METRICS TO EVALUATE R,D-AND-E

Metrics affect research decisions, research efforts, and the researche rs themselves. From a review of the literature, interviews at ten rese arch-intensive organizations, and formal mathematical analyses, the au thors conclude that the best metrics depend upon the goals of the R,D& E activity as they vary from applied projects to competency-building p rograms to basic research explorations. For applied projects, market o utcome metrics (sales, customer satisfaction, margins profit) are rele vant if they are adjusted via corporate subsidies to account for short -termism, risk aversion, scope, and options thinking. The magnitude of the subsidy should vary by project according to a well-defined formul a.For R,D&E programs that match or create core technological competenc e, outcome metrics must be moderated with ''effort'' metrics. Too larg e a weight on market outcomes leads to false rejection of promising pr ograms. The large weight encourages the selection of lesser-value prog rams that provide short-trm, certain results concentrated in a few bus iness units. This, in turn, leads a firm to use up its ''research stoc k.'' Instead, to align R,D&E with the goals of the firm, the metric sy stem should balance market outcome metrics with metrics system should balance market outcome metrics with metrics that attempt to measure re search effort more directly. Such metrics include many traditional ind icators. For long-term research explorations, the right metrics encour age a breadth of ideas. For example, many firms seek to identify their ''best people'' by rewarding them for successful completion of resear ch exploration. However, metrics implied by this practice lead directl y to ''not-invented-here'' attitudes and result in research empires th at are larger than necessary but lead to fewer total ideas. Alternativ ely, by using metrics that encourage ''research tourism,'' the firm ca n take advantage of the potential for research spillovers and be more profitable.