E-commerce and Daily Thinking – A Thinkibility Nibble

In our blog post Daily Thinking – Discovering Patterns we showed some alarming daily thinking habits, like assuming that there is a linear, unambiguously relation between a cause and an effect. For example, it is assumed that increasing e-commerce will reduce traffic. People will less … Continue reading

Key Performance (mis) Indicators

kpi

Key Performance Indicators are meant to keep an organisation on track. By measuring the performance over time, you are able to look at deviations and to take measures. As Wikipedia defines it: A  key performance indicator (KPI) is a type of performance measurement. An organization may use KPIs to evaluate its success, or to evaluate the success of a particular activity in which it is engaged. Sometimes success is defined in terms of making progress toward strategic goals, but often success is simply the repeated, periodic achievement of some level of operational goal (e.g. zero defects, 10/10 customer satisfaction, etc.).

The concept behind Key Performance Indicators is to build a feedback loop between input and output. Its working principle does not differ from a thermostat, which senses the temperature of a system so that the system’s temperature is maintained near a desired set-point.

500px-Feedback_loop_with_descriptions_svg

In order to get not market driven organisations more efficient the adage “The numbers tell the tale”has become fashion among governments, institutions and not-for-profit companies. There are several metrics or key performance indicators.

However, Key Performance Indicators can also lead to perverse incentives and unintended consequences as a result of employees working to the specific measurements at the expense of the actual quality or value of their work. In the social sciencesunintended consequences (sometimes unanticipated consequences or unforeseen consequences) are outcomes that are not the ones intended by a purposeful action. Perverse incentives are a type of unintended consequence. A perverse incentive is an incentive that has an unintended and undesirable result which is contrary to the interests of the incentive makers.

There are a lot of examples of bad designed Key Performance Indicators. We came across, but not exhaustive:

  • Police officers get a predetermined quota of fines to give out. The unintended effect of this KPI that the police organisation will be focused on easy to obtain files, f.i. traffic fines instead of fighting serious crime;
  • An organisation involved in handling objections has a KPI for the amount of rejected complaints. Imagine how employees will approach complaints. . .
  • It is generally accepted that the progress of students is evaluated by tests. However, student tests assess only a small part of needed knowledge, skills and attitude of students. Also, often the purpose of the test, timely warning of learning difficulties and study delays, dilutes to “a (missed) ticket to the next hurdle”;
  • An agency of child protection is responsible for placing abused or emotional neglected children in foster parents and child care institutions. It is very logic to design a KPI: like the number of placed children. If this performance is coupled to the financing of the agency, it can easily lead  to placing children out of their home, against sound indications that there is no need for or against parents objections;
  • It is complete reasonable to expect higher efficiency and experience of surgeons as a hospital performs at least 30 knee surgery or angioplasty a year. However, such a KPI can lead to more instead of less knee surgery and angioplasty, an example of a perverse effect contrary to what was originally intended (an intended solution makes a problem worse);
  •  The selling of mortgages as an end in itself, even to people who could no pay the interest, led to the bank crisis in 2008. Another example of a negative, unexpected detriment occurring in addition to the desired effect of the policy to motivate sellers to do better their best.
  • To increase the efficiency of university studies universities are judged on the number of successful students per year. It is now tempting to reduce the requirements for passing exams.
  • In order to increase the efficiency of General Practitioners many assurance companies allow for not more than ten minutes consults by patients. This KPI leads to far more referrals to medical specialists because GP’s have not much time to carefully investigate the medical complaints. This is an example of a counterproductive KPI: it is more of an “obstacle” than a help in the achieving of a productive project or an objective;
  • Crews of warships run annual series of nautical and operational exercises. Through a complex multi-factor analysis, a KPI is derived: Operational Employ-ability. Members of Parliaments asked questions when the KPI decreased to 10%, as a warship was actually deployed in a crisis;
  • Notorious are budgets: the setting of expenditure levels for each of an organization’s functions. It expresses strategic plans of business units, organizations, activities or events in measurable terms. However, such budget tends to be exhausted at the end of the year, because organizational units realise that they will be shortened in budget for next year, because last year they needed not the full budget. So, as an example, in many towns you can observe that every five to ten years the same streets and squares are completely overhauled without any need but in order to use the full budget.

Many Key Performance Indicators have unintended effects. They function as rules for behavior. Key performance Indicators are designed to notice need for adjustments of the course of an organisation. However, more often than not, they are invitations to cheat, by employees but equally by companies and institutions,  especially when financial consequences are attached to the KPI.

Whenever designing or encountering a Key Performance Indication, be warned!

 

unintended consequences

For more examples of perverse incentives, see here. For examples of unintended consequences see here.

To built up your Thinkibility skills, imagine your are the director of a hospice. You have set a thinking task: how to improve the occupancy (KPI) of the hospice. Then check your answers with How Dying Became A Multibillion-Dollar Industry.

