A really interesting read on the ‘surrogation’ phenomenon, which is where strategies and goals are mentally replaced by the metrics developed to measure the strategy. There’s several papers on this topic which I plan to summarise in the future.
As the article notes “Every day, at almost every company, strategy is being hijacked by numbers” because strategy is abstract, whereas hard numbers/metrics are more tangible and easier to manage. Because of this, “: A company can easily lose sight of its strategy and instead focus strictly on the metrics that are meant to represent it”.
They provide an example from Wells Fargo bank. Here they measured cross-customer sales as a proxy for evaluating their strategy for long-term relationships with customers. This resulted in people managing the metric by employees opening 3.5 million accounts without customer consent.
Hypothetical examples include “delighting the customer” as a strategic objective and then decide to monitor customer satisfaction survey scores. However, employees inadvertently maximise survey performance over actually delivering a great customer experience. Hence, “there are plenty of ways to boost scores while actually displeasing customers”.
They argue that surrogation “is especially harmful when the metric and the strategy are poorly aligned”.
Ways to perhaps manage and minimise surrogation are provided (and I recommend reading the authors’ published papers on the topic for more info).
In any case, they note that “Your performance management system is full of metrics that are flawed proxies for what you care about” and that surrogation, as “the mental tendency to replace strategy with metrics”, can ultimately harm company value.
Not surprisingly, similar phenomena in the health and safety space have been observed (substitution effect, goal displacement). The most obvious example is managing injury metrics over the wider contributing factors.
It was also evident (in some form) in the Esso Longford gas plant accident, where managing the safety system insidiously replaced actually managing the plant.
Second, it was also highlighted in the San Bruno pipeline explosion – again, where people inadvertently managed the system and documents over issues that were well-calibrated to the actual operational integrity risk.
Link: https://hbr.org/2019/09/dont-let-metrics-undermine-your-business
Link to the LinkedIn article: https://www.linkedin.com/feed/update/urn:li:activity:6937531107131166720?commentUrn=urn%3Ali%3Acomment%3A%28activity%3A6937531107131166720%2C6937531718815866880%29
SafetyInsights.org 