In his article “The metric behind the slogan”, Michael Schrage explains how innovative metrics have made selling new products a much easier prospect. For example, James Watt is largely hailed as the genius who invented the steam engine. Whilst the steam engine was undoubtedly a triumph of the industrial revolution, Watt’s most enduring innovation was the invention of the “Horsepower” metric. Used to articulate the power of his engines in terms mine owners were familiar with, his measure effectively defined an industry and has outlived every engine he designed or built. Another example is the shift from measuring “miles per gallon” to “gallons per 100 miles”. Researchers have shown that most consumers miscalculate comparisons between vehicle mileage performance; most people ranked an improvement from 34 to 50mpg as using less fuel over 10,000 miles than an improvement from 18 to 28mpg over 10,000 miles, even though the latter saves twice as much fuel. (Going from 34 to 50mpg saves 94 gallons; going from 18 to 28mpg saves 198 gallons).

These examples highlight an interesting challenge associated with common measures of organisational performance. Metrics tend to be either too one-dimensional (measuring performance in the financial dimension whilst ignoring customer and stakeholder value), delayed (for example, financial measures tend to lag what is actually occurring in a business – they are symptoms of a deeper cause), or they do not intuitively show how a situation can be improved (if staff turnover is high, what must be done to improve it?).

The challenge for all organisations is to find a range of metrics that articulate organisational performance in a way that helps key stakeholders (shareholders, customers and employees) understand precisely what must be done to improve or sustain a particular level of performance. Improved methods of measuring the performance of an organisation will ultimately help people focus on the aspects of performance that matter most.