Why You Need to Choose and Use Performance Metrics Carefully and Beware of . . .

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Most marketers are now deep into their planning for 2024, and a critical part of that planning is determining how marketing performance will be measured. Performance metrics are essential for effective marketing, but they can also have unintended consequences.

Surrogation can be a particularly pernicious source of such unintended consequences. Read on to learn what surrogation is, why it happens, and how to avoid it.

Measuring performance has been a prominent feature of the business landscape since double-entry accounting appeared in the 14th or 15th century. “You can’t manage what you can’t measure” is one of the most often-repeated maxims in the business world, and it’s been an article of faith for generations of business leaders.

Performance measurement permeates virtually all business functions, including marketing. For the past several years, marketers have been increasingly focused on measuring the performance of their activities and programs, and many marketing leaders now use performance data to allocate budgets and make marketing mix decisions.

Overall, this has been a positive development. Using performance data to guide the choice of marketing tactics and investments should lead to more rational, evidence-based decisions.

However, performance metrics must be selected thoughtfully and used carefully because they are powerful tools that can produce unintended consequences as well as desirable results.

Surrogation is a frequent cause of unintended consequences in performance management systems. It can happen even when the selection and use of performance metrics are well-intentioned.

What Is Surrogation?

Surrogation refers to the human tendency to lose sight of the real objective and focus only (or almost entirely) on the metric that is designed to measure performance against the real objective. In other words, we have a tendency to decide (often subconsciously) that scoring well on the metric is the real objective.

For example, suppose that one of your company’s important objectives is to provide outstanding customer experiences, and you decide to measure your performance against that objective using customer surveys. The survey results are shared with customer-facing employees, and they are frequently discussed at team meetings.

Under these circumstances, some of your employees can begin to think that the objective is to gain high customer survey scores rather than deliver great customer experiences. This becomes a significant problem if those employees begin to entice customers to give high scores on the surveys even if they aren’t completely happy with their experiences.

Why Surrogation Happens

Surrogation can occur because of the inherent power of performance metrics to shape human behavior. After all, that’s one of the main reasons they’re used. When marketing leaders institute performance metrics, they expect their teams to use those metrics to guide their activities.

Dan Ariely, the noted behavioral economist and author of Predictably Irrational, described the power of performance metrics in a column in the Harvard Business Review. He wrote:

“Human beings adjust behavior based on the metrics they’re held against. Anything you measure will impel a person to optimize his score based on that metric. What you measure is what you’ll get. Period.”

Eli Goldratt, the developer of the theory of constraints, made the same point in his book The Haystack Syndrome where he wrote:

“Tell me how you will measure me and I will tell you how I will behave.”

Reducing the Odds of Surrogation

Surrogation can happen wherever performance metrics are used, and there’s no ironclad way to completely prevent it. However, marketing leaders can take steps to lower the odds that surrogation will occur.

One effective way to reduce surrogation is to use multiple metrics when measuring the performance of significant programs or initiatives. This approach is most effective when the metrics used require managers and other team members to balance several competing dimensions of performance.

So, for example, if you are measuring the effectiveness of your demand generation program, you will obviously track the number of leads generated. But you should also track other aspects of performance such as the number of leads who actually become customers (the conversion rate), pipeline velocity, and customer acquisition cost.

This combination of metrics – or something similar – will lead your demand generation team to consider quantity, quality, and cost when evaluating the effectiveness of their activities.

Image courtesy of CC BY-SA HonestReporting.com via Flickr (CC).

Republished with author's permission from original post.

David Dodd
David Dodd is a B2B business and marketing strategist, author, and marketing content developer. He works with companies to develop and implement marketing strategies and programs that use compelling content to convert prospects into buyers.

6 COMMENTS

  1. Great piece, David. It is an important wake-up call on what is really important. As you suggest, organizations now have metrics that convincingly demonstrate the link between employee engagement and customer loyalty, as well as the all-important tie between customer loyalty and profitable growth. Happy employees make happy customers and happy customers buy, advocate, forgive, and most importantly, return. While there are plenty of resources on how to “keep score” on employee engagement, far less exists on how to raise and sustain that score. Besides, “metric mania” can seduce leaders into focusing on the scoreboard while losing track of what’s happening in the game.

    John Steinbeck’s description of a fishing expedition in his book Sea of Cortez puts an insightful finger on the dilemma today’s leaders face. Read the passage below and consider what it communicates about the implication of “accurate metrics without effective methods”:

    “The Mexican sierra has 17 plus 15 plus nine spines in the dorsal fin. These can easily be counted. But if the sierra strikes hard on the line so that our hands are burned, if the fish sounds and nearly escapes and finally comes in over the rail, his colors pulsing and his tail beating in the air, a whole new relational externality has come into being—an entity which is more than the sum of the fish plus the fisherman.

