Measure What Matters, Part I
Grown-ups love figures. When you tell them that you have made a new friend, they never ask you any questions about essential matters. They never say to you “What does his voice sound like? What games does he love best? Does he collect butterflies?” Instead they demand “How old is he? How many brothers has he? How much does he weigh? How much money does his father make?” Only from these figures do they think they have learned anything about him." ––Antoine de Saint-Exupéry, The Little Prince
In the sixteenth century, a new word appeared in English dictionaries—Pantometry, which means universal measurement. Ever since, man has been obsessed with counting things, from people and sheep to the amount of cars imported and the number of McDonald’s Hamburgers served.
Being able to count and measure is one of the traits separating man from animals. Scottish mathematician and physicist Lord Kelvin [1824–1907], is inscribed—slightly inaccurately—in the stones of the Social Science Building at the University of Chicago:
When you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind….It may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the stage of science."
The problem for the pantometrists is the same one facing businesspeople today: what should be measured? Facts and figures do not provide a context, or reveal truth; we still need our imaginations and creativity.
If we only focus on what we can measure, we will become prisoners of our past, because it would be impossible to create a future that would be different than an extrapolated past.
Even Lord Kelvin’s statement cannot be expressed in numbers, but that does not automatically make it “meagre and unsatisfactory.” If everything important has to be quantified to be comprehended, how are we to understand art, music, poetry, literature—indeed, our own human feelings?
One could persuasively argue that the more valuable something is, the more likely it cannot be quantified.
Numbers give the illusion of presenting more truth and precision than they are capable of providing. Human’s genetic code is 98 percent identical with our chimpanzee cousins. We share even more DNA with whales.
So what? Should we marry whales and chimps? That 2 percent is an enormous difference, so obviously the accuracy of the measurement misses the reality.
The McKinsey Maxim
We have all heard the famous saying, often referred to as the McKinsey Maxim, named after the famed consulting firm: “What you can measure you can manage.” (This is often attributed to Peter Drucker, but he never wrote it, nor did he believe it).
This bromide has become such a cliché in the business world that it is either specious or meaningless. Specious since companies have been counting and measuring things ever since accounting was invented, and meaningless because it does not tell us what ought to be measured.
Besides, has the effectiveness of management itself ever been measured? How about the performance of measurement? Measurement for measurement sake’s is senseless, as quality pioneer Philip Crosby understood when he uttered, “Building a better scale doesn’t change your weight.”
This is not to imply we need to eliminate “hard data,” but rather that we do not allow measurement mania to crowd out “soft” judgment. Since management itself cannot be measured, we have to rely on judgment. We can certainly use hard data to vouch for soft intuition, but we can also do the opposite—use soft judgments to check hard facts.
A lot of information is soft—gossip, hearsay, and intuition. The partner who learns his largest customer was golfing with a major competitor is not going to be served well by the time the lost revenue shows up on his profit and loss statement. As one manager quipped, “I would be in trouble if the accounting reports held information I did not already have.”
Accounting reports are, by their nature, lagging indicators—like timing your cookies with your smoke alarm. What is needed in organizations today, similar to the canary in the coal mines of the last century, are leading indicators—early detection systems that allow companies to perform their ultimate function of creating wealth for the customers they serve.
Blindly relying on this metric mania can obscure many oblique realities. The ultimate problem with numbers and measurements is what they don’t tell us, and how they provide a false sense of security and the illusion of control—that we know everything that is going on.
In fact, one could put forth the argument, running counter to the McKinsey Maxim, that the most important things in life cannot be measured. How do you measure happiness? How do you measure love, joy, respect, or trust? How do you measure the success of your marriage?
Even the not-for-profit world is infected with this mentality. Consider the one measure that most people believe establishes the “efficiency” of a charity: “What percentage of my donation goes to the cause?”
