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Thursday, November 23, 2020

Measuring Contribution

Today’s obsession with “management by measurement” (especially numerical measurement) is a major contributing factor to the decline of a civilized and truly productive workplace. In place of using intelligence and understanding to gauge progress towards agreed goals, business leaders follow more or less fixed ratios and “key indicators.” Trying to manage that way is doomed to produce simplistic, often highly inaccurate decisions. Asking purely quantitative questions—or trying to force qualities into a spurious, quantitative format—is mostly useless and frequently grossly misleading. Organizations and business are far too complex to be reduced to a few, simple numbers on a spreadsheet.


One of the pleasures of blogging is the way so many people contribute by adding their comments and questions to what I have written. They often raise extremely valuable questions, challenging me to think and make good on assertions I have made in my posts. A recent question was so interesting that I thought it should not simply be confined to the comment section of a single posting, but was worthy of much wider circulation.

The question was: “How would you measure the amount of wealth that an employee is contributing?”

I think the best analogy for the whole process is the difference between a painter like Cezanne and someone using a “painting by numbers” kit. One does it faster, but I know which one I would prefer to own.
Regular readers will know that I believe that the current obsession with “management by measurement” (especially numerical measurement) is a major contributing factor to the decline of a civilized and truly productive workplace. In place of using intelligence and understanding to gauge progress towards agreed goals, business leaders follow more or less fixed ratios and “key indicators.” They no longer try to manage the business in relation to the real world. Everything is centered on taking such action as will make the numerical indicators arrive at the “right” place. It’s the commercial equivalent of the nonsense in schools today where teaching isn’t based on encouraging learning, but linked solely to standardized test scores (But that’s another story). I think the best analogy for the whole process is the difference between a painter like Cezanne and someone using a “painting by numbers” kit. One does it faster, but I know which one I would prefer to own.

Still, whatever I think about the idiocies of much of the measurement in use today, the point remains that it is necessary to be able to decide whether individuals—or groups or departments—are contributing real value to the business. You also need to know whether you are actually making progress towards your business goals, or simply kidding yourself.

Here’s how I think you can start to answer these question in terms of value. You need to understand these things about every employee, group, or project:
  1. Is he/she/their/its presence and activities adding to the overall, long-term value of the business? Examples might include providing useful and creative ideas, developing productive business relationships, enhancing the organization’s reputation, or delivering outstanding levels of service and support to customers or clients.

  2. Does he/she/they/it increase the ability of the business to deliver on its promises? Here I would look to providing a steady contribution and long-term commitment to the success of the business, the willingness to help create a civilized and effective workplace environment, going the extra mile when that mile is needed, and contributing in full measure to business success by freely offering his/her/its/their full potential and capacity.

  3. Does he/she/they/it act as a good corporate citizen? This means keeping confidential what should be kept confidential, avoiding being a jerk whenever possible, being kind and helpful to colleagues and customers, and refraining from spreading malicious gossip. But it also means being willing to speak out whenever unethical, discriminatory, dishonest, or other unacceptable behaviors are encountered.
You will notice that most of my “measures” are qualitative. If you are measuring value (which is itself a quality, not a quantity), you have to use appropriate measures—and that means qualitative ones.

Even obviously quantitative inputs, like finance or production capacity, have little meaning without qualitative measures being attached to them.
I think that most behavioral or creative inputs to any business have to be measured in qualitative terms. Even obviously quantitative inputs, like finance or production capacity, have little meaning without qualitative measures being attached to them. Some outputs may be suitable for quantitative measures alone (profit, sales made, number of customer complaints), but even then they will have very little meaning without understanding their qualitative aspects. If production is high, is it the right kind of production? Is the business operating in the right place, at the right time, and aimed at the correct customer needs? Whatever the level of sales, are they “good” sales (ones that have been gained from customers convinced about maintaining a long-term relationship with your organization); or “poor” sales (obtained only through discounting or similar means, where the customer feels no loyalty and will switch to whoever offers the lowest price at the time)?

Only our mad lust for speed, our idiotic assumption that numbers are somehow more “scientific” than qualitative measures, and the unwarranted reverence given to accounting are preventing people from seeing the truth: if you want value and quality, that is what you must track . . .
Asking purely quantitative questions—or trying to force qualities into a spurious, quantitative format—is mostly useless and frequently grossly misleading. Organizations and business are far too complex to be reduced to a few, simple numbers on a spreadsheet. Trying to manage that way is doomed to produce simplistic, often highly inaccurate decisions. Only our mad lust for speed, our idiotic assumption that numbers are somehow more “scientific” than qualitative measures, and the unwarranted reverence given to accounting are preventing people from seeing the truth: if you want value and quality, that is what you must track, whether you can reasonably use numbers or must rely on your wider intelligence and commonsense instead.


