A good analogy is capable of bringing concepts together and making abstract ideas easy to understand and remember. For example, I once met a person who spoke of “feudalism” when referring to departments within a company, and suddenly words like “inheritance”, “castle”, and “servant” took on new meanings… and coffee conversations become colorful.
The same thing happens to me every time I hear “business ecosystem”. I end up imagining a savanna with open spaces, wary gazelles, and crouching predators; I imagine crocodiles lurking in ponds, as if there weren’t enormous hippos right beside them.
In these “ponds”, many species of this business ecosystem gather. There are those who come quietly; they take notes and do not speak unless spoken to. There are those who make their presence known and raise their voices over others; their argument is based on volume. Others take control of the meeting and “facipulate” (facilitate in a manipulative manner); they get up and take notes or draw, offering to send a summary of what was agreed upon so that they can maneuver the message closer to their interests. And then there are the hippos: peaceful and sleepy… until they open their mouths, capsize the boat of the unwary tourists, and turn everything upside down.
It just so happens that in the business world and, more specifically, in business meetings, there are real HiPPOs: that is, the “Highest Paid Person’s Opinion”.
People with certain status (and power) within an organization have a super-powerful capacity for conviction that makes their opinion weigh considerably more than others’. These relevant positions are achieved by special management capabilities, knowledge, greater assertiveness and personal skills, or by working more hours than anyone… always complemented by being in the right place at the right time. But they all suffer a pronounced confirmation bias; they tend to think that they are not in that position by chance and assume that their judgment and instincts, which have led them to where they are, are infallible and must be accepted by others.
This vision that a director or manager may have of themselves is an irrational belief, which can be dangerous. How can organizations protect themselves from this risk?
Use Metrics to Reign In Opinions
Nearly three centuries ago, the Enlightenment brought about a revolutionary idea: to put science and knowledge above magical thought and superstition. When we translate this to the language of the 21st century, we’re talking about Data-Driven Management, metrics, and hypothesis validation. In fact, much of the industrial revolution is based on the idea of applying science (evidence, proven data, etc.) to manufacturing processes.
As you can see, the way to mitigate the risks that arise from relying solely on instinct, intuition, and opinion is to have a good representation of reality in the form of metrics that help reduce uncertainty while providing us with a solid foundation. A good metric should be:
- Understandable: they don’t need any additional explanation to be understood.
- Comparable over time or with other elements of the same nature.
- Expressed as a ratio, percentage, or index and not as an absolute value. This is how the metric is reinforced and augmented with another factor (such as size or effort). For example, speed is only understandable in relation to time (kms/hour).
- Impactful in the form of changes in attitude, behavior, processes, etc.
Types of Metrics
Since evil does not rest, the metrics themselves, the data, can be imbued with irrational thinking. For example, vanity metrics, enlarge the ego but do not provide information or value. A team may be very proud to have delivered a large number of integrations or to have corrected many flaws, but that doesn’t tell us anything about the value they bring, which is what’s really important. In organizations, vanity metrics are a pest; they permeate processes, distorting the perception of reality, creating a false sense of certainty, distracting from what is truly important.
There are several types of metrics that actually measure value:
- Actionable metrics: these allow decisions to be made. They are the opposite of vanity metrics. An example of an actionable metric is commuting time saved by constructing a new road. The “vanity” version of this metric would be the how many miles the new road spans.
- Qualitative and quantitative metrics: the former are based more on observation and subjective assessment, while the latter are obtained objectively.
- Lagging and leading metrics: the former are records of what happened, and the latter allow us to know where what we are measuring is heading. For example, the number of speeding tickets received on a long trip is a lagging indicator; it can no longer be remedied. Monitoring speed to avoid exceeding the speed limit allows us to anticipate the speeding tickets we can expect to receive at the end and take corrective actions.
- Correlated and causal metrics: With causal metrics, one of the variables directly causes the other (e.g., spending capacity and income, investment in quality/UX and customer satisfaction, unfounded decisions and business risks, etc.). With correlated metrics, the variables are related in some fashion, but one does not cause the other. For example, if ice cream consumption and air conditioner sales both increase at the same time, it doesn’t mean that air conditioners cause people to eat ice cream. The two are related, but not causal. (While we’re on the topic, also beware of “Spurious correlations”, such as ice cream consumption and shark attacks in Australia.)
Ideally, metrics should be leading and causal. They should allow us to anticipate the end result, and they should examine factors that have real influence (that is, factors that bring value to our customers, organization, and even employees and colleagues; they don’t just inflate someone’s ego).
Back to The HiPPO
Data is your best friend to avoid making decisions without foundation or reflection. But your instincts also have value, since after all, in most cases you don’t get to be a HiPPO just by chance. Knowing when to listen to data and when to follow your gut is a winning combination of art and science. This requires both the humility to recognize that you may be wrong and the ability to appropriately deal with uncertainty.
If there’s an excess of HiPPOs in your ecosystem, then data, metrics, and other information that reduces uncertainty will help you counteract their effects.
Let’s face it: defying reality in order to assert one’s opinion over others’ is a style of leadership that is not in short supply. Luckily, peer pressure, or social conformity, strengthens the power of data. However, it is not foolproof; in the tale of “The Emperor’s Clothes”, the emperor might have chosen to ignore the child’s voice and continue walking in his “magical” suit. He was undoubtedly the HiPPO of the tale, and no one provided him with data that would counter his opinion, so despite the voices of those who saw him, he continued his walk as if nothing had happened.