Surrogation in Business Management

Performance Management
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Jaap de Jonge
Editor, Netherlands

Surrogation in Business Management

🔥NEW In wars and extreme poverty, desperate people use various kinds of inferior substitutes for products like bread, coffee and tobacco. These are called "surrogates". Likewise, in performance management the human tendency or cognitive bias to confuse and substitute what's being measured with the metric itself can also be called "SURROGATION".

As we all know, a business strategy is typically long term oriented, and quite complex and abstract. So various tools and metrics like CSFs and KPIs, Strategy Maps, and Balanced Scorecards are being used to cascade the strategy downwards in the organization, to make it more concrete and simpler to grasp, and to measure the progress made (in the short run). All fine.

But sometimes managers and employees mentally mix up and replace the actual strategy with the hard metrics which were meant to assess whether the organization is succeeding at it. They might even start "gaming" the performance metrics.

According to an interesting article by Professors Harris and Tayler surrogation is destroying a lot of value in businesses. Why? Because business metrics are inherently imperfect. Especially if they are used to gauge intangible goals (like is the case in strategy). And still more so if the metrics being used are not well matched to the particular strategy.

Of course, metrics have their merits. They are useful to provide some direction where the strategy may otherwise be perceived as too abstract. And they can also help to track the progress made and to coordinate behaviors and efforts. But it's important the inherent distortions of metrics are properly understood. That's why I prefer the term "indicators" over "metrics".

To counteract surrogation, the authors recommend companies to:
I found the introduction of the term "surrogation" and its explanation by Harris and Tayler a useful addition to our management dictionary, because it explains the core issue in performance management so well. To use the famous words of Prof. William Bruce Cameron back in 1963: "Not everything that can be counted counts, and not everything that counts can be counted."

Source: Michael Harris and Bill Tayler, "Don't Let Metrics Undermine Your Business", HBR Sept–Oct 2019.

  Paramathmuni srinivas Kumar
India
 

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  Gandhi Heryanto
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The Effect of Incentive Compensation and Cognitive Efforts on the Occurrence of Surrogation

Measurement is a fundamental component of (management) accounting. Companies use measurement as a representation of stra...

  Bernhard Sterchi
Management Consultant, Switzerland
 

In Other Words: the Cobra Effect

To raise the attention to the topic of surrogation, also known as the Goodhart's law: "If a measure becomes a target, it...

  Maurice Hogarth
Consultant, United Kingdom
 

Measure Qualities as Much as Quantities

@Srinivas: In the world of Organisation & Method one of the principles is that "If it cannot be measured it cannot be ma...

  Paramathmuni srinivas Kumar
India
 

Measuring Qualities

@Maurice Hogarth: Agree that we need metrics for measuring quantities as well as qualities. I may sound to be repetitive...

  Gary Wong
Consultant, Canada
 

The Order System versus the Complex System

Terms like "What gets measured, gets done" and "If it can't be measured it can't be managed" reside in the ORDER SYSTEM....

  HUGH BILLOT
Business Consultant, United Kingdom
 

Surrogation

However you want to sum this up we should remember that if you can't measure something you can't manage it, and if you c...

  Maurice Hogarth
Consultant, United Kingdom
 

Past Measures & Future Forecasts

@Gary Wong: As you state, Gary, measurement resides in the ORDER SYSTEM while the COMPLEX SYSTEM relates to the future. ...

 

More on Performance Management:
Summary
Forum
Overview of Performance Measurement Systems
👀Surrogation in Business Management
How to Measure the Performance of Admin and Support Departments?
Limitations of Traditional Performance Management
Best Practices
Performance Management in Government Departments
Performance Management in SME's / Small Organisations
Performance Management in Hi-power Structured Organization
Monitoring Performance of Businesses
Performance Measurement: Realistic?
Measure the Performance of Logistics and Warehousing
Customer Performance Management
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