7 Deadly Sins of Performance Measurement

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S p ri n g 2 0 0 7

V O L . 4 8 N O. 3

Michael Hammer

The 7 Deadly Sins of Performance Measurement and How to Avoid Them

REPRINT NUMBER 48302

S P E C I A L R E P O R T: M E A S U R I N G T O M A N A G E

THE

OF PERFORMANCE MEASUREMENT
[and How to Avoid Them]
By Michael Hammer

7 Sins
DEADLY
SPRING 2007 MIT SLOAN MANAGEMENT REVIEW

Operational performance measurement remains an unsolved problem. Despite the relatively little attention it gets in the management literature, designing and using metrics to track and improve operating performance is one of the most persistent problems that organizations face. In my interactions with companies in virtually every industry, I scarcely ever encounter one that believes it has an effective set of metrics for their operations: manufacturing, customer service, marketing, procurement and the like. To be sure, companies do have measurements for these areas that they employ every day, but few managers or staff believe that these metrics are the right ones or that they help the company improve its performance and achieve its strategic goals. This is remarkable for two reasons: First, operational performance measurement is so fundamental Michael Hammer is president of Hammer and Company, a management education and research firm based in Cambridge, Massachusetts. He is also a Visiting Professor of Engineering Systems at MIT and a Fellow of the Said Business School at Oxford University. He is the author of numerous books and articles on transforming operational performance. His Web site is www.hammerandco.com. Comment on this article or contact the authors through smrfeedback@mit.edu.

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S P E C I A L R E P O R T: M E A S U R I N G T O M A N A G E

to basic operational management that it should presumably have been resolved a long time ago; second, in the last several years companies have developed much more sophisticated strategic measurement systems, based on such tools as the balanced scorecard, key performance indicators, computerized dashboards and the like. Nonetheless, among the hundreds of managers with whom I have discussed this matter, there is a widespread consensus that they measure too much or too little, or the wrong things, and that in any event they don’t use their metrics effectively. The most striking manifestation of this problem is that many of the operational metrics that companies commonly use make little or no sense. I have found that organizations fall prey to a half

dozen or so recurring mistakes in defining and using metrics, mistakes that seriously impede the relevance and usefulness of their operating measures and that help explain the widespread malaise about measurement that they feel. I call these the seven deadly sins of performance measurement, and, like the seven deadly sins of theology, they present grave dangers, if not to the prospects for the immortal soul then to the prospects for superior business performance.

1

Vanity One of the most wide-

spread mistakes in performance measurement is to use measures that will inevitably make the organization, its people and especially its managers look good. As one executive

said, “Nobody wants a metric that they don’t score 95 on.” This is particularly the case since bonuses and other rewards are usually tied to results measured in terms of performance measures. For instance, in the area of logistics and order fulfillment, it is common for companies to measure themselves against promise date — that is, whether they shipped on the date that they promised the customer. A moment’s impartial reflection shows that this sets the bar absurdly low — a company need only promise delivery dates that it can easily make in order to look good on this metric. Even worse, companies often measure against what is called last promise date — the final date promised the customer, after changes may have been made to the delivery schedule. It

M I N D O F T H E M A N AG E R

Carole J....
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