Management Insights

Red Flags and Brown M&Ms

Today's managers are frequently overwhelmed by information. Flat organizations and ever cheaper information technology have resulted in a torrent of data. The challenge is not getting enough information, but sorting through it all to find the proverbial needle-in-a-haystack.

What if you could identify early warning signs by monitoring only a few key pieces of information? Rather than trying to measure everything - often just because it can be measured - focus on a few critical things that act as a red-flag for potential problems. For example, when visiting a factory for the first time I find it helpful to keep an eye on housekeeping, which is frequently a good early warning indicator for maintenance effectiveness.

As Dan and Chip Heath write, your source of data doesn't need to be high tech or numerical. Consider the rock band Van Halen. In its heyday, the band became notorious for a clause in its touring contract that demanded a bowl of M&Ms backstage, but with the brown ones removed. The story is true - confirmed by former lead singer Dave Lee Roth himself - and it became the perfect, appalling symbol of rock-star-diva behavior. 

Get ready to reverse your perception. Van Halen did dozens of shows every year, and at each venue, the band would show up with nine 18-wheelers full of gear. Because of the technical complexity of staging a show, the band's standard contract with venues was thick and convoluted with many clauses. Van Halen buried a special clause in the middle of the contract. It read, "There will be no brown M&Ms in the backstage area, upon pain of forfeiture of the show, with full compensation." So when Roth would arrive at a new venue, he'd walk backstage and glance at the M&M bowl. If he saw a brown M&M, he'd demand a line check of the entire production. So Roth was no diva, he was an operations expert. He couldn't spend hours every night checking every detail. He needed a way to quickly assess whether the stagehands at each venue were paying attention - whether they had read each line of the contract and taken it seriously.

Ask yourself, what are the brown M&Ms in your business?

The Power of Positive Reinforcement

Successful companies are masters of using positive reinforcement to motivate their people. My first experience of a company that truly understood this was when I attended a Mary Kay event with my wife. I was vaguely aware of the pink Cadillac driving direct sales cosmetics firm, but I was not prepared for the level of energy and enthusiasm that greeted me. I had never before been in a room with so many happy and excited people. After a few individuals shared emotional stories of how they had overcome personal challenges to become successful, the evening progressed to recognizing individuals and teams for their various accomplishments. It seemed that no achievement was too small to celebrate. Women went on stage to receive pins, ribbons, and in some cases jewelry. More importantly they received recognition for their achievements from their peers. Every woman was introduced by name to the applause and cheers of the crowd and for some it was a very emotional experience; you might have thought that they had just won an Oscar or the Miss World contest. The enthusiasm was contagious and these women were clearly having fun and loving every minute of it. There was a real sense that this was a room full of winners. As a somewhat reserved Englishman, I was overwhelmed by it all. It was loud, emotional, and in a word 'hokey' ... and it clearly worked. I was intrigued and couldn't help wondering why more firms didn't do this.

We've know about positive reinforcement since the 1930s when B.F.Skinner was teaching rats to navigate mazes. Tom Peters and Robert Waterman discussed the concept extensively in their classic book In Search of Excellence. Rewarding good behavior using positive reinforcement has been proven to be dramatically more effective than punishing bad behavior using negative reinforcement. Without using positive reinforcement, it is unlikely that any business can unlock the full potential of their people. However, many firms are afraid of using it because it feels uncomfortable for managers used to dealing with spreadsheets rather than people. Other businesses try and then fail because they do not use positive reinforcement appropriately or consistently. For positive reinforcement to be effective, feedback must be:

- Specific (highlighting the behavior being rewarded)
- Earned (people know when you're being disingenuous)
- Unconditional (no if, and or but) 
- Appropriate (not everything is reinforcing to everyone)
- Immediate (the longer the delay, the less the impact)
- Frequent (to keep the behavior going)

Over the years I've seen a lot of businesses and without doubt the best run factory I ever visited was a brewery in Brazil. They too were masters of using positive reinforcement. Performance boards were displayed prominently showing actual versus target performance for each team. All employees participated in an easy to understand bonus scheme and a horn sounded every hour if they were on target for the monthly bonus payment. Each month, all of the employees assembled in the cafeteria to review performance and progress towards the bonus target. Teams from each area went on stage to review their performance and share their target for the coming month. There was a sense of good natured competition between each team and the one with the best performance received a trophy. Throughout the event people clapped and cheered and were clearly having fun.

You might feel uncomfortable with this approach and think that it wouldn't fit the buttoned-down culture of your business. Perhaps, but you would be missing out on a powerful technique to motivate your people and maybe have some fun along the way.

Sunlight Is The Best Disinfectant

Referring to the benefits of openness and transparency, U.S. Supreme Court Justice Louis Brandeis said,"Sunlight is the best disinfectant." In a business context, measurement provides the necessary sunlight. However, the illumination that comes from measuring performance can often make things look worse.

