Measuring Performance Is Not One Size Fits All

(Bloomberg) -- Jerry Z. Muller is a professor of history at the Catholic University of America known for his finely wrought accounts of capitalism’s intellectual origins. John Doerr is the billionaire chairman of venture capital firm Kleiner Perkins Caufield & Byers, known for his early investments in the likes of Amazon.com Inc. and Google. They both have new books out about performance measurement. Muller’s is titled “The Tyranny of Metrics.” Doerr’s is “Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs.”

Muller’s book is, as you might expect, more elegant and erudite than Doerr’s. It is also, as you might not expect, shorter. Here’s what I really didn’t expect, though: Muller and Doerr more or less agree about the use and misuse of metrics.

I picked up Doerr’s book right after finishing Muller’s this past weekend mainly because the juxtaposition amused me. And yes, stylistically they’re really different! But a core message of both books is that while standardized numerical performance measurement usually doesn’t work, nonstandardized metrics sometimes can.

Muller’s indictment of performance metrics is that they are overused, especially in government and nonprofit settings, and frequently create perverse incentives. He’s not against all measurement, just against what he calls “metric fixation,” which is characterized by these three beliefs:

  1. “that it is possible and desirable to replace judgment … with numerical indicators of comparative performance based on standardized data.”
  2. “that making such metrics public … assures that institutions are actually carrying out their purposes.”
  3. “that the best way to motivate people within these organizations is by attaching rewards and penalties to their measured performance.”

Doerr is out to proselytize an approach he calls objectives and key results (OKR for short), which he learned from the late, great Andy Grove at Intel Corp. in the late 1970s and has been pushing on the companies he invests in ever since. It entails setting a goal, agreeing on a few (usually three to five) key results that would indicate progress toward that goal, and frequently revising or replacing them. The OKR process is not standardized, it’s not necessarily comparative, and it’s generally not directly linked to compensation. It also shouldn’t just be handed down from on high — “teams and individuals should be encouraged to create roughly half of their own OKRs,” Doerr writes. And while OKRs should be transparent to others within an organization, there’s usually no need to share them with the outside world.

It comes down to a couple of statements that Doerr makes in the book:

  • “In business, I have found, there is rarely a single right answer.”
  • “For anyone striving for high performance in the workplace, goals are very necessary things.”

OKRs are an attempt at avoiding one-size-fits-all metrics while still taking goals and measurement seriously. The concept is necessarily a bit loosey-goosey, and Doerr’s book is a shaggy mess, told in a bunch of different voices  and eventually devolving into hyperventilating managementspeak (“As OKRs are combined with 360-degree feedback, the silo will soon be a relic of the past”). But I appreciated the sentiment and the effort.

Muller’s book, meanwhile, is a sharply written critique of the notion that more measurement and quantification can make education, health care, law enforcement and other non-business fields operate more like businesses. One major catch, Muller writes, is that

Businesses have a built in restraint on devoting too much time and money to measurement — at some point, it cuts into profits. Ironically, since universities and other nonprofit institutions have no such bottom line, government or accrediting agencies or the university’s administrative leadership can extend metrics endlessly.

Still, not attempting to measure performance or progress doesn’t seem so smart, either, and Muller’s book is light on prescriptions for how to do it better. Near the end, though, he does run through a list of the kinds of metrics that are OK by him: those that inform rather than form the basis for reward and punishment, those that are used in ways that appeal to the “intrinsic motivation and professionalism” of the people whose work is being measured, those that are developed for specific cases. It’s not an exact match, but those are awfully reminiscent of Doerr’s OKRs.

To contact the author of this story: Justin Fox at justinfox@bloomberg.net.

  1. When Doerr left Intel to join Kleiner Perkins in he recounts in the book, Grove told him, "John, venture capital, that's not a real job. It's like being a real estate agent."

  2. There are contributions from U2's Bono, Bill Gates and Patty Stonesifer of the Gates Foundation, and a bunch of startup founders and corporate executives who have used OKRs. The accounts by Bono of the early days of his One Campaign and by Susan Wojcicki and Cristos Goodrow of the rise of Google's YouTube division are the most entertaining.

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