Measurement and Organisation Design: three paradoxes

coastline paradox

Continuing the alternate week pattern of posting blogs picking up themes from the previous weeks’ chapter extracts from the forthcoming third edition of my book “Guide to Organisation Design,” this week’s blog, drawing on Chapter 6 – Measurement,  is written by Giles Slinger, an OD expert and member of the group I am working with on the book.  Next week will be an extract from Chapter 7.

Measurement is vital to most organisational life. Take the example of the Olympics. Much of athletes’ training is guided by measurement: the time taken, the height or distance jumped, the power produced. They seek to achieve a qualification benchmark or to break a record. It is just the same for the organisation that delivers the Olympics. The LOCOG (’Local Organising Committee of the Olympic Games’) must meet its own metrics in an extraordinary organisation design performance: 5-10,000 staff must be hired then made redundant again in a 1-3 year period, and their employment and allocation must be co-ordinated along with 70,000+ volunteers. Without measurement, this organisational design wonder could not occur.

Measurement in organisation design is especially interesting because it contains three inevitable paradoxes.

The first paradox is that you can’t measure an organisation… but you have to try. Anyone designing an organisation wants to understand their starting point, and must do so in the knowledge that measuring the full nature of the organisation, the full detail of what we supply, what we do, who we have, how are we organized – how the whole system fits together, is impossible. The CEO of SAS airline said that their business was composed of “50,000 moments of truth” every day. Even this was a gross simplification. The richness in the interactions between people, between employees and customers, and the variations possible are unmeasurable. So any organisation designer with an eye for measurement must swallow their pride, and simplify to accept that they must choose to measure only some basics: for example, how many people do we have, where are they, doing what, at what cost, and with what impact for customers?

The second paradox is that you can never get to the To-Be. You would love to be able to stop, point and say ‘we have arrived at the future!’, but it is never ‘done’. Is this like Xeno’s paradox, where the arrow never quite reaches the target? Not quite – it is because the world changes continually, and the design must continually evolve. Business leader and politician David Sainsbury has brilliantly explained that contrary to market-based views of economics, business life is forever in disequilibrium.[1] People continuously collaborate and innovate. Novel things are by their nature unplanned and undesignable. So measurement in organisation design must tread carefully: by specifying very precisely what ought to exist, and measuring very precisely our progress towards achieving it, we might become very good at delivering in future what would have been perfect in the past. Famously, armies are often re-designed to win the last war. Again, the organisation designer must swallow their pride and accept that designs of the future organisation should be incomplete.

The third paradox is that tracking against plan is vital, but potentially misleading. The purpose of tracking is not so that you can achieve conformity. It is not to spot variations, correct for them and control. The purpose of tracking is especially so that you can learn from places where the organisation starts to vary from the plan, because there will always be reasons why this is occurring. The differences can start to help you, the designer, learn from the organisation, your teacher.

So we have three principles:

  • Full measurement is impossible, but some measurement is necessary
  • Full design is impossible, and future designs should be incomplete
  • Ongoing measurement is vital, not to force the organisation to get it right, but to help the organisation designer learn from what the design got wrong

The three principles here argue for at least three moments for measurement in any organisation design work: (1) measuring an As-Is, (2) creating a quantified version of a To-Be, and (3) tracking progress against these two reference points. People typically ask for a host of questions during organisation design work but will almost always ask about these three moments and what metrics can be applied.

The full chapter sets out an 8-step approach to using measurement, starting with the purpose of measurement and the measures to use, finishing with presenting results and converting to action.  There are discussions of examples all the way, from Uber and Microsoft to healthcare, airlines and retailers.

I find the examples very useful – they make me ask myself whether I would have used the same measurement techniques, and to choose which metrics I would find worth the data-collection effort.

As a rule of thumb, which metrics are worthwhile? Briefly: outcome data – always. Examples: CSAT, mortality, output, revenue. Resource data – always. Examples: headcount, cost, hours used. System data: sometimes. Examples: activity data, skills data, location data, time data, engagement data. Qualitative information: always. Examples: atmosphere, alignment, energy. The qualitative information orients your choices of what quantitative information are worth collecting. Diversity data? Always. In an equal world we could ignore it. Our world is not equal, so diversity data is core resource information.

What do we put into the organisational system? What comes out of the organisational system? Measurement is critical to our ability to interact with organisations. As organisation designers, we have to be comfortable too with the idea that most projects will need to start with understanding the As-Is, will use reasons (design criteria) that guide us in choosing a quantified version of the To-Be, and that along the way we must track so that we can notice, learn and respond when things start to develop in unexpected ways.

This is not just a theoretical argument about how to think about organisations. Right now, some of the world’s largest organisations are having to redesign themselves. Automotive manufacturers are confronted with Tesla (established 2003) being worth as much as every other car company in the world combined. The stockmarket may be over-reacting, but its message is that it is more prepared to back Tesla to survive than all the others.

Meanwhile, an 80,000 person bank that ten years ago was rated ‘the most influential corporation in the world’ (Barclays, 2011)[2] is valued at less than half of a 2,500 person company started by two brothers in 2010 [March 2021: Barclays $43bn, Stripe = $95bn].

The banks, the automotive manufacturers, the retailers, the hoteliers, the airlines: a host of very large organisations have to think through what they are, what they do, and how they can move from a disappearing profitable position in one market disequilibrium to find another profitable position in a new market disequilibrium. For that move to work, a whole group of people need to be inspired by the purpose, the vision and the excitement of creating something new. And at the same time, the challenges of measurement to help with the transition are serious and worth engaging with. Organisation designers have to love the unmeasurable: the innovation, the novelty, the energy – and they have to be willing and ready to measure to deliver it.

[1] David Sainsbury, 2020, Windows of Opportunity

[2] Vitali, Stefania; Glattfelder, James B. & Battiston, Stefano (26 October 2011). “The Network of Global Corporate Control”