    The only way to count the spines of the sierra unaffected by this second relational reality is to sit in a laboratory, open an evil-smelling jar, remove a stiff colorless fish from the formalin solution, count the spines and write the truth. There you have recorded a reality which cannot be assailed—probably the least important reality concerning either the fish or yourself.”

    Steinbeck’s prose reminds us that no matter how comprehensive and accurate our modern metrics may be, they will never completely capture the magic and mystery of an engaged and spirited relationship. By focusing too heavily on objective data, tidy calculations, and sterilized reports, leaders risk losing touch with the fact that they are putting precious energy on the “least important reality concerning” the customer, the employee, or the leader.

    The life expectancy of the average company today is between 40 and 50 years. According to Arie De Geus, author of the book The Living Company, a full one-third of the companies listed on the 1980 Fortune 500 had vanished by 2000. Yet some companies last for centuries. According to De Geuss, the most enduring have four things in common. They find ways to keep passion and spirit in their cultures. They are sensitive to their environment. They keep a strong sense of identity. And, they tolerate employee eccentricities and activities on the margin. In a phrase, they act like living, spirited organisms.

    Enterprises are born with spirit. Typically the product of a visionary, entrepreneur or pioneer, they emerge from the womb oozing both excitement and anxiety. As they grow, the need for standardization, efficiency and enhanced productivity usher in new processes, structures and procedures. Randomness is replaced with replication and chaos with control. Initially, spirit and bureaucracy co-exist. However, after a time there is a battle between the intuitive, heart-driven visionary and the rational, brain-driven administrator. For many companies, process soundly defeats passion and form supplants spirit.

    Yet to be effective enterprises, must find a way to balance efficiency with enthusiasm; pattern with passion. If the rational side routinely trumps the emotional, it encourages employees to become robotic and rules-obsessed. Mechanical wins over inventive; impassive or listless actions replace passionate behavior. Be careful with your yardsticks for you may end up stuck in the organizational “lab” and completely miss the real goal–a passionate employee focused on influencing a live, spirit-filled prospect or customer through the experience they create and/or support.

  2. Eli Goldratt’s classic book, The Goal, was published in 1984 (I have a copy), at a time when much of the business world was focused on total quality. Where performance metrics are concerned, my takeaway from his concepts was, and is, “measure what matters.” In other words, whatever measure or set of measures a company uses to understand performance against a specific business outcome, it/they should be readily understood, consistent, and, above all, actionable. A few years ago, my colleague Alyona Medelyan wrote a concise post evaluating the effectiveness of CX metrics which, I think, makes Goldratt’s points very well: https://getthematic.com/insights/matter-which-customer-experience-metric-you-choose/

  3. David,
    I enjoyed this well-written reminder on how not to get caught up in measurement mania, disappointing conclusions, and wrong directions.
    I strongly agree with not relying on one measurement and would also expand your solution to checking on your measurements with other tools such as VOC.
    Dennis

  4. I agree with you David that there are always (or hedging my bet “almost always”) unintended consequences from any initiative meant to change or guide behavior. I also really enjoyed Chip’s insights – especially around the organization’s spirit and how standardization, while important and measurable, can stifle creativity. People are prone to game systems either intentionally or unintentionally. The infamous Wells Fargo incentives to drive new accounts (based on unrealistic sales goals) led to unprecedented fraud and a $3B fine. The approach of looking at multiple metrics – some of which may be in conflict – provides a better view of performance and potentially revealing attempts to game the metric or to meet the metric to the detriment of other important measures. Support centers attempt to reduce the time-per-incident metric, but that may result in lower customer satisfaction if the agent is rushing the call or not solving the problem causing the customer to have to call back. Therefore time per incident needs to be tracked alongside first call resolution percentages and customer satisfaction. Aggregate scores such as likelihood to recommend need to be broken down into contributing factors and their associated KPI’s. Perhaps customer support is poor and scores low, but the product and price are great. The customer may still recommend the company or product because it is a great value but not looking at things holistically and at the right level of granularity can hide weaknesses.

  5. Thanks for sharing your work David.
    I knew about this problem before but I didn’t know its name – Surrogation.
    Also, I liked that you explained the concept of how measurement and behavior relate and how they can impact the actual performance of a business and therefore the bottom line.

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