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Stop metrics destroying your strategy

Terry Frost

Wells Fargo’s cross-selling scandal happened because the metrics the firm used to measure the success of company strategy became the strategy itself.

Business needs metrics because measuring outcomes is the only way to determine the success or failure of strategy. But when strategy is too abstract, the concrete reality of the metric can create a situation where staff substitute the measurement for the objective – with sometimes devastating consequences. 

Writing for Harvard Business Review, Michael Harris and Bill Taylor explain how this happens and what to do about it. 


Wells Fargo employees opened 3.5 million deposit and credit-card accounts without gaining customer consent. The so-called “cross-selling” scandal cost the firm billions of dollars. The source of the disaster is reputed to have been the firm’s compensation programme, which rewarded employees based on their sales stats, plus a permissive sales culture which incentivised dishonesty. 

Ex-CEO John Stumpf’s mantra: “Eight [accounts per customer] is great” contributed to an environment in which “slippage” – offloading unwanted and unneeded products onto customers – was justified as “the cost of doing business in any retail environment”.

But while these factors certainly contributed to the gestation of the scandal, on closer examination, it was the metrics used to express and quantify strategy that lay at the root of the problem: “There would have been no accounts per-household goals, pressure to meet them, or culture surrounding them if customers’ accounts were never counted”.

“Wells Fargo had – and still has – a strategy of building long-term customer relationships”, but as soon as the bank decided to track cross-selling, staff began to treat it as a goal. Tracking cross-selling was only supposed to be a metric, but instead, it became the strategy. 


In psychological terms, switching the measure for the objective is called surrogation. Recent scientific research into the ways people make decisions reveals that surrogation is a “common subconscious bias” – ”whenever metrics are present, people tend to surrogate”. 

The authors of the research suggest three factors which, combined, produce the ideal circumstances for surrogation to occur in a business setting:

1) The objective is abstract.

2) The metric is “concrete and conspicuous”.

3) The employee, even if unconsciously, accepts the measure as the goal.


Resolving even one of these three preconditions is potentially enough to safeguard the integrity of your company strategy; the more of them you address, the more successful you will be.There are three main ways to avoid surrogation:

1) People responsible for fulfilling strategy must be involved in its development.

2) Leaders must decouple metrics from incentives.

3) Firms must use multiple metrics.

Metrics remain a cornerstone of performance monitoring, but for them to work in a positive way, they must never be allowed to usurp strategy. 


Intermountain Healthcare is a high-quality, low-cost care provider. In a highly competitive market, dealing with lower-back pain can be expensive and, because most back problems resolve without the need for medical intervention, unnecessary. The firm needed to ensure its medical practitioners delayed treatment for most patients, without failing to refer those in genuine need of urgent investigation and treatment.

Here’s how the firm avoided surrogation:

1) Doctors helped develop the strategy. Intermountain Healthcare instituted a metric to track whether doctors waited four weeks before referring back-pain patients for X-ray, MRI or other tests. The danger was that doctors would begin to “make patients wait” regardless of need. 

The firm avoided this by involving doctors in the strategy-design process. Inviting them to help develop the strategy and roll it out was vital: “Talking about strategy with people is not sufficient.” 

Involving the doctors produced a better metric. The target for the percentage of patients advised to wait for four weeks before seeking further intervention was 80% – a good way to ensure doctors remembered the positive objective at the heart of the strategy – to offer a quality service which provided prompt attention to those in need of it.

2) The firm decoupled metrics from incentives. If doctors were paid a small bonus for withholding treatment, subconscious bias would have meant that even the most conscientious of physicians would likely have begun to withhold treatment unnecessarily. But Intermountain Healthcare didn’t link pay to any one metric.

3) They used multiple metrics. Intermountain Healthcare implemented a raft of metrics which together could help to quantify staff excellence. “Multiple yardsticks do add complexity to the task of performance evaluation, but they’re essential to keeping people focused on the true strategy and avoiding surrogation.”


Despite clearly elucidating its long-term customer-relationship strategy, removing all sales goals, and instituting multiple metrics “related to customer focus”, Wells Fargo still struggles to retain customers. By acting now to reinforce the understanding that “metrics are mere representations of strategy, not the strategy itself”, you can make sure that your company is not the next to be embroiled in a damaging financial scandal.

Source Article: Don’t Let Metrics Undermine Your Business
Author(s): Michael Harris and Bill Tayler