• Julian Talbot

Peter Drucker was wrong


"What gets measured gets managed." - Peter Drucker [1]

Like many cliches, "what gets measured gets managed" is correct enough to be believable but wrong enough to be misleading.

We can measure the velocity of planets, but that doesn't mean we can manage or influence their speed in any way. We all know that What gets measured is NOT what gets managed.

If we measure our weight, will that change it? Highly unlikely. But if we measure the things we can influence, such as how often we go to the gym, we will almost certainly manage our weight.

If we have a particular goal weight, that will also help. An objective such as running a marathon or an incentive involving being more attractive will turbocharge our gym attendance. But measuring and incentivising the right thing isn't always this simple.

The useful element

The kernel of truth behind the 'what gets measured gets managed' concept is that nothing in life is quite as important as you think it is while you are thinking about it.

When we think about something, our brain registers it as more critical than it truly is, not because it is always the most important thing in our life. Simply because we can only focus on one thing at a time. It is a valuable heuristic. If we are working over a hot stove or riding a motorcycle, we