Ten Overlooked Metrics
Updated: Jan 30, 2018
There are lots of recommendations on metrics that companies should measure to focus attention and resources. As companies grow and become large enterprises, I think it’s important to have a set of metrics that balance external metrics (e.g. customer acquisition costs, return on capital, customer satisfaction) with metrics that reflect the health of internal operations (e.g. employee turnover, employee satisfaction). Here are a few metrics for internal operations that you may have never considered but should. Even if your organization rejects them, my hope is that they will serve as a catalyst for discussions about some of the hidden forms of waste that are pervasive in most large companies.
Manager half-life is the amount of time it takes for half the employees to report to a new manager. It measures the decay rate of stable employee-manager reporting relationships. Changes in management take time and effort away from work as new managers and employees learn how to work together (refer to the Tuckman model on forming, storming, norming, performing) and establish new social contracts. While there are ways to reduce the amount time spent storming and norming, most people just muddle through without much thought toward making the change process effective and efficient.
Changes in management can be particularly problematic for underrepresented minorities and for anyone evaluated with an annual performance review process. This is especially true for companies that use a vitality curve or stacked ranking. Employee performance assessments are complex and exceptionally difficult for one manager to hand off to another. I knew a few employees that had three or four different managers during a single annual review period. I have serious reservations that these employees received a fair performance assessment.
Manager half-life is not difficult to measure. Most large companies with HR systems track when an employee transfers from one manager to another. If half-life doesn’t feel intuitive enough, the average duration an employee has reported to their current manager or the manager turnover rate are good alternatives.
Mean Time To Reorg
Mean time to reorg is the average time employees have between reorgs. In a business context, a reorg (or reorganization) is a change or overhaul of an organization’s internal structure. As part of a reorg, organizational units (e.g. teams, departments, divisions) split, merge, or get restructured to focus on different competencies or missions. Reorgs are a way of life in large corporations. One common reorg pattern is to shift structures from a functional orientation (e.g. R&D, development, customer support) to a customer or product line orientation. This is sometimes referred to a horizontal to vertical shift. Unfortunately, another all too common pattern is to shift back a few years later.
Despite the seductive benefits of a reorg, these changes are also a tremendous form of waste that is rarely accounted for by senior leaders and corporate executives. Time is spent to update websites and slide templates instead of on something that adds value to customers. Reorgs shift the distribution of power, priorities, and decision making. These shifts also result in business process changes that can cascade and spill over to other parts of the company. Reorgs trigger political jockeying, plays for power, and turf wars and act as source of fuel for a corporate Game of Thrones.
Mean time to reorg is a fairly easy metric to measure for large companies as most HR systems track org unit changes along with the number of employees that were part of the changed organization.
New Employee Setup Time
New employee setup time is the amount of time it takes from when a new employee starts work to when he or she has everything setup in order to create and deliver value. Some may think that a corporate email account, laptop, and desk are all that is needed, but these are just the basics. Some employees (e.g. engineers and technicians) need access to restricted tools, controlled data repositories, and secured labs before they can begin work and add value. One common workaround is to have new employees do busy work, network with colleagues, or train while they wait for necessary approvals and access privileges.
As employee turnover increases and average tenure drops, processes to hire and onboard new employees need to be more effective and efficient. According to Business Insider, these are the average employee retention rates for some popular tech companies:
Facebook: 2.02 years
Google: 1.90 years
Oracle: 1.89 years
Apple: 1.85 years
Amazon: 1.84 years
Twitter: 1.83 years
Microsoft: 1.81 years
Airbnb: 1.64 years
Snap Inc.: 1.62 years
Uber: 1.23 years
If the average employee tenure is only one to two years, there is no time to waste to get every new hire setup quickly. At one client organization I worked with, it took three weeks for new hires to get access to everything they needed to work. In response, the leader of the organization sponsored a concerted effort to reduce this setup time. After a few months, the organization was able to shorten the duration down to 24 hours through business process changes and automation.
While I think new employee setup time is an important metric, one downside is that it is a hassle for most companies to measure. The organization I coached used a manual process to solicit data from every new employee for the duration of the project. This was not ideal, but it was good enough at the time.
Net Employee Loyalty Score
Net employee loyalty score is a measure of how likely employees are to stay if they were offered an equivalent role, benefits, and compensation at another company. This metric is a riff on the popular Net Promoter Score used by many organizations to measure the loyalty that exists between a provider and a consumer.
Net Employee Loyalty is measured on a scale ranging from zero to ten where zero means very unlikely to stay and ten means very likely to stay. Employees who respond with a score of 9 to 10 are called Enthusiasts, and are considered likely to exhibit value-creating behaviors and stay longer. Employees who respond with a score of 0 to 6 are called Cynics and are believed to be less likely to stay. Employees that respond with a 7 or 8 are called Neutrals. The Net Employee Loyalty Score is calculated by subtracting the percentage of employees who score as Cynics from the percentage of employees who score as Enthusiasts.
While this metric may be interesting and fun to use for a while, the New Employee Loyalty has flaws. Like most Likert scale questions with a perceived right and wrong answer, this metric can be gamed, especially if employees are familiar with how the scores are calculated.
Cost Per Meeting
Cost per meeting is the amount of money is costs a company to hold a meeting. I think it is fair to say that most large companies have too many meetings with too many people. To calculate this metric, multiply the average hourly cost for an employee (e.g. $150/per hour) by the number of employees in attendance and the duration of the meeting. The obvious question to ask is whether any given meeting is worth the cost? Keep in mind that these costs only reflect the cost of labor and not opportunity costs which are likely even higher.
If your organization uses Scrum, you may also want to consider calculating the cost of a sprint, the cost of a story point, the cost of a release, and even the cost of a Daily Standup Meeting. I rarely find software development managers or product owners that know what the cost of a sprint is for their Scrum teams.
If your organization does not have automated expense reimbursement options, consider calculating the cost for reimbursing an expense. The average cost per expense report is the average amount of money spent to generate, submit, and approve an employee’s expense report based on hourly rates for everyone involved. Warning! You may find yourself asking why a $15 lunch costs another $50 to get reimbursed.
Here are a few more that are less serious, yet still worthy of consideration.
% of Flaky Meetings
The % of flaky meetings is the overall percentage of meetings where a key person flakes out and does not show up in time. According to Urban Dictionary, a flaker is someone who does not show up when they had previously stated they will. Flake time expectations need to be established for this metric. Flake time is the amount of time someone is expected to wait for a key person to show up for a meeting before leaving and getting on with their day. Flake time may vary based on group etiquette, seniority, or perceived urgency.
Decision Wait Time
Decision wait time is average amount of time someone waits before getting time with a decision-making committee to present a recommendation or make a decision.
Motivational Poster Refresh Rate
Motivational poster refresh rate is the rate at which a company refreshes its internal propaganda. Wikipedia defines propaganda as information that is not objective and is used primarily to influence an audience and further an agenda, often by presenting facts selectively to encourage a particular synthesis or perception, or using loaded language to produce an emotional rather than a rational response to the information that is presented.
Neologism Production Rate
The neologism production rate is the number of neologisms attributed to your organization over a period of time (typically annualized). According to Wikipedia, a neologism is a relatively recent or isolated term, word, or phrase that may be in the process of entering common use, but that has not yet been fully accepted into mainstream. There are services that generate neologisms should your organization fall below benchmark levels and you are tasked with closing the gap.
Purgatory Cycle Time
Purgatory cycle time is average number of days employees spend in a state of limbo before they know if they have a job or not. If can often take weeks or months for layoffs or reduction in workforce events to unfold.
I hope you enjoyed this proposed list of internal metrics. Like most metrics, there are diminishing returns for each one as targets are set too high or low and imbalances emerge. There is no one “right” set of metrics for an organization. Metric selection and target setting is a complex balancing act that requires ongoing adjustment as conditions evolve. I hope you found the ideas enlightening with a grain of truth in them that gave you something to think about for your own organization. Please let me know if you have other recommendations like these and share this message with others as needed.