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Comments:
May I clarify a point about "measurement"? Measurement always starts by imagining something qualitative (as you have done with your 3 questions), then defining what "more and less" of that thing would look like (as you are doing), and then turning that "more and less"-ness into a number. Measures corresponding to your 3 questions can be constructed in the same way that we measure "quality of life" for patients in post-operative therapy. A current book on the topic is: "Instrument Development in the Affective Domain: Measuring Attitudes and Values in Corporate and School Settings" by Robert K. Gable, Marian B. Wolf
 
I enjoyed this post on the dangers of quantitative metrics, it illustrates the misconception that by putting a number on something that we now understand or control it. I think we also need to be very careful what metrics we attempt track as the act of measurement itself can influence the out come. See Most Software Development Metrics are Misleading and Counterproductive for an account of misleading metrics in the software industry.
 
Thanks, Mike G, for your helpful comment. It was well worth reminding us that measuring can itself impact on what is being measured.

Keep reading, my friend.
 
Thanks for your comment, Mike L.

Of course, what you say about measurement starting with a qualitative idea is sometimes true (if not always—some things are inherently quantitative, like money). And we often do want "more" or "less" of something. But I don't agree that it is possible to construct useful and meaningful numerical measurements for anything qualitative.

You can construct a numerical measure (I've done it myself in the past) and try somehow to use it to put a number on "more" or "less," but that doesn't equate to something that has the same, exact meaning for everyone (which is always true of a real quantity). "Quality of life" is a good example. If I say my quality of life is "good" (put a measure on that: say, 8 out of 10) and you say yours is "very good" (and also rate it 8 out of 10), are we saying the same thing? Or is my 8 worth less than your 8?

This problem infects performance appraisals all the time. One boss rates someone 3 (average, say) on commitment. Another boss rates someone on his or her staff also 3. But when you get down to the level of actual behaviors and outcomes (if you ever can), each is rating something different. On paper they appear identical, and will be treated as such. In reality, they are two different judgments of different behaviors.

That's what I mean when I write that many numerical measurements of qualities or values are spurious: they produce the same number, but are based on different realities.

Keep reading, my friend.
 
The question was: “How would you measure the amount of wealth that an employee is contributing?”

Why would you want to do this, if you are a Manager or above? You don't even want to do this as a Manager, to use against your subordinates. It might not match your perception of the person. If you like them it makes no difference what their worth is to the company. It only matters what their worth is to you, the Manager.

This is because the Manager Syndrome, called the "Divine Ego", requires the Manager to feel indispensable to the corporation.
Even in publicly traded companies we have "Management by Stealth!".

I have never seen anyone who wanted this ability. And certainly not a public, easily known and understood way to do it. I often worked with people who made twice what I did. Sometimes I learned this openly, sometimes by inference and deduction by comparing lifestyles. How did this happen? I was the technical genius that made everything work! Two reasons. They were much better negotiators than I, because I have never known my own worth. Two, they took credit for work I did. Either directly or by claiming they managed the task.

Just look at CxO, CEO in particular, compensation. I don't care if they do have a longevity, on average, of 18-24 months. I have always found that the bigger the reward the bigger the risk. Why are we hiring big "risk takers" as CxOs? A whole new topic here...

I took a lot of heart when I first started hearing about "Open Book Accounting" as a way to do business. The example I first read was about a machinist in an auto parts secondary/add-on source how the type of crankshaft he made, and the method used to finish it, affected the corporate bottom line.

I took more heart when I saw first hand how TQM (Total Quality Management) had a method to quantify complex processes in order to manage them. TQM's motto was "IF you can't measure it, you can't manage it!". This was the only good thing I saw about TQM.cadxlgu
 
Your topic bring to mind some of W. Edwards Deming's basic statements:

In the 1970s, Dr. Deming's philosophy was summarized by some of his Japanese proponents with the following 'a'-versus-'b' comparison:
(a) When people and organizations focus primarily on quality, quality defined by the following ratio:
Quality = {results of work efforts}/{all costs}
then quality tends to increase and costs fall over time.
(b) However, when people and organizations focus primarily on COST, then costs tend to rise and quality declines over time.
Deming and I are in exact agreement on this. Companies have fostered and maintained the "cash cow" approach using this very technique.

A Lesser Category of Obstacles:
1. ...
2. Relying on technology to solve problems.

One of my favorites is from Walter A. Shewhart

His more conventional work led him to formulate the statistical idea of tolerance intervals and to propose his data presentation rules, which are listed below:

1. Data has no meaning apart from its context.
2. Data contains both signal and noise. To be able to extract Information, one must separate the signal from the noise within the data.

[I changed "information" to "Information"]"

We can paraphrase this to:

1. Management has no meaning apart from its context.
2. Management contains both signal and noise. To be able to extract Information, one must separate the signal from the noise within the data.

[I changed "information" to "Information"]"

Two conclusions by me:
1) ROI (Return on Investment) should always be emphasized over TCO (Total Cost of Ownership) - Demings equation

2) The only real value is in the Information. People are the only real source of Information.

The challenge is to bring people into the process. Not just a pair of hands.
 
My favorite Strategy is used by the DOD (Department of Defense).
They refer to it as "Transformation".
The three components are:
1) Knowledge
2) Speed
3) Precision

Add your own definitions or look up the DOD ones.

Contribution should be measured by "Transformation" achieved, not a simple process addition.

