Wednesday, March 07, 2007

Re-thinking Performance Metrics

Last year due to the startup I was working on, I spent a lot of time trying to understand ROI - Return on Innovation. Its one of those metrics where the companies that have this metric think they have it down, but is it really measuring what they want it to? Is number of filed patents or number of 'launched' products really a measure of your return on innovation?

Since then, I have spent a lot of time thinking about how metrics are changing and shifting in the new economy. What non traditional metrics could be used to better measure and drive performance in an organization? I think one of the issues with most traditional metrics or even the various definitions of newer metrics such as return on innovation is that they tend to ignore the people factor - your customers and employees.

John Hagel has created some great thoughts for new performance metrics including Return on Attention (ROA), and Return on Information (yet another ROI). His most recent thinking is around ROS - Return on Skills or more accurately Return on Talent:

For me, talent is ultimately about the ability to deliver superior value through one’s activities, whether it is the janitor or the CEO. There are no caps to talent - no matter how good people are at what they do, there are infinite opportunities to deliver even more value. Talent is ultimately a function of human capital, intellectual capital, social capital and structural capital working together to amplify the value that can be delivered.

What other metrics could be explored? I think it would be interesting explore ROCS - Return on Customer Service, or ROA - Return on Authenticity. Next step - how to define and create measures to support these. What other types of metrics do you think could help drive performance in the new economy?

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