Tuesday, June 29, 2010

Bed Metrics and Unintended Productivity Losses

One of the constant challenges in innovation, a topic we address in Conquering Innovation Fatigue, is finding the right metrics to encourage meaningful innovation. The problem is that poor metrics can lead to all sorts of unintended bad behaviors that can waste resources or even squelch real innovation. If you measure and reward innovation primarily based on the number of patents a group files, you may gets lots of patents--and lots of legal fees and wasted time, including internecine rivalries as groups try to keep others in the corporation from sharing in the credit for patent filings. One must have a variety of metrics and must constantly scrutinize their impact and application to keep the behaviors they engender aligned with the objectives of the corporation.

To bring the problems with weak metrics down to earth, let me share an example from a Midwest grocery store chain, as reported to me by one of their employees. Upper management imposed challenging goals for cashier productivity as measured in terms of IPM - Items Per Minute - a measure of how rapidly a cashier scans and processes items as customers check out. Naturally, for good customer satisfaction and good ROI on cashier salaries, the Corporation should want high IPM, right? Sure, but there are unintended consequences arising from the way the metrics are determined. The problem comes from the use of "terminal secure mode." Terminal secure mode is intended to essentially shut down a cashier's terminal when a terminal is not in use or the cashier is momentarily away. But it also provides a slick way to game the system and get better statistics, for when the terminal is secured, the clock stops ticking. Thus, local management in at least one store has urged all cashiers to use terminal secure mode frequently. If you have to pause for any reason - helping with bagging, etc. - they are told to use terminal secure mode to stop the clock. This requires two keyboard actions to initiate, and then further actions to bring the terminal back up, all resulting in lost time. But even worse, going into terminal secure mode nullifies the credit card scan that the customer may already have done to prepare for payment, so the puzzled customer finds that they have to scan their card again for payment, causing delay and irritation. Time is lost, customers are annoyed, productivity is lower, and the in-store experience deteriorates, but IPM stats look good and management is happy. Counterproductive metrics. So easy to do.

Always scrutinize your innovation metrics (and all other metrics) for unintended consequences and for alignment of behaviors and incentives with corporate goals. It's something that Innovationedge can help you with today. Give us a call!

No comments: