Why By-the-Numbers Management Doesn’t Work
Simon Sinek, author of Start with Why and Leaders Eat Last says the following: “The single best machine to measure trust is a human being. We haven’t figured out a metric that works better than our own sorta, like, ‘There’s something fishy about you.'”
I am personally untrained in traditional techniques of command-and-control management (or any other traditional management techniques for that matter.) But from what I glean of them, I find traditional management techniques to be quite old-fashioned. They are certainly not for me. My bias is for maximum creativity and through-branded freedom in accomplishment of corporate goals. (My firm, Corporate Rain International, is designed as horizontally possible for this reason.)
From what I can see, much of what present day corporate leadership is based on is metrics-driven. As they say, “You can’t manage what you can’t measure.” I find this adage increasingly wrong-headed. There are a huge number of important things that can’t be measured. 20th century American management guru, statistician, and author, W. Edwards Deming says simply, “It is wrong to suppose that if you can’t measure it, you can’t manage it — A costly myth.”
In an interesting Forbes online column in January, Lisa Earle McLeod, the author of Selling With Noble Purpose, says the following. “When you try to manage by the numbers, be they test scores, sales activity, or productivity measures, you drive towards mediocrity. Quantitative (numerical) measurements alone will never make an organization great, because it is the qualitative (non-numerical) elements of performance that achieve greatness.” She goes on to state, “We default to the easy to understand quantitative elements, while completely ignoring the more nuanced qualitative elements, yet it’s qualitative elements like emotional engagement, passion, and purpose that are critical drivers of success and satisfaction.” I would say this is especially true for the entrepreneur and the small business person.
In a blog titled “The Folly of Stretch Goals” in the Harvard Business Review, Daniel Markovitz, author of Factory of One, quotes famed psychologists Edwin Locke and Gary Latham describing large metric goal setting as “the most effective managerial tool available.” Stretch goals are the tactic of giving your employees metric goals that are just beyond reach, pushing them to greater and greater achievement. Markovitz does not agree with that approach and neither do I. For Markovitz stretch goals are not useful and are even dangerous for three reasons.
Stretch goal metrics can be terribly demotivating. To the extent stretch goals seem overwhelming and unattainable they suck dry intrinsic motivation. They are innately manipulative, cynical, and condescending to the employee/colleague. Money motivators crowd out intrinsic motivators like learning, growth, and service. He cites psychologist Karl Weick, who argues, in an article titled “Small Wins,” that steady, slow, organic progress creates more complete solutions, conditions, and accomplishment.
Stretch goal metrics have a dangerous tendency to foster unethical behavior. For example, Markovitz offers the illustration of Sears in the early 1990s. “Sears gave a sales quota of $147/hour to its auto repair staff. Faced with this target, the staff overcharged for work and performed unnecessary repairs. Sears Chairman at the time, Ed Brennan, acknowledged that the stretch goal gave employees a powerful incentive to deceive customers.”
Stretch goal metrics can lead to excessive risk-taking. A couple of years ago J. P. Morgan took an eight billion dollar loss (and counting) inspired by the stretch profitability goals of their London subsidiary and its leader, “The London Whale.” This echos Enron’s incentivization of its executives to meet specific revenue goals, irrespective of the profitability or the riskiness of the moves. Enron was ultimately and totally destroyed in 2001 by this strategy. Or note the recent ethical breaches utilized by Volkswagen engineers to simulate environmentally acceptable emissions for their cars.
I’m not saying metrics (the numbers) don’t matter. They do. You have to make payroll every week. That’s a cold, hard fact. But things that create long term entrepreneurial greatness, like culture, purpose, values, and corporate vision, are seldom metrically quantifiable.
Nassim Taleb, author of The Black Swan and Fooled by Randomness, says the following: “Success is about honour, feeling morally calibrated, absence of shame, not what some newspaper defines from an external metric.” I agree.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
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