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Outcomes Versus Outputs: A Performance Trap

by Dave on March 5, 2012

In the core of Yupana’s consulting practice is the search for inconsistencies in one’s business. A profound gap that often occurs is when the lines between “outcomes” and “outputs” blur passed a point of no return.

The purpose of this entry is to look at 3 things:

  1. What is an outcome?
  2. What is an output?
  3. What happens if they mix?

Outcomes

First, an outcome. These are particularly relevant for not-for-profits, but are of increasing importance in for-profit organizations as well. An outcome is that thing your organization does that makes an impact for clients or customers. Outcomes don’t necessarily need to be intended, but they inevitably happen.

Let’s look at a few examples.

  1. An Auto Mechanic. One outcome for an auto mechanic is that safer, better-functioning cars are on the roads. Is this an intended outcome? Probably not for most mechanics who understand their business as fixing cars, but it’s an outcome nonetheless.
  2. Drill Manufacturer. This is a classic example used widely in literature, but it applies quite well. The outcome for drill manufacturers are safely-made, efficiently-drilled holes. Again, maybe not what comes to mind initially.
  3. Food Bank. The food bank reduces hunger in the community as its core outcome. This is intended and most likely part of the food bank’s mission or reason for existing.

You can see from the examples that not-for-profit organizations may have greater ties to its outcomes, but for-profit organizations aren’t running short on outcomes just because they may be unintended.

Outputs

Outputs are the thing or service that an organization actually produces and puts out to the market. Using the same examples as above, we can list some outputs.

  1. The mechanic’s output is fixed cars.
  2. The drill manufacturer’s primary output is drills.
  3. The food bank’s output is free or low-cost food.

The output is usually pretty straight-forward though many not-for-profits may require a bit more thought than, say, a food bank in order to determine them because they are often so closely tied to outcomes.

Mixing Outcomes and Outputs

Now that these are defined, we’re going to look at what happens if they get mixed up or mixed together or even if one of these is forgotten about. The outcome is really the organization’s reason for being: Regardless of outputs, it is an organization’s ability to deliver an effective outcome that makes it relevant. In fact, outputs can change over time or be innovated somehow, but the fact of the matter is that cars need to run well and be safe, people need (carefully placed) holes in walls and the hungry need to be fed.

The outcome, then, is tied very closely to what the market is saying it needs. The output is the thing that addresses a certain need, but it may change over time or have substitutes from competitors. Issues arise when an organization’s management team comes to believe that the output is the outcome.

If you are in the drill-making business and you believe that your job is to keep making newer, better drills, you’ll be catching up from a long ways back when the industry starts shipping devices that emit low-heat lasers that punch the perfect hole every time for half the price. That’s a stretch, but ask someone from Blockbuster Video how treating VHS and DVD rentals as outcomes worked out for them. They missed the opportunity to change their output to meet market needs.

Even more dangerous is compensation that is based on performance related to outputs. If an organization’s output is off the mark in terms of meeting the market needs, like a Blockbuster Video, would you want to carry the liability of paying people to not meet market needs? You would probably want to pay people based on their contributions to the overall outcome. At Blockbuster, if store managers were paid a commission based on total sales, if Blockbuster had seen the signs that the industry was, in fact, changing, they might have shifted the commission model away from a failing output.

The bottom line is to know your outcomes, know your outputs and do not under any circumstances mistake one for the other.

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