Metrics: Overmeasuring Our Way to Management

(page 2 of 2)

But reducing relationships to the common currency of behavioral indicators and money has a way of reducing intrinsic motivations such as obligation or ethics.

When the numbers are all that matter, we hear: "It's not personal, it's business." Trust is based only in small part on numbers; in large part, it is based on personal interrelationships that get replaced by overmeasurement.

4. Increased Cost and Risk.

To a point, measurement helps. When Robert McNamara first joined Ford's (F) finance department, he reported that payables were estimated literally by weighing the paper receipts. In such cases, a little improvement in metrics goes a long way.

But after a point, the return diminishes. Trust relationships can be less costly and time-consuming than complex legal and accounting systems—not to mention more effective. Trust is often the low-cost solution. Numbers can also give a false sense of security. Quantification looks precise; but as the securitization debacle on Wall Street showed, precision can give a false sense of security by masking greater risk.

How did we get this way? Technology has been seductive; think of the power of the spreadsheet, not to mention Moore's Law. Consider also the recent celebration of the "hard" sciences over those such as psychology or economics. Too often this thinking has implied that lack of measurement implies irrelevance. It doesn't. Einstein (or at least his attributed statement) was right.

Some solutions seem evident. Even if we believe that everything in principle is measurable, sometimes it's just silly to do it.

• If you want to improve your customer relationships, metrics should not be your only choice. To borrow from Shakespeare, if you want to tell someone how much you love them, don't count the ways. Just say them. Better yet, act them.

• If you want to improve customer and supplier relations, listening over dinner and a handshake can sometimes be more powerful than relying on the legal department.

• If you want to motivate your sales force to create deep relationships, don't lead by putting a price and a stopwatch on every customer's head. Emphasize intrinsic rewards as well as extrinsic ones.

Both measurement and management will be improved if we can rediscover how to think about each of them independently. Financial performance will improve, too. Another plus is the reintroduction of the human element into business. You can't measure it, but you can't deny its impact.

Charles H. Green is founder of TrustedAdvisor Associates and the co-author of The Trusted Advisor (Simon & Schuster, 2000). He is a 1976 graduate of Harvard Business School.

Business Exchange

Track and share business topics across the Web.