Topic: Organizational Design


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How to Avoid Vanity Metrics: Getting Under the Hood of Business

VanityMetrics

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Mental Models Used: ,

Most organizations have analysts reviewing financial and operational information on a regular basis – the objective being to gain some kind of meaning from information, and to capture that meaning with a metric or metrics.  Analysts are generally providing descriptive information (telling us how we’ve done) or predictive information (telling us how we suspect we will do).

But many commonly used metrics don’t provide any actionable insight.  In other words, they’re just for show.  These are called vanity metrics.  Other times metrics don’t properly measure the underlying data, potentially resulting in what only appears to be a valid metric on the surface.  This is called an Isomorphism.

A metric is only as valuable as its ability to decipher underlying data.  When metrics are properly developed and implemented, they become meaningful because they capture the drivers that lead to the behaviors and decisions desired.

A great resource for understanding metrics is the book Lean Analytics.  Although geared to start-ups, the logic used is widely applicable to organizations large and small.  You will find much of this logic in the following paragraphs.  Read More »

How to Build Relationships and Deliver Happiness: The Story of Zappos

Zappos

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In 1999, Tony Hsieh made an investment in a online shoe shop that was then called shoesite.com.  It was renamed shortly thereafter, and today we know it as zappos.com.  The first year wasn’t very pretty, but in year two Zappos started to show some traction.  It ended the year 2000 with $1.6 million in gross sales.  Gross sales continued to climb, and by 2008, they had exceeded $1 billion.  This is an absurd level of sales growth, yet the fuel for this growth was amazingly straightforward.  Read More »

Giving Information Meaning: The Rise of Business Analytics

BAnalytics

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Business Analytics is the scientific process of transforming data into insight for making better decisions.  Data doesn’t always cooperate with this process, as it is often massive and messy.  But no matter what condition data is in, we use business analytics to make decisions with it.

In order to make these decisions, we have to understand the ultimate value that various combinations of this data can present.  So, we measure it.  That is, we measure what data carries: information.  Measurement is what informs uncertain decisions, and almost all decisions are made under uncertainty.  Read More »

Is There an Ideal Team Size?

Teamwork

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People are always looking for ways to get things done better or faster.  Depending on the task, that can often mean putting together teams.  Of course, a team isn’t always the best way to accomplish something.  I mean, there’s obviously no need to create a team to do something an individual could do as well or better.  However, if a team makes sense, what is the ideal team size?

Unfortunately, there’s no consensus on what the ideal team size should be.  This is probably because there just simply isn’t one.  And that, of course, is fine.  But everyone seems to have an opinion on what’s best.

Steve Jobs liked to keep his teams to no more than 100 people so that he could remember names; Peter Drucker said teams work best, as a rule, if they have three or four members (and should normally not exceed five or six); Google likes to limit teams to a max of six people; 37Signals thinks three people is the optimal team size for a product release; Reid Hoffman (of LinkedIn) would likely refer to Dunbar’s Number to substantiate groups of up to 150.  And the list could go on…  Does this mean that teams are effective at any size between three and 150 members?  It’s more likely that this simply means teambuilding is a situational exercise, and nothing more.  Read More »

How Great Leadership is Created: The Building Blocks of a Super Company

City13

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People don’t want to be managed, but they are absolutely willing to be led.  How do I know this?  There is a cognitive bias that we all suffer from called the Authority-Misinfluence Tendency.  Charlie Munger summarizes it as follows: “Man was born mostly to follow leaders, with only a few people doing the leading.”  It’s just the way we are.

But just because people are willing to be led, doesn’t mean that any type of leadership will be effective.  Read More »