetent for that job.

The Evidence for the Peter Principle

A study looked at promotions and performance of some 40,000 sales workers across 131 firms.

It showed that the best salespeople as measured by sales revenue are more likely to be promoted (top figure) but their value added as managers actually declines in their sales revenues (bottom figure).

The "Purpose" of Promoting Workers
  • To assign the suitable person to the managerial role.
  • To motivate workers excel in their current roles.

However, If firms promoted workers on the basis of managerial potential rather than current performance, employees may have fewer incentives to work as hard.

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