The Cobra Effect: How to avoid unintended consequences when setting goals
As a leader, setting and communicating goals for your team is crucial for building focus and moving your business forward. The communication part is crucial. If you communicate your goals as tasks — i.e. “increase product demos by 20%” — you run the risk of those goals being misinterpreted, and potentially gamed.
Keeping with the product demo example — with their new goal in mind, your sales team may conduct demos with anyone despite their likelihood to convert. The end result is wasted company resources without increasing sales. We call this The Cobra Effect — a phenomenon that earned its name from a historic legend.
It’s believed that in the 1800s, the British Empire wanted to reduce deaths caused by Cobra bites in India. Thinking the best solution was to reduce the number of Cobras, they offered a financial incentive for every Cobra skin brought to them. People saw an opportunity to earn a quick buck and started farming cobras. When the government caught on and removed the incentive, Cobra farmers released their snakes increasing the overall cobra population.
You can see how this was problematic.
Setting health metrics that move the company forward
Using health metrics to measure progress against your goals will ensure your team engages in activities that will benefit the business as a whole. But first, you have to explain the bigger picture for each departmental goal.
You’ve likely heard Simon Sinek’s TED Talk on why leaders should start with ‘why’. By communicating the overarching goal for your business, you’re more likely to align your team around a common mission. But you can’t communicate it only once. Each goal needs to be tied to that mission. That’s where health metrics come in.
Health metrics balance the unintended consequences or gaming of goals. When setting goals or objectives, identify which metric or two need to be maintained to ensure the goal is achieved in a healthy way for the business. To illustrate this, let’s take a look at a couple of examples…
- Customer support: If you want Customer Support to increase first response time, there’s a potential unintended consequences that they could craft short unhelpful responses to reduce the first response time, leaving customers dissatisfied. Measuring customer satisfaction (CSAT) score as a health metric ensures your team’s responses will be truly helpful to your customer and their experience.
- Marketing: If you want your marketing team to increase email signups with the intention to build a relationship that could lead to a sale, an aggressive pop-up when people land on the site could seem like a good solution to them. However, as a site visitor this could be annoying and lead to visitors bouncing. It’s important to communicate that you’re trying to build trust with prospects. In this situation, measure health metrics like return visits and bounce rate to ensure the email list is grown in an effective way for the long-term.
- Sales: Let’s say you sell CRM software to enterprise companies and you instruct your sales team to increase sales by 20% by the end of the year. Their immediate instinct might be to pitch your product in whatever way they think will sell it to the prospect, whether or not it’s actually a solution to a company’s problem. The result is a high-paying customer churning (cancelling) once they realize your product isn’t a fit. The health metrics would be churn rate and/or lifetime value.
Not sure which metrics will best measure the health of your business? Here’s a library of examples of key performance indicators (KPIs) for a variety of different departments including support, marketing, sales, and more!
Avoid encouraging snake breeders in your business by setting health metrics for your goals. They’ll help focus your team on the ultimate mission and the best experience for your customers.