Monday, June 30, 2014

Keeping Score

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Clay Christensen was one of my advisers in business school at Harvard. He’s known for “The Innovator’s Dilemma” and other insights about strategy, but he also talked to us about management as an ethical undertaking [..] his proposition to us was really about, “How can you create an environment where you make people’s lives better in that fundamental way?” It really stuck with me.

I think it’s a hard problem at multiple levels [..] In the software industry, you’re used to dealing with very smart people. What they really need out of leadership is very simple. They need to know the game we’re playing and how to keep score.

The first one is about making sure everyone understands the company’s core competency and how we’re going to beat competitors. Most leaders get that right. But how you keep score is equally, if not more, important. Because if you don’t give people metrics, smart people will make up their own [..]

So if you have a company where everyone has their own ways of keeping score, you’ll get incessant fighting and arguments, and they’re not even arguing about what to do. They’re arguing about how to keep score. They’re arguing about what game we’re really playing. That’s all counterproductive.

Most people think that metrics are something you use to control employees. I take the complete opposite view. I think metrics are actually the way that you can harmonize a large number of people, whether it’s dozens or even thousands, so that when they’re on their own and making their own decisions, they can be empowered to make those decisions, because they know they’re aligned with the rest of the company.

I actually see that as a gift. People genuinely hate being micromanaged. They hate being second-guessed. If you, as a leader, can provide an environment where you can simply explain what your business is about, and give them a handful of measures to know how to evaluate things, all of a sudden hundreds of conversations will happen without you, with people reaching decisions that are better than the decisions that you would have come up with, because you don’t have their data and their expertise. I think that’s a great gift that leaders give their companies and organizations.

Everyone knows at Wealthfront that there are just a couple things that we have to do to make this business successful. I’ve got it down to two things — we have to acquire clients, and we have to delight them. And there are four metrics that the whole company tracks. They’re up on the wall, literally on a giant screen. And so you hear people debating different ideas, and they’ll say: “Well, wait, is this an idea to do A or is it to do B? How do we measure that?”

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