What Gets Measured Gets Managed
Want to get your sales numbers (or online reviews, or any other metric) cranking? Want to improve your company's performance? Then keep an eye on your numbers. The simple act of focusing on your company’s key performance indicators (KPIs) will create an improvement in those numbers. This is called the Hawthorne Effect.
The Hawthorne Effect is a well-known phenomenon that will change everything about how you manage your business. The effect was first identified in a series of experiments conducted in the 1920s and 1930s at the Western Electric Company's Hawthorne Works in Cicero, Illinois. These experiments sought to understand the relationship between work conditions and worker productivity.
Researchers were brought into Western Electric's Hawthorne Works wiring harness factory to determine whether additional lighting improved production. It turns out it did. So they kept the additional lights. But when the researchers left, production soon dropped back down to match the pre-lighting levels. It turns out that it was the presence of the researchers and their production tracking that created the increase in output, not the lighting. Thus was born the storied Hawthorne Effect.
The Hawthorne Effect refers to first, the phenomenon in which people improve their performance when they are aware that they are being observed, and next, the principle that collecting and focusing on key performance indicators (KPIs) almost axiomatically produces an improvement in said KPIs.
This effect is not limited to the workplace but can be seen in a wide range of situations. For example, students tend to perform better on tests when they know that their performance will be evaluated. Similarly, athletes tend to perform better when they know that they are being watched by their coach or teammates. People who weigh themselves every day are more successful at losing weight than people who weigh in only weekly. And so on.
What does the Hawthorne Effect mean for my business?
In the business context, the Hawthorne Effect has been shown to have a powerful impact on productivity and performance. The effect suggests that by simply focusing on certain aspects of business operations, companies can improve their performance in those areas. This is because employees become aware of the company's focus on these areas, and they are motivated to perform better in order to meet the company's expectations.
For example, let's say that a company wants to improve its customer service. By simply tracking customer service metrics such as response times and satisfaction rates, the company can create a culture of customer service excellence. Employees will become aware of the company's focus on customer service, and they will be motivated to perform better in this area. This can lead to improvements in customer satisfaction, which can in turn lead to increased sales and profits.
Similarly, if a company wants to improve its sales, it can track sales metrics such as conversion rates and revenue per customer. By focusing on these metrics, the company can create a culture of sales excellence. Salespeople will become aware of the company's focus on sales, and they will be motivated to perform better in this area. This can lead to improvements in sales performance, which can in turn lead to increased revenue and profits.
The Hawthorne Effect can also be seen in the realm of employee motivation. By simply tracking employee engagement and satisfaction, companies can create a culture of employee empowerment and motivation. When employees are aware that their engagement and satisfaction are being tracked, they are more likely to feel valued and motivated to perform at their best. This can lead to improvements in employee performance and retention, which can in turn lead to increased productivity and profitability.
The Hawthorne Effect is a powerful tool for business leaders seeking to improve their operations. By focusing on the right metrics and creating a culture of excellence, companies can motivate their employees and drive performance improvements across their organizations. Whether you are a small business owner or the CEO of a Fortune 500 company, the Hawthorne Effect offers valuable insights into how you can improve your business operations and drive long-term success.
Let’s take a look at how you can put the Hawthorne Effect to work for your business.
As a business owner, you've got to know your numbers (KPIs).
The Hawthorne Effect teaches us that focusing on specific metrics can improve those metrics over time. As a business owner, it's crucial that you identify and track KPIs for your company. These KPIs should align with your overall business goals and help you measure progress toward achieving them.
For example, if your goal is to increase revenue, your KPIs might include monthly sales figures, average order value, and customer retention rate. By tracking these numbers and analyzing trends over time, you can identify areas where you need to improve and make data-driven decisions to drive growth.
Knowing your numbers also allows you to quickly identify issues and address them before they become bigger problems. By regularly monitoring your KPIs, you can spot trends and patterns that may signal issues with your business model, products or services, or team performance.
You should meet regularly with your team to go over your numbers.
Once you have identified your KPIs, it's important to share them with your team and work together to achieve them. Regularly meeting with your team to review progress and discuss strategies for improvement can help create a culture of accountability and collaboration.
During these meetings, it's important to focus on the data and use it to inform decision-making. Avoid getting caught up in anecdotal evidence or personal opinions, and instead rely on the numbers to guide your conversations.
In addition to helping you achieve your business goals, regular meetings focused on KPIs can also boost employee morale and engagement. When employees understand how their work contributes to the overall success of the company, they are more likely to feel invested in their roles and motivated to perform at a high level.
Your key people will perform better if you manage them by their numbers, not by anecdotes.
As a business owner, it's important to hold your team accountable for meeting performance targets. However, it's equally important to manage your team by their numbers, not by anecdotes or subjective measures.
When you manage your team by their numbers, you provide clear expectations and a roadmap for success. Your team members know what they need to achieve, and they can track their progress over time. This approach can help create a sense of ownership and empowerment among your employees, as they have a clear understanding of what success looks like and how they can contribute to it.
On the other hand, management by anecdotes or subjective measures can create confusion and frustration among team members. When expectations are unclear or based on personal opinions rather than data, it's difficult for employees to understand how to perform at a high level. This approach can also lead to a lack of trust and respect between employees and management.
By managing your team by their numbers, you create a culture of accountability and transparency. Your team members understand what is expected of them and how they will be evaluated, and they have the tools and resources necessary to succeed.
The Hawthorne Effect teaches us that focusing on specific metrics can improve those metrics over time. As a business owner, it's crucial to identify and track KPIs for your company, meet regularly with your team to go over those numbers and manage your team by their numbers, not by anecdotes.
By following these principles, you can create a culture of accountability, collaboration, and transparency that can drive growth and success for your business. Remember, what gets measured gets managed, so make sure you are measuring the right things and using that data to guide your decision-making.
So how can Simple.biz help put the Hawthorne Effect to good use for your business?
It starts with knowing your cost-per-lead. Our PPC customers get a monthly report showing exactly what they spent for each lead and phone call our campaigns produce. This tells them whether to spend less or more the following month. It also compels them to make sure they convert a profitable percentage of these leads and phone calls into paying customers. "Breaking even" is a sorry goal in online marketing; a Google Ads campaign should multiply your money. Reach out to your project manager and ask them about how we can use Google Ads to grow your business.