Let’s talk about metrics fixation and unintended consequences.
Consider 3 ideas:
- Emphasize standardized measurements.
- Incentivize actors with rewards and punishments.
- Publish measurements in order to hold groups accountable.
They sound great. And they are great – sometimes.
However, when we let these three concepts mindlessly replace our judgement, we often end up with unintended consequences and dysfunction. Jerry Muller calls this fetishizing of metrics “Metrics Fixation” in his recent interview with Russ Roberts on EconTalk.
Where do things go wrong?
- Oversimplification of organizations, their values, and their complex facets can lead to measuring and incentivizing the wrong things or an incomplete list of things.
- Actors play games in order to attain the desired metrics, often at the expense of the organization’s vision. Creative energy is now being diverted into gaming the metrics instead of creating real value.
- Measurements, incentives, and transparency all have costs too.
- Unintended consequences are sometimes intended.
That’s all great, but let’s make this tangible. Muller gives a crazy example in his book.
The original situation: Emergency rooms in the UK (called A&E Departments for accident & emergency) had long wait times.
The solution: Incentives for reducing wait times to below 4 hours were introduced.
The unintended consequence: Patients were required “to wait in queues of ambulances outside A&E Departments until the hospital in question was confident that that patient could be seen within four hours.” To make matters worse, these ambulances were now unavailable for other patients who needed emergency services.
Take away: metrics, incentives, and transparency are all great when properly coordinated. But watch carefully for unintended consequences.