How to use metrics to quantify performance

In Decoding Greatness, Ron Friedman explains how the best in the world reverse engineer their success. He extends the concept of reverse engineering into a wide range of applications that include but are not limited to investing. Carl Gustav Jacobi, a nineteenth century algebraist, famously said, “Invert, always invert.’” Jacobi calls it “inversion” but the process is perhaps better viewed as “deconstruction.” In his exceptionally informative introduction, Friedman notes that the laptop on which he is typing the manuscript “would not exist had Compaq not reverse engineered an IBM personal computer and applied their learnings to develop portable computers.”

He goes on to point out that the practice of reverse engineering , “of systematically taking things apart to explore their inner workings and extract important insights, is more than an intriguing feature of the tech industry. For a surprising number of innovators, it’s a tendency that appears to have emerged organically, as something of a natural inclination.”

For example, consider these remarks during which he discusses how to use metrics to quantify performance.

Former Intel CEO Andy Grove “believed that every metric has the potential to backfire. Grove is credited with introducing a crucial imperative: ‘For every metric, there should be another paired metric that addresses the adverse consequences of the first metric.’

“What Grove is saying  is that metrics are [or at least can be] powerful motivators. Therefore, if you’re going to set up a scoreboard, you need to ask yourself: What if I am too successful with this measure? By anticipating the negative consequences of a desirable metric, you can develop a second, paired metric that prevents you from losing sight of the bigger picture.

“A final best practice for creating an effective scoreboard that reliably improves performance is to evolve your metrics from time to time instead of mindlessly following an outdated formula.”

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Ron Friedman, Ph.D. is an award-winning psychologist and founder of ignite80, a consulting firm that helps smart leaders build extraordinary workplaces.

Decoding Greatness was published by Siimon & Schuster (June 2021).

 

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