From boardrooms to shop floors, performance metrics are touted as essential tools for driving strategy implementation. “We can’t know where we stand without metrics,” says an executive.
But what if metrics aren’t delivering? Recent research reveals a harsh truth: metrics have zero impact on a company’s strategy implementation and financial performance.
Study
Bendoly, Rosenzweig and Stratman surveyed senior manufacturing managers from 118 firms that varied in size and industry. The authors measured tactical and strategic metrics in three strategy implementation areas—Operational Excellence, Customer Intimacy, and Product Leadership—and linked them to financial performance using a multi-variate regression.
Key Results
The results were clear and direct: there’s no evidence that using performance metrics improves financial outcomes. Below is a summary of the results:
Table 1: Impact of Metrics on Financial Performance
Key Takeaways for CEOs
For CEOs, this study is a wake-up call. If you’re pouring resources into metrics without seeing results, it’s time to reconsider. Here’s what CEOs should focus on:
- Question your assumptions about metrics: Don’t assume metrics will lead to success. Evaluate which metrics truly matter.
- Cut the Fat: Stop wasting time on metrics that don’t matter. Focus on metrics that are statistically correlated to outcomes that matter.
This research is a reminder that many strategy implementation practices are not as effective as they seem. CEOs should use science-based results to educate themselves before going down the path of dubious management practices.
Citation:
Bendoly, E., Rosenzweig, E. D., & Stratman, J. K. (2007). Performance Metric Portfolios: A Framework and Empirical Analysis. Production and Operations Management, 16(2), 257-276. DOI: 10.1111/j.1937-5956.2007.tb00177.x.