 

 

Daily Thinking – Discovering Patterns

ID-10087466

Daily Thinking – the thinking you do quiet effortless during the day – do have some features. In this blog we will point out some of the characteristics of Daily Thinking that differs from scientific or deliberate thinking. However, that does not mean in our opinion that Daily Thinking habits does not affect or have affected academic thinking, as for instance in economics, psychology, biology and medicine

 Daily Thinking takes place, as deliberate thinking does, in a logic bubble

The most dominant feature of Daily Thinking is that it happens in a logic bubble, and that no conscious effort is made to escape from that. The logic bubble – or the standard thinking pattern – is the thinking space that defines the width and depth of the thinking, its time frame, what is Left Out and what biases color the construction of reality. Daily Thinking is fierce controlled by social influences and the Main Stream Media.

logic bubble

Neglect of the importance of focus

 In Daily Thinking thinking happens automatically without any reflection on what exactly the subject is and what to obtain with the thinking. There is an absence of meta thinking. As a result Daily Thinking is reactive.

spotlight

There is also a tendency to focus on immediate problems, neglecting long-term challenges. Also, we habitually prefer solutions that focus on fighting results (“putting out the fire”) instead of preventing and detecting the cause (fire detectors and prevention plans). Mostly, rules follow from crises, instead of the other way around. If thinking about risks we tend to think that the worst thing that can happen has already been in the past, not in the future.

If there is an effect, then it has a cause

 In Daily Thinking we suppose  – without further thinking – that an effect has a cause, which is not always so. Or the effect could be merely coincidental with the cause, or the effect could be produced by a complete other cause or it could happen that two causes produce together an effect.

relation

There is a linear relation between a cause and an effect

We are inclined to assume that the relation between a cause and an effect is a linear one, but it could be exponential, or a flattening relation (the influence of the cause decreases in the course of time..

linear non linear

The relation between a cause and an effect could also been shaped by a bell curve, also called a life cycle curve.

bell

 In close relation with this phenomenon is that when thinking about effects, mostly only the nearby-in-time effect is taken into account. Effects on a longer time scale are neglected.

We tend to see only purposeful effects, and not unintended side effects of causes. Also, we assume that circumstances will not change during an effect is evolving under influence of a cause.

Logic is logic, isn’t it?

Then it is assumed that the logic any person uses is the same for all humans. In other words: Chinese, Arabs, Jewish and Americans take the same thinking paths to get to a conclusion. It is supposed to be hard wired in the brain.

However, we know that thinking is narrowly related to language. And regarding the fact that Chinese, Arabs, Jewish and Americans differ in language, in the construction of sentences, in fonts and in the direction of reading/writing we might challenge that.

writing

 We suppose that those properties of language involve other brain areas and as such influences the “logic” of the thinking, although the same conclusion has been reached.

logic different

Mechanistic reasoning

 However, the most remarkable feature of Daily Thinking is it mechanic nature. In Daily Thinking seldom is taken into account that there might be a feedback effect. Or in other words: a cause produces an effect, what will in turn effect the cause.

netwerk

Our Daily Thinking habits are far remote from thinking in system dynamics, complex networks or system theory. However these thinking strategies originates back to 1950-1960, we still continue thinking “Newtonian” in our daily practice.

Photo “Student Thinking With Textbook” by imagerymajestic

Thinking Loops

What was I thinking?

Becoming conscious of the consequences of one’s actions is an important part of the thinking process. Frederic the Great said: “What good is experience if you do not reflect?” We should strive towards being prepared to take a step back and view our thinking from a distance. In a similar way, a manager or leader needs to view the business from a distance.

This will help us to get a bigger picture and to prevent us from being wrapped up in details. But how do you develop skills which help you to reflect, step back and monitor your own thinking?

Becoming self-aware and managing our thinking, rather than reacting and acting is a way to gain a view and perspective that would not have been possible if we have never started to reflect upon our thinking. If you attend a meeting, you are involved in the learning and discussions that takes place. But if you try to consider the actual meeting from above the content and activity, you gain other insights such as ideas regarding how you reacted to opportunities that were presented. Your focus is split like light passing through a prism on different aspects – this gives you insight into different points and views and most importantly your own thinking.

A common problem is speeding and several different solutions have been tested to get people to slow down. A successful approach has been to use dynamic speed displays or driver feedback signs where digital readout announces “Your Speed.” These signs do not tell the driver anything new – there is a speedometer in every car and all you need to do is to glance at the dashboard.  There is no speeding ticket linked to the “Your Speed” signs, yet the signs have proved to be an effective way to get drivers to slow down. The signs have proved to  reduce speed on average by 10 percent and the effect lasts for several kilometres. The “Your Speed” signs are interesting from a thinking perspective and they start a feedback loop. By providing us with information about our actions in real time, more or less, it gives us a chance to change our behaviours.

  • Action, information, reaction.

A deceptively simple way to alter our behaviour.

Feedback Loops

Feedback loops are effective when the information that we receive is presented in a context that is emotionally rich, there also needs to be a consequence linked to the information. In the case with the “Your Speed” signs, the consequences of speeding are clear. Athletes often use feedback loops in their training plans. The tool is also common in self-improvement programs and it is used as a management strategy.

The problem with feedback loops has been that it is difficult to get reliable data and information. Today various methods are used to provide as with data so that we can change our behaviour. In some case, these methods can be of a Big Brother character when a device is designed to track people’s movements and actions. Yet the real power of feedback loops is to learn to use them yourself. A real feedback loop gives us control and connection to the thinking process. They can create opportunities and help to motivate and empower us. We can monitor and control our own behaviours and replace them with better and more suitable strategies and actions.

Greenroad is a device that uses GPS and accelerometers to help drivers detect and correct risky or fuel- inefficient driving habits in real time. Zeo makes a headband that measures brainwaves while you are sleeping and Belkin makes a plug-in device measures the power consumption of appliances. All these devices provide us with data and information that can be used to explore weakness and positive aspects with various aspects of our behaviours. In a similar way, we can make sure that we reflect upon our thinking and use the available information to consider the quality of our thinking process.

Photo: “Composition Abstract” by Danilo Rizzuti