Metrics are a powerful tool to avoid micro-management and tip a culture towards innovation rather than stagnation.
Metrics are not the same as KPIs (Key Performance Indicators). KPIs are about target setting. Metrics are about measurement and setting people up for success. An metric might be “Number of Customers”. The equivalent KPI would be “Increase the number of customers by 10%”. Metrics and KPIs drive different behaviour. Metrics drive understanding and learning and a hypothesis based culture. KPIs lead to risk aversion culture as people are punished for failure.
At the board level, you need three sets of metrics… Value, Lead Time and Quality. If you only have two, they can be gamed by ignoring the third.
Each organisation is different and so each company would have a different set of value metrics. The pirate metrics are a popular set of metrics used by many start up companies.
Lead Time Metrics
Each organisation needs two lead time metrics. The first is the average time from investment to a return or “Weighted Lead Time“. The second is the average time to fix a serious bug or incident.
Each organisation needs a customer perceived quality metric. This metric considers bugs, performance, UX bugs, and unnecessary call center contact (Failure Demand). This is idiosyncratic to the organisation.
Metrics provide a mechanism for senior managers to steer the ship without being command and control. They allow a mechanism for managers and subordinates to agree on the focus of the organisation without having to agree the details of how improvements will be implemented.