Play fake games. Win fake prizes.
#39 - 06.13.2021
Brother -
Let's talk about "invented metrics." Essentially a simple metric (e.g., revenue, profit, etc.) that increases in complexity on how it is calculated - usually as the business grows and becomes more politicized.
Fake internal metrics can destroy the value of a company overnight. Just look at WeWork as an example. They measured their performance based on an invented profit metric called "community adjusted EBITDA." It took out essential cost items, including marketing and most operational expenses. They were supposed to IPO for $50B and lost 90% of their value in a few days after it caught up to them.
These metrics seem innocent at first. Always well-intentioned, but usually with a key benefactor. It inflates one team's performance over another.
We had a marketing team at Uber that got tired of measuring their simple customer acquisition costs and decided to make a new metric that took a 30-page slide deck to explain instead. It was confusing, and no one was clear on what it was.
The only certainty is that their team seemed to perform well against the metric consistently. It kept enabling them to hire more people and spend more money. One time their performance against the metric started to flatten, so then they changed the metric again.
If this sounds like a red flag… It is.
An unfortunate by-product of fast-growing politicized organizations is that internal teams fight for resources. Either headcount or budget. Each team creates their scorecard for showing their "impact" on the company and is selective with the metrics they show.
How political a company becomes depends on the strength of the CEO or leadership team:
Strong CEO = low politics. They are focused on the mission instead.
Weak CEO = the opposite.
The point of all of this, brother, is to be aware of when it is happening. You can fool someone on invented metrics for only so long. Eventually, it catches up.
Play fake games = invented metrics.
Win fake prizes = approval from superiors you've fooled.
Let me leave you with a quote and a question
What gets measured gets managed
-Peter Drucker
Where do you see invented metrics at work?
Enjoy the dance,
Nate