Next is the "Solutions Triangle".
Solutions must be Politically, Financially and Technically
correct. The percentages are:
1) Politically correct=60-80%
2) Financially correct=10-20%
3) Technically correct=10-20%

In my experience, Technically correct is never more than 10%.
I have never heard of it being more than 20%.

The other mitigating factor is the Triangle of Unobtainium.
The triangle has three sides:
1) Low Cost - dirt cheap to reasonable
2) Speed - very fast
3) Quality - acceptable? or best?

Pick any two.

In the "good, old days" Low Cost (reasonable) and Best Quality were favored. Today it is "Dirt Cheap" and frighteningly Fast. Quality is purely Serendipitous.

Your job, should you choose to accept it, is to reconcile all three of these triangles into a transparent working solution whereby "Your Contributions" is readily apparent.

Then we will measure your Contribution to the stock price management and determine your compensation...
The care and well-being of the company and its employees is purely serendipitous.
 
Thanks for your comment, Robert. I feel that you must have had some really bad experiences to make you quite so suspicious of any kind of understanding of what a person might be contributing. How sad.

I never suggested that getting a handle on individual contribution should be used against anyone. In fact, using it in the way that you imply sounds like Hamburger Management to me—a process I am constantly saying is negative, pointless, and uncivilized.

In an ideal world, everyone would be doing the best they can and there would be no need for going any distance at all down the track of "measuring" the value contributed by an individual. But it isn't an ideal world. Most people behave extremely well (provide that they are also treated well), but a few aren't well disposed or sensibly behaved. They are lazy, unpleasant, and try to get a free ride at the expense of the rest. There has to be a way of catching them that doesn't allow poorly behaving bosses to use the excuse of "bad behavior" by others to get rid of team members they simply don't like.

For that reason alone, I do not think it is practicable to have no approach to understanding individual performance at all beyond personal liking.

Keep reading, my friend.
 
Wow, Robert. I am amazed and humbled by all the time you must have taken with these comments. Really helpful!

I think we are thunderously agreeing with one another, though your approach is perhaps more technical and precise than mine.

Keep reading, my friend.
 
With regard to:
"I never suggested that getting a handle on individual contribution should be used against anyone. In fact, using it in the way that you imply sounds like Hamburger Management to me—a process I am constantly saying is negative, pointless, and uncivilized."

I fully agree. You are "Right On!".
Your postings are like the breathe of Spring to me.

Until I read your Blog I didn't have a name and description for all the "Hamburger Managers" I worked for. Some of it was my own fault. I didn't leave when I realized what the situation was. Enough of my personal lack of timing and luck.

I will share with you the definition of Job, Position and Career. I worked in the same company with a wonderful lady named Malle. She was in charge of training customers who bought our multi-million dollar software package and used it in remote parts of the world to look for oil. She was very customer focused as was Chris, the Manager of Customer Service. Chris is another story.

I had not seen Malle around the building for a while so I went to her office to see how she was doing. There was a complete stranger sitting in her office. Malle had done a really great job of decorating her office because she was so proud of getting the position. The new person had a minimalist take on office decor to be charitable. The visual shock was palpable.

The new person said they did not know Malle and therefore I would have to ask someone else. I thought that very strange as Malle was one of the "charm" spots in our company.

I ran into Malle outside taking a smoke break. The only vice I know of that she had. She was completely without guile. I asked her, "What happened?".

All she would say was that she had a new office in the broom/mop closet and no phone. I was stunned. I had heard of this treatment before from a friend who got on the wrong side of a political battle between VPs. It took him a year to find another job and leave. It took Malle about 8 months.

I ran into her once more before she left and all she would say was, "I used to have a Career. Now I have a Job."

I never knew there was a difference. A Position is between a Job and a Career.
 
Thanks, Robert. Great comment.

Like Malle, I was once sent into "corporate Siberia" for refusing to cave in to a total asshole who was the politicially dominant boss at the time. I know how it feels.

That was when I first learned that going against what you know to be right isn't worth it. I saw friends and colleagues decide to "go with the flow" and fall in line with what that jerk wanted. It didn't save them. Several were fired for no reason other than to show the boss's power. Others became sad, wretched creatures clinging to a job they now hated. All found their careers damaged or destroyed.

It took years after that boss finally left for the organization to recover from all the damage he did.

Keep reading, my friend.
 
I think that numbers are important. When they have been collected well they become facts. Of course, facts are to be interpretated. Numbers alone mean nothing. For example, you set a measurable goal for people working for you and, at the end, you have a result, bad or good. You always have to evaluate how this result has been obtained.
 
Thanks for your comment, Adriana.

I'm afraid I cannot share your opinion that numbers are facts. Some are, but the degree of interpretation and the number of assumptions behind so many sets of statistics hardly qualify them as simple facts.

If you set people a goal and get a result, what does it mean? What is the context? How reliable are the figures that you have?

I am not rying to say that there is anything wrong with numbers per se; or that you should never use any kind of metrics. I just want people to stop giving numerical data an exaggerated amount of respect.

Keep reading.
 
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