Charke Ching, a TOC colleague recently wrote a humorous short story about wizards and quality, in an attempt to illustrate the possible consequences of applying the concept of "you can't manage what you don't measure" combined with the Law of Unintended Consequences.
Clarke's story reminds me of Eli Goldratt's famous phrase:
"Tell me how you measure me and I will tell you how I will behave", or the flipside "If you measure me in irrational ways, do not complain if I behave irrationally".
Long story short: be careful what you measure and what you reward.
A critical skill of any effective manager is the ability to bring out the best of people, by identifying what specific behaviors are productive to the organization, and then reinforcing them and rewarding them appropriately. It is the systematic application of this reinforcement process, along with a rewarding environment, that can propel your organization to superior levels of performance.
What are the key things you measure in your organization? How is that working for you?
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