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  • Measuring Qualitative Outcomes

    Posted by Nathan on January 14, 2022 at 1:39 pm

    Question: How are people measuring quantitatively or qualitatively some of the “soft” conditions like collaboration, team agility, etc.?

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    We recognize the need to manage many things that do not easily lend themselves to metrics, but it is impossible to reduce our uncertainty when we make no attempt to measure them at all. Seemingly immeasurable constructs are best measured by breaking them down into the detectable impact we wish to monitor.

    Let’s consider a hypothetical example. Say you are the CEO of a financial institution. One of your senior vice presidents, Steve, is a jerk and is hated by the rest of your executive team. Your other five SVPs regularly complain about him to you, and two have even threatened to leave if he stays. But Steve is an all-star when it comes to closing deals. You have retained Steve because he is by far your top revenue generator. You know that Steve is a problem, but how big of a problem is he? How much is Steve’s actual cost to the company? There isn’t exactly a standard metric for assessing the costs of being a jerk in the office.

    Next, you must answer the question of why you care about the problem, as this will frame how you measure it. If you, the CEO, spend about 2 hours per week fielding complaints about Steve from your team, that’s an annual 104 hours from you alone. Divide your salary by the number of hours you work in a year to calculate your hourly rate (which is $5,000 an hour for the average American CEO), and multiply that by 104 hours. Apply the same math to the other executives on your team and add in the search costs to replace the two executives who plan to leave, plus the cost of the lost productivity from on-ramping new execs.

    Now, you have a much more complete picture of how much Steve actually costs you. Is the high performer still worth retaining? This measure, while imperfect, gives you a more accurate idea of Steve’s cost to you than traditional metrics on your P&L would. With this analysis you are able to make a more informed decision.

    In conclusion, for any single intangible there will be many possible measurement techniques at your avail, some of which will be easier to employ than others. As Jason Larson aptly observes in the popular Rent song, there are a lot of ways to measure the construct of a year (he suggests daylights, sunsets, midnights, cups of coffee, love, among others). Similarly, intangibles lend themselves to many units of measure, and one is not necessarily better than the others. It is up to you to choose which particular metrics best represent the problem you wish to manage. If the measure reduces your uncertainty at all, it will allow you to make more informed decisions.

     

    Nathan replied 1 year ago 1 Member · 0 Replies
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