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When you can measure what you are speaking about, and express it in numbers, you know something about it. But when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind.

Until customers of measures and owners of measures get together, what gets measured doesn't necessarily get managed...What gets rewarded gets managed.

There are two - and only two - kinds of variables in a system dynamics model: levels (or accumulations) and rates (or actions). Once you believe that there are only two kinds of concepts in a system, everything you look at has to be one or the other.

The existence of only two kinds of variables - levels and rates - is true of all systems. Levels - that is, things like number of employees, reputation of the firm, degree of trust within a group, and quality of products - state the condition to which a system has arrived at any point in time. They are gradually built up or degraded over time by streams of actions. Rates, by contrast, are controlled by the system policies that describe how decisions result from system levels.

People don't do what you expect but what you inspect.

Not everything that can be counted counts, and not everything that counts can be counted.

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In a knowledge economy, am I measured by ideas per minute? That's silly. It makes perfect sense to measure a field worker in bushels per hour, but in the emerging network economy, the measurement problem has become profound. We are not driving our economy very intelligently on the basis of a real-world set of measures. They're way off the mark. People are saying, look, we're in an era of enormous uncertainty because we can't even measure what's going on.

Metrics can be a dangerous thing. Everyone is good at attaining a metric goal that's given to them. If we drove a bad behavior to reach that number, are the metrics that we're measuring correct?

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Performance is dependent on ability, but the reverse does not hold true. Because an individual or group has the ability to do something does not necessarily mean they will do it. When competencies focus on abilities, values, or beliefs, they begin to stray from what is observable, understandable and measurable. And the link to performance becomes highly tenuous.

Marketing has a long history of paying attention to measurement and the creation of metrics, especially when it comes to claiming success, but little has been done to standardize the way that marketing defines success. The problem is that most of the metrics used to assess the outcomes of marketing activities are tactical and not directly relevant to the overall financial performance of the firm. Furthermore, while the financial results of many firms depend on marketing, the link between traditional marketing metrics and the financial performance of the firm is seldom explicit.

Every company has metrics that track performance. The key question is whether these metrics really provide visibility to performance as viewed by the customer.

We think we know what innovation means, but to study it, we use fiscal measures that don't actually tell you much about innovation or invention. Consider patents. What are patents? They're legal documents. They're not in themselves a measure of inventiveness. Research and development spending is a measure of how much you spend on research and development. It doesn't tell you anything about outputs.

Most organizations are good at collecting internally focused data, but few systematically provide insight about a company's external environment. For example, only 21 percent regularly track how their competitors are performing. Business is not an us-vs.-us exercise, yet management reports rarely touch on the world outside.

The IEEE standard glossary of software engineering provides the following definitions of measures and metrics. A measure is a standard, unit, or result of measurement. A metric is a quantitative measure of the degree to which a system, entity, or process possesses a given attribute. Without a trend to follow or an expected value to compare against, a measure gives little or no information. It especially does not provide enough information to make meaningful decisions. A metric is a comparison of two or more measures. Therefore, a measure by itself doesn't provide much understanding unless it is compared with another value of the measure i.e., it becomes a metric.

Reality is what we pay attention to, but measurement requires classification and classification requires abstraction. By paying attention to abstractions, we grasp the generic, but only at the expense of understanding the particular. This means that we lose the smell, feel, and touch of what’s going on right here, right now. And with that loss of the sensual, we lose our ability to respond quickly to events as they happen.

A CEO... should be tracking and managing by the numbers—the nonfinancial numbers. By the time financial results turn downward, it is far too late to act. Financial numbers measure the past and lead to "rearview mirror management."

The numbers that predict the future are the Four Rs-employee retention and referrals, returns to labor (productivity), and relationships with customers (exhibited by loyalty and ownership behaviors such as referrals)—as well as measures that track innovation. Once these numbers start to turn downward, it's time to reexamine organization values and behaviors, hiring practices, and other elements of the culture cycle.