Measuring the Unmeasurable

I don’t agree with the common business dictum, “If you can’t count it, it doesn’t count.” There are many important things in business that can’t be directly measured.

But don’t confuse “it can’t be measured” with “we can’t know if it worked.” You don’t always need an Excel spreadsheet to tell you that the things you do for your business are effective.

Believe in your strategy

Let’s say that you run a restaurant, and you receive a number of comments from customers that your staff is rude and that your restaurant’s atmosphere is unwelcoming. You decide to instruct your hosts and hostesses to greet each customer with a smile and warm eye contact. Do you need to be able to measure the direct effect of these greetings in order to know if they are a good idea? Of course not. You know that they are in line with your strategy.

Now, let’s move from this simple, straightforward example to something with higher stakes. Imagine you run a chain of luxury hotels, and you are trying to decide whether to invest in creating more comfortable room environments or to invest in upgrading the common areas in your properties. After much market research and strategy development you decide to invest in your rooms. Once you calculate the appropriate level of investment for upgrading each room, should you only buy mattresses if you can determine the exact return on investment for purchasing them? Of course not. You’ll buy the mattresses because they conform to your strategy of creating comfortable rooms for your guests. (And, of course, if you try to calculate the return on investment for each mattress you’ll be paralyzed, since this is an impossible calculation.)

Contribution vs. Attribution

In a conversation about philanthropic return on investment, non-profit consultant Wendy Rosov described a profound distinction to me. Wendy explained that there are certain results you can attribute to actions, such as when a non-profit executive invites a reluctant donor to a lunch meeting and walks away with a large donation. In this case you can safely attribute a substantial portion of the credit for the donation directly to the executive’s work. But what about the 10-minute video the non-profit shows to attendees at its annual dinner? Can you attribute the 14% increase in donations received at the dinner directly to the video? No, but it’s appropriate to assume, with a high degree of confidence, that the video contributed to the positive results.

I write this fully aware that humans have a natural tendency to infer cause and effect relationships where they don’t exist. In other words, it’s built into our brains to assume that the video caused people to donate, or, on the contrary, to assume the video was poorly produced if people didn’t donate. Seeing causal relationships where they don’t exist is as natural for humans as is sleeping and dreaming.

This is why we need strategies to run our businesses; without strategy our tendency to infer cause and effect can run rampant, leading us to focus superstitiously on the color of napkins for the charity dinner instead of focusing on the actual message in the video.

Real world example

Today a client and I were discussing how to measure the effectiveness of a public relations program. As anyone who has worked with PR knows, it is often difficult to connect your publicity efforts directly to business results. But that doesn’t mean you shouldn’t do any PR. It means that your PR strategies should be driven by your business strategies, and that you should measure the effectiveness of your PR people based on how well their work product supports your business strategies. So, we summarized the business strategies that the PR program should support, and then defined the key PR goals that correlate with that support. As the program moves forward, we will evaluate the PR program on how well it reaches those goals, even if it is difficult to attribute sales directly to the PR program.

You don’t need to focus only on actions that can be measured. Instead, be clear about your strategies, and measure the effectiveness of everything you do by how well your actions support these strategies.

Steve Yastrow

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Posted in Latent Profit, Loyalty, Newsletters, Observations
2 comments on “Measuring the Unmeasurable
  1. Peter Adams says:

    Steve, this is a great post-thank you.
    A great resource on this topic is the book “How to Measure Anything: Finding the Value of Intangibles in Business.” by Douglas W. Hubbard This book demystifies a lot of the issues surrounding measurement that typically causes people to just throw up their hands in despair by clarifying how understanding the role of uncertainty in measurement is critical for success. Many people see uncertainty as a binary issue, but in measuring intangibles, 80% certainty is often more than enough to make smart business decisions.

    Also, you had a post a few years ago on a similar topic and we discussed how it was difficult to measure retail traffic with anything but a clipboard and a bored intern. Since then, I’ve discovered an interesting company, Flonomics.com that uses facial recognition to determine retail demographics, wayfinding and behavior analysis, gender recognition, etc. It’s pretty cool!

  2. Mark JF says:

    I always wonder how much an outcome is really one person’s work and how much is, if not a team effort, at least building on the work of others?

    It’s a very American / European outlook that gives individual bonuses when Asian companies often rely more on collective payments.

    Even the example of the wavering donor is ambiguous. How much was due to the fact that the person was to some extent pre-disposed to making a donation – which isn’t necessarily due to our case study executive? So taking a wavering donor to lunch and him then becoming an actual donor isn’t a black and white case of “winning the sale?” It seems to me to be simply the last act in a process and I’m not at all convinced the executive concerned should take the credit for the entire process. There’s a strong case to say he made a great contribution but it really can’t be attributed to him.

    Of course, if he had responsibility for the entire process then he’s achieved a positive outcome so it can be attributed to him. But even then, in environments where teams contribute to the final outcome, attribution vs. contribution is a much more nuanced issue.

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