The Dallas Mavericks won the 2011 National Basketball Association (NBA) championship because its leadership team understood that measuring “how” matters more than measuring “how much.”
Boards of directors and executive teams should take note. Measuring how individuals and organizations behave concentrates attention and resources on a competitive asset that is so varied and rich in supply that it promises to deliver enduring value at time when nearly every product and service can be replicated and commoditized by others.
Although adopting a new measurement framework can be difficult, there are a growing number of examples, including Mavs Coach Rick Carlisle, from which to learn.
Right Answer, Wrong Questions
Conversations about “how much” echo throughout business, politics and our personal lives: How much revenue can we squeeze into this quarter? How much debt can we tolerate? How much growth can we generate? How much government do we need? How much square footage can we afford? How many superstars can our basketball team sign?
We have become extraordinarily successful at measuring “how much.” Executives work diligently to scale their companies so they can join the Fortune 500, a list that measures company performance based solely on how much revenue it generates in one year. Professional sports owners vie to out-bid each other for the services of high-priced free agents, such as the NBA’s LeBron James, Dwyane Wade and Chris Bosch, the NBA superstars who this year consumed two-thirds of the combined salaries the Miami Heat invested in its entire 15-man roster.
These and many similar efforts are genuinely impressive; they illustrate successful endeavors to answer the “how much” question by out-selling and out-spending the competition.
But “how much” and “how big” aren’t the right questions – not in a world with dwindling resources, and not in a business realm where competitive advantage cannot be sustained via out-producing, outspending or out-selling. Instead of reflexively asking “how much,” we should examine “how” we can create organizations, societies, institutions and businesses that mirror our deepest values.
The case for “how” has never been stronger; in recent years, we have repeatedly witnessed that size alone does not guarantee success in business or in life. The aggressive pursuit of scale—whether it’s more revenues, profits, customers, stores, or a bigger market capitalization—tempts companies to lose sight of the values that create true sustainability. Show me a company that’s ‘too sustainable to fail’ and I’ll be interested in buying shares.
Others will too, judging from the encouraging signs that the world is moving from “how much” to “how.”
Consider the Himalayan Kingdom of Bhutan, which has long measured its economic and social progress by the yardstick of “gross national happiness,” as opposed to gross national product. Today, policymakers in Britain, France and even Somerville, Mass. (where census-takers now ask citizens, “How happy do you feel right now?” to help guide future public policy decisions) are debating how similar indices might measure public welfare.
On the basketball court, Carlisle used a different yardstick than his competitors. Carlisle was hired because, in his previous coaching stints, he used optimal lineups far more often than his opponents. That is, he was more likely to have a winning combination of five players working together on the court at any given time.
An avowed “stats geek,” Carlisle accomplished this by expanding his measures of player performance beyond traditional “how much” metrics such as rebounds, assists and points. Carlisle also measured how well different players interact with each other to produce better team offense and defense. By effectively measuring teamwork, Carlisle also rewarded it (those who demonstrated it received more playing time) and helped further it.
In doing so, Carlisle was “managing by measuring” the most important competitive differentiator of our time: his team’s culture. HOW his players collaborated with each other on the floor determined the final score, so he measured it. So, why don’t we as business leaders measure the strength of our own organizational cultures and how well our employees collaborate with each other, inspire each other to greater levels of performance and produce innovation? The answer, as I’ll share in upcoming columns, is that all organizations can manage via “how” metrics, and a growing number of companies are beginning to do just that.
Measurement is a Window
Carlisle’s approach supports one long-held measurement notion and refutes another.
Carlisle shows that the old saw that you can’t manage what you don’t measure became an article of faith in business for good reason: It’s true. It’s also true that what we measure is a window into what we believe matters and how we reward employees.
“Measurements have to come before rewards because you can’t reward anything you haven’t measured, but definition has to be the first thing you do,” says Steve Kerr, my friend and author of “Reward Systems: Does Yours Measure Up?” (Harvard Business School Press, 2008). “Definition includes being very clear about what it is you’re trying to do. One of the central premises of my book is that rewards have to be the third thing you do.”
Many companies need to align their definitions and measures. Kerr points to organizations whose mission statements call for teamwork and long-term sustainability, “yet they use rewards and measurements that, however unintentionally, discourage teamwork.”
By tracking new metrics of performance, such as player efficiency rating (PER), Carlisle disproves the commonly held notion that intangibles like teamwork cannot be measured. Every basketball coach will tell you teamwork is crucial to winning, but only a few have figured out ways to measure it. Business leaders who say intangibles like behavior, inspiration and values cannot be measured would do well to look back to corporate naysayers who argued that quality could never be measured.
They can also look to Carlisle. He knew when to shift his management focus to less tangible metrics to help inspire the excellent team work the Mavericks executed while triumphing over the individual brilliance of the heavily favored Miami Heat.
Asked by reporters how his team managed to outplay the Heat in the fourth quarter, Carlisle quoted an old coaching mentor by replying that he knew when to wipe his whiteboard clean of Xs, Os and statistical measures and instead rely on his players’ desire to fulfill their mission of becoming champions.
It turns out that Carlisle also had a good measure of his players’ winning character.
Originally published on Forbes.com.