In the name of growth; How your performance measurement is killing your brands & company.

In the name of growth, accountability, and transparency, companies have set up several measurement criteria with idealistic goals that allow them to publish reports with high-sounding, flowery results while incubating rot, allowing it fester until the stem crumbles from within.

From the economic idea of rational expectations, we can deduce that entities who are aware of a system of rewards and punishment will optimize their actions within such system to avoid punishment and gain reward. The problem here is that these entities will attempt to optimize their position whether (or not) their actions are sustainable for company growth and profit maximization. In a lot of cases, key high-flying executives and employees successfully game measurement systems resulting in their own growth at the expense of the true organizational objectives.

I’ll give a few examples:

In 2013, I led a team to drive enlistment of a new product into twenty thousand retail stores in Eastern Nigeria. At the end of the first month, we had achieved 90% of our target and we celebrated our work so far. Our excitement was cut short when we saw the results of other regions; the Northern Nigeria team had achieved 155%, Middle Belt was at 130%, and West at 120%. Even though my results at the time gone were excellent versus target (we still had 1 week to go for the project), I received several queries to answer for why my team was behind other regions. I detailed the work, the process and the results achieved but what the African leadership team cared about were the numbers (of course, the Numbers!). So, the business leaders in other regions got accolades, while I dealt with the feelings of inadequacy some of my team members developed, encouraging them to keep up the good work.

One year later, the impact of the work we had done started to show. The reviews had new questions such as these two below (out of many), and the results revealed too much.

1.      What percentage of the enlisted outlets bought the product after the initial launch sales?

(Results: East 95%, North 20%, MB – 65%, West 82%)

2.      What percentage of the enlisted outlets returned at least once every month?

 (Results: East 68%, North 10%, MB 37%, West 50%)

These results prompted further inquiry into the results from a year ago when we enlisted the new product in outlets and the findings showed (the below) about the regions that seemed to do exceptionally above target:

1.      They hadn’t enlisted the products in the stores they claimed they had. Number of stores with new product was counted/recorded based on number of submitted sales invoices from each region. It isn’t hard to imagine how overly ambitious sales teams would fake invoices. 

2.      They dumped huge stock of the product with wholesalers and recorded this single large sale in bits across hundreds of small retail stores and supermarkets. The impact of this is that the company doesn’t have as much distribution and engagement as it needs, and then, the sales data is wrong.

3.      Because the sales data is wrong, all further promotions targeted at retailers who supposedly stocked the product, are designed and executed based on false data and are doomed to fail. This is one of the most underrated reasons why new products fail in the market. In fact, it is better to have no data, and work based on intuition, than work with data that points you the wrong direction.

Another way business leaders in the FMCG industry game performance measurement systems in a profit-endangering way, is in the enlistment of unsuitable Distributors and other unfit high-worth trade partners. The core criteria for selecting a Distributor are:

-         Involvement: The Distributor must be physically present and not an in-active investor)

-         Infrastructure: The distributor must have necessary infrastructure (warehouses, Trucks, etc)

-         Investment: The cash the distributor is bringing in must meet minimum working capital requirement.

-         Interest: Irrefutable proof that the Distributor has interest in the business.

More frequently than not, distributors that have Investment (Cash) but do not have two of the other criteria, are still selected to manage sales for a company within a territory or area. They usually last a few years until they lose most of their capital in bad debts or burn out simply because they weren’t qualified in the first place. At the time when the business crumbles, the business leader that brought them on board has been rated highly for enlisting these high-worth partners and moved to a different position.

In 2016, I had spoken with a colleague who had just become a regional sales manager in a multi-national fortune 100 consumer goods industry and he told me in his own truthful way, “Joseph, you can either chose to do what is right, or chose what will bring you a promotion.” I didn’t have to ask him which of the two options he had chosen seeing as he had gotten three promotions within four years. “The system hasn’t learnt to merge these two key items, so success is for people that have mastered how to be perceived as effective,” he added.

Consumer goods companies can better measure performance and minimize metrics gaming by following the below:

1.      Incentivize behavior, not results: At first, this may seem counter-intuitive, but the right kind of behavior often leads to sustainable, profit-maximizing results.

2.      Employ Specialists: SETA FIELD is an African company focused on field execution tracking. There are other specialist companies that measure production efficiency, recruitment, etc.

3.      Asking questions that seek to uncover the hidden costs of growth spurts

4.      Reducing bureaucracy.

Depending on the department, there are several ways employees have successfully gamed measurement systems and I will like to hear what you have also observed, and suggestions on how to deal with these dire situations.

-Written By Aito Osemegbe Joseph