The pressure for quick and simple simple answers, more powerful computers, and easy access to analytical software are luring managers into “flying on instruments” most of the time.

In recent years, the rise of macho, “grab-and-go” management has been accompanied by a huge increase in the use of numerical or statistical indicators as the basis for management decisions. It’s easy to blame IT for almost anything, but, in this case at least, there’s a good deal of truth in the charge. The success of IT in providing powerful computing software, with terminals on every manager’s desk, makes it all too easy to rely on “what the numbers say” in place of taking the time needed to think about what is really happening — and why.

Numbers have such allure: they don’t answer back, they operate according to fixed rules, and even the most challenging choice can be cut down to size by stating it as a series of abstract equations, rather than painful human dilemmas of who loses his or her job and who is forced into excessive working hours. To say, “We must reduce labor costs by 15%” not only sounds scientific and dispassionate; it allows you to feel better than you would if you phrased it as, “I’m going to fire 200 innocent people tomorrow morning and make the rest work longer hours without extra pay.”

Bad, easy measures soon take over from better, harder ones

In February, Simon Caulkin of the British newspaper The Observer wrote a perceptive article about just this issue. In it, he said:

“If there’s one management platitude that should have been throttled at birth, it’s ‘what gets measured gets managed’. It’s not that it’s not true - it is - but it is often misunderstood, with disastrous consequences.

The full proposition is: ‘What gets measured gets managed — even when it’s pointless to measure and manage it, and even if it harms the purpose of the organisation to do so.’ In the truncated version, there are two lethal pitfalls. The first is the implication that management is only about measuring . . . Here we encounter the second problem with the measurement-management equation. All too often in a kind of Gresham’s law (which said bad money drives out good), the easy-to-measure drives out the hard, even when the latter is more important. Strategy writer Igor Ansoff said: ‘Corporate managers start off trying to manage what they want, and finish up wanting what they can measure.’”

You can’t remove the human element in business

Even if all the measure were relevant ones, properly applied — an unlikely situation given the limited math and statistics skills of most senior managers — you would still be left with that all-important, non-measurable item: human feelings and perceptions.

No one has ever been able to predict individual human behavior; probably no one ever will. Forget all the nonsense you read about “average behavior” and what people do en masse. A prediction based on some abstract generalization might hold good in purely arithmetical terms (an average is always the total dived by the number of observations, regardless of whether that produces a logical or believable outcome), but it tells you next to nothing about what any individual might do.

Besides, to allow for statistics to be used at all, “random” elements, such as emotions, personal beliefs, and irrational choices, have to be removed from consideration. Take economic theories. Conventional economics assumes that all choices are made on the basis of rational self-interest, and sets out its equations accordingly.

Think about this. Has every choice you have made, even in financial matters, been based rigidly on the most logical course to maximize your self-interest? I very much doubt that even 10% have. If you’ve ever refused to buy because something about the person selling put you off, been swayed by fashion or what you’re friends said, or jumped to a choice without bothering to work out all the possible alternatives and carefully analyze every one, you have behaved like a typical, irrational and emotional human being — and undermined economic theory by doing so.

Business is about trust and mutual satisfaction, not spreadsheets

It’s surely true today that what is measured is what gets managed. That’s why so many mistakes are made and so many choices go terribly wrong.

By taking away the acceptance that business is about human relationships, and depends almost entirely on trust, the proponents of “management by numbers” produce simple-seeming answers to most of the wrong questions.

“Return on investment” for example, is easily calculated, but — like most management ratios that can only be found after the event — tells you nothing useful about why you got a pay-back and why it was the amount it was. Worse, by the time you get the number, it’s way too late to change anything. Even the business climate may have changed enough to make the number useless as a guide to future action.

Did you get your return because customers loved the product? Or only because it was cheap (until your competitors cut their prices to undercut you)? Was your service good or fashionable? The one may suggest a stable basis for future success; the other a temporary boost that could disappear overnight.

Management by numbers is like painting by numbers. Both produce lifeless, unnaturally perfect reproductions of what has already been done by someone else — and cannot produce anything fresh, or creative, or appropriate to changing circumstances.

When people feel insecure, they spend more time justifying what they did in the past than planning what to do next

Management is not about justifying the past; it’s about deciding what to do for the future. While some numbers can be useful to help you sort out what’s important to look at, amongst all the mass of useless information, using them to make future-oriented decisions is generally a bad idea.

I have sympathy for people forced to waste time producing figures to justify past decisions; none for those who demand the justification. What’s done is done. Mistakes cannot be reversed, only used to learn how to do better. All the hours spent looking at charts and numbers displayed on endless Powerpoints is time wasted, unless it leads to increasing the time allowed for thought and introspection.

Managing the wrong “measure” can be fatal — literally

I’ll let Mr. Caulkin have the last word with a frightening example:

“What happens when bad measures drive out good is strikingly described in an article in the current Economic Journal. Investigating the effects of competition in the NHS (Britain’s National Health Service), Carol Propper and her colleagues made an extraordinary discovery. Under competition, hospitals improved their patient waiting times. At the same time, the death-rate following emergency heart-attack admissions substantially increased. Why? As targets, waiting times were and are measured (and what gets measured gets managed, right?). Emergency heart-attack deaths were not tracked and therefore not managed. Even though no one would argue that the trade-off — shorter waiting times but more deaths — was anything but a travesty of NHS purpose, that’s what the choice of measure produced.

As the paper observes: ‘It seems unlikely that hospitals deliberately set out to decrease survival rates. What is more likely is that in response to competitive pressures on costs, hospitals cut services that affected [heart-attack] mortality rates, which were unobserved, in order to increase other activities which buyers could better observe.’

In other words, what gets measured, matters. Measures set up incentives that drive people’s behaviour. . . Imagine the cost to NHS morale (one of Deming’s unknown and unknowable figures) of the knowledge that managing to the measure resulted in more deaths — the grotesque opposite of its aims. Hospitals are the extreme example of a general case. As such, they allow us a definitive rephrasing of our least favourite management mantra. What gets measured gets managed — so be sure you have the right measures, because the wrong ones kill.”

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