This metric explicitly assumes that a lower administrative and overhead structure leads to a more effective charity. Yet the empirical evidence does not warrant this false belief. This efficiency measurement, in and of itself, provides no information on the effectiveness of the charity.
If Jonas Salk had spent 50 percent on overhead and administration but developed the polio vaccine—saving countless billions of lives—should we conclude that his charity was “inefficient” because the ratio was only 50 percent spent on the cause? To ask the question is to answer it. Measurements can crowd out judgment.
As Albert Einstein said: “Sometimes what counts can’t be counted, and what can be counted doesn’t count.” If this is true in a scientific discipline such as physics, it is certainly true in business, which is not a science, but rather an art.
Perhaps we need a corollary to the McKinsey Maxim: What is really important cannot be measured. This is what author David Boyle calls the McKinsey Fallacy. This will no doubt be met with tremendous resistance. It goes against the very grain of the MBA mind-set, the modern-day pantometrists, who are taught everything needs to be quantified and counted, and decisions should be based on the numbers.
In other words, don’t think, count. This is not to suggest that no measurements are relevant or useful. Rather, that anything we measure that is meaningful needs to be guided by a theory, the subject we will take up in Part II of this series.
Photo: Getty Images
Residency Group Leader
10yWell I do believe that , measurement does not really the matter but to just ensure every company or establishment maintain the principle of FFC ...Firm , Fair and Consistent. adapt this Policy and you don't do wrong, thats how we use measurement... its for every person and company.
AVP Data Analytics-Property Operations
10yThe point that is missing here is that Cost accounting is a Mathematical Exercise – Utility (or Value) Accounting is a Logical Intellectual Exercise. Utility Value is in the eye of the beholder. The Higher the Utility – The More Economic value can be recovered! The efficiency metric for nonprofits that you mention is essential, not only because we live in a capitalist system, but because the goal is to choose that which provides the greatest benefit at least cost, in this manner we can do more (not just pay the CEO a huge salary). In your curing of the polio vaccine no want would claim that this was not a success, but this is a post hoc hindsight assessment. If prior there was a choice of two strategies to try, and because we are so inefficient we could only afford to choose one – the wrong one. What would say then? Measurement is not a Substitute for Intellect. The biggest problem with data Science and statisticians working in domain areas that they do not understand is that they can find and explain what is Statistically Significant is, but not what is materially significant. Nor can Measurement address ethical, emotional or moral questions. I often see the use of measurement as an abdication of moral authority, just blame the numbers. Sometimes things are just right or wrong irrespective of the profits or costs, but Measurement does Enhance Intuition. As always we live in an infinitely analog world but want to manage it by simply binary mental models. One or the other, but even Richard Feynman suggested that the power to insight and moving knowledge forward is to be able to Hold in mind and operate multiple even contrary models in mind, and not be immobilized by their contradictions.
Execution specialist. Driving improvement step by step, with customers and employer.
10yNormally your judgment (or gut feeling) is biased in several ways (try Kahnemans Thinking, Fast and Slow for reference). What you measure is what you know. The rest is what you assume. Or? Really interesting piece but your second piece is hitting home for me. If you want something to happen, measure it. And to be able to measure anything at all you need to have a clear understanding of where you are going. The problem is not measurement in itself. It is the poor qualification of WHAT needs to be measured and HOW it should be measured. You get what you measure, so measure the right thing.
Product Manager & Consultant, Myriad Stars
10yAll start-ups to follow this series of articles keenly. Good writing Mr.Baker.
Head of Customer Research and Marketing Insights, Author, International Keynote Speaker, Advisor
10yA very thought-provoking piece, thank you Ron. Very good points about the danger of blindly measuring things and hoping to get to some "truth." I think what's behind this debate is not so much whether to measure or not, but whether when we make decisions we rely on our intelligence, past knowledge, and gut feel or on some objective criteria. This is the distinction between Rationalism (Decertes - "I think therefore I am") and Empiricism (Hume - "How do you know?").