One of the paradoxes of introducing a new measurement process is that performance often appears to decline. Some people use this as an argument to abandon new metrics claiming not only that they are time-consuming and difficult to use, but they actually make things worse. While the first two points may have some merit, the argument that measuring something somehow diminishes performance is nonsense. The reason that performance often appears to decline is that measurement forces people to confront the brutal facts. Often, we are in denial about performance and with no objective measurement of performance, we rationalize poor performance or ignore it altogether. It's not that performance declines; more typically performance was already bad but cannot now be denied. However, once a performance gap is highlighted, people typically feel compelled to close it.

Sometimes just the threat of measurement is enough to elicit change. For example, several states are introducing legislation requiring restaurants to list the nutritional content on their menus. The Economist ponders menu labeling:

"Menu labeling may...encourage restaurants to provide healthier dishes. In response to New York’s menu-labeling law, Cosi, a restaurant chain, created a new menu with healthier items and lowered the calorie content of some of its existing sandwiches. As a result, it says, people are switching to the lower-cal products. National chains like Starbucks, McDonald’s, Denny’s and Dunkin’ Donuts have all introduced less calorific items since menu labeling went into effect in New York. Changes in consumer taste, they say, not menu labeling, are the reason for these changes. But worries about having to print supersize calorie counts on their menus may have played some part. The proof is in the reduced-fat pudding."

Be Careful What You Measure

What gets measured gets done. Unfortunately, that works both ways. Measure the wrong thing, and you are liable to encourage the wrong behavior. Even measuring the "right" thing may result in unintended consequences.

When I first started work, piecework was still common in many manufacturing industries. Workers were paid based on the quantity they produced. However, I soon discovered that this system was often counterproductive. With an emphasis on speed over quality, workers were encouraged to cut corners to make their numbers and products needed to be inspected and reworked at the end of the line, which was inefficient and expensive. The quality movement of the 80s reversed this equation as the focus shifted from speed to quality and doing things "right-first-time". Paradoxically, as workers started to focus on quality rather than speed, output increased and costs tumbled.

While piecework may have largely died out in manufacturing industries, it is alive and kicking in many other industries including health-care. In the US, doctors are paid based on the number of procedures they perform rather than the outcomes they achieve. As a result, patients in the US receive a far greater number of unnecessary tests and operations than people in other countries. As the Economist reports, the US has the most expensive health-care system in the world despite having results that are no better and in many cases worse than other developed countries.

Sales is another area prone to measuring the wrong things. Sales organizations often focus solely on revenue, resulting in salespeople chasing deals at any cost. As a result, the business slowly accumulates unprofitable and undesirable customers who eat up valuable resources and erode margins.

The consequence of measuring and rewarding the wrong thing can be deadly. As this analysis of the 100 plus fatalities of Delhi's blue line buses suggests: 1) Drivers’ salaries are dependent on how many fares they pick up - the faster they drive the more money they make. 2) Drivers rent their buses, so they have no incentive to make repairs - and sometimes drive their vehicles until the wheels literally fall off.

Selecting the wrong metric could produce at best unintended consequences and at worst entirely the wrong outcome. When selecting a metric, take time to consider the possible outcomes of it's use. Use role-play and simulation to evaluate alternatives. Consider using complementary metrics or a composite number that reflects real-world compromises and trade-offs. Alternatively, consider not measuring something; just because you can measure something does not mean that you should. As this article describes, measures set up incentives that drive people's behavior, so what gets measured, matters.

Can't Drive 55?

My local police department recently parked a radar speed display on a road down which I frequently drive. The posted speed is 30 miles per hour which is significantly slower than most people including myself typically drive down that stretch of road. The moment the sign was activated, drivers immediately slowed down to the posted speed limit. This made me wonder why the illuminated sign was so effective at changing driver's behavior where the previous static sign had not been? 

Visibility: Over time, static signs blend into the background and we tune them out as extraneous noise. Whereas an illuminated and continuously changing sign demands our attention. Moreover, since only one variable - speed - is displayed, the information is not lost in a clutter of other information.

Feedback: A radar display provides continuous and immediate feedback on how fast we are actually driving versus the speed limit. It provides us with a mechanism to calibrate whether we should slow down, and by how much. Moreover, the knowledge that others drivers can also see this information prompts us to change our behavior.

Repeatability: Unlike a traffic officer, radar displays provide consistent and repeatable feedback 24-hours a day. Their effect continues all the time they are in operation. However, once removed, their impact quickly dissipates and drivers return to their old habits.

So what can we take away from this? To influence behavior, we need to measure a limited number of relevant metrics that provide immediate - or as close to immediate as possible - feedback of actual performance versus a clearly defined target. This information needs to be visible to everyone and not hidden away in a report or spreadsheet that only a few people see. Rather, it should be displayed conspicuously in a way that cannot easily be ignored.

Finally, like the speed sign, once we stop using these feedback mechanisms, people quickly ignore them. Unfortunately, during my visits to many businesses I see various displays, graphs, and control-charts that are incomplete or that have not been updated for months. Remember, just parking the radar display at the side of the road is not enough; it needs to be switched on.