3 mistakes companies make when creating performance metrics

Many organisations at some point will decide "We want to measure performance and report it to management..."

Don't do this:
1. Measure individual people's performance.
2. Focus on outputs.
3. Ignore the knock-on effects of those metrics.

Here's why:
When you focus on individual performance, you make people feel targeted. Some are still learning, some are not good at communicating challenges they're having, and mostly because comparison between individuals creates soul-crushing demotivation.

Don't just focus on outputs, because that just creates a desire to mindlessly pump out work. If the only focus is "get more done", then teams will do that, but they will no longer think through problems and give valuable feedback and help stakeholders solve problems. You have made their focus "just get it done" and they leave all of their other valuable skills behind.

Knowing the knock-on effects of metrics and performance measurement means considering the behaviour change that it will create. Almost all metrics are gameable, so it's easy to "look good on paper". For example - You want teams to increase their velocity? That's easy - "Team, we are bumping up the story point estimate of all work from now on by 15%."

“Tell me how you will measure me, and I will tell you how I will behave.” - Eli Goldratt

Here's what to do instead:

1. Define objectives that are meaningful to management and stakeholders, and gain their buy-in. They need to be better than just "more output, please!"

2. Sit with teams and show them the objectives targeted. Ask them for a range of meaningful, measurable performance metrics that they believe they can improve.

3. Curate the list down to very few. Maybe one or two. Communicate what was chosen, and why.

4. Define and agree how these metrics will actually be measured. Be transparent how performance is measured, and also the why - which is the objective defined at the start.