The symptom
A specific symptom of growth-driven metric distortion is the local win that produces no corresponding organisational gain. A team, department or function reports a genuine, verifiable improvement in its own measure, and the improvement is real by every standard applied to it. At the level the organisation actually cares about, nothing has moved. This is disorienting in a way that a straightforward failed initiative is not, because there is no obvious error to point to — the local number genuinely improved, and yet the thing that number was supposed to be a proxy for did not.
The instinctive read is that the gain must be an accounting artefact — a redefinition, a boundary shifted, a number that looks better only because of how it is now being calculated. That is sometimes exactly right. It is also, on its own, an incomplete diagnosis, because the more interesting and more common version of this symptom in growing organisations is not miscalculation. It is genuine local optimisation that simply has nowhere organisationally coherent to land.
Why it happens
Larry Greiner’s research on organisational growth, first published in Harvard Business Review and reissued as an HBR Classic, describes growth as a series of phases, each resolved by a practice that becomes, at the next phase, a constraint in its own right. As organisations grow, coordination that once happened informally — because everyone sat near each other and simply knew what everyone else was doing — has to be replaced by formal structure: separate teams, separate budgets, separate reporting lines. That formal structure is usually necessary and usually an improvement on what came before it. It also, as an almost unavoidable side effect, creates boundaries across which cost, effort and outcome can move without any single measure capturing the movement.
This is the specific mechanism behind cost or effort that appears to disappear locally while persisting organisationally. When a department stops performing an activity, that activity does not necessarily stop happening — it may simply relocate across a boundary the department’s own measure does not see past. The department’s number improves honestly. The organisation’s total does not, because the activity, or its cost, has moved rather than vanished, and the measurement structure that would reveal the movement — a view spanning both sides of the boundary — is exactly the kind of thing that informal, pre-growth coordination used to provide for free and that formal, post-growth structure does not automatically replace.
What leaders typically conclude, on first seeing a local gain with no organisational counterpart, is that the local report must be wrong or misleading in some way. What the evidence more often suggests is nothing so clean: the picture is genuinely mixed, part transfer and part real reduction, and untangling which part is which requires looking specifically at what happened on the other side of the boundary — not simply distrusting the number that improved.
What it looks like in practice
Consider an organisation where a department successfully reduces its own recorded costs by fourteen per cent, a genuine achievement reflecting real changes in how the department operates. Organisational costs overall, measured the same way over the same period, are essentially unchanged. The first and most tempting explanation is that offsetting increases have appeared elsewhere, unrelated to the department’s own work.
A closer examination tells a more specific story. Two of the activities the department stopped performing are now, in fact, being performed elsewhere in the organisation — quietly absorbed by an adjacent team that has not yet updated its own budget or resourcing to reflect the additional load. The third activity appears to have genuinely stopped altogether, and nobody has yet identified any downstream consequence of its absence, which could mean the activity was unnecessary all along, or could mean the consequence simply has not surfaced yet. The picture stays mixed rather than resolving cleanly in either direction: part of the department’s saving is a real transfer of cost to somewhere else in the organisation, and part may be a genuine elimination of work that was not adding value. Which portion is which has not, at the point of reporting the fourteen per cent figure, actually been established.
This ambiguity is a common and underappreciated feature of growth-related metric distortion: it frequently does not resolve into a clean verdict of “real” or “fake.” It resolves, if it resolves at all, only when someone deliberately looks across the boundary the original measure could not see past — checking not just whether the department’s number improved, but what happened, organisation-wide, to the work the department used to do.
A related manifestation shows up not in costs but in speed and quality metrics tracked at team level. A team that appears to have become notably faster after a reorganisation may, on closer inspection, have simply redefined the boundary of what counts as “its” work — handing off a slower, more complex portion of the process to an adjacent team whose own metrics do not yet reflect the additional load. The originating team’s metric is accurate. The organisation’s overall speed, measured end to end rather than department by department, may be entirely unchanged, or may even have worsened once the additional coordination the handoff requires is accounted for. As with cost, the distortion here is not fabrication — it is a genuine local improvement that a boundary drawn by organisational structure, rather than by the actual flow of the work, fails to net out correctly.
For how this pattern presents in other kinds of organisation, see other sectors.
Questions worth considering
- How would this organisation distinguish a genuine cost saving from a cost that has simply relocated across a reporting boundary?
- Does anyone check, some months after a local win is reported, whether the activity that generated it has actually disappeared or has reappeared somewhere else?
- Which of the organisation’s current departmental boundaries would make a cost or activity invisible if it moved across them?
More on this topic: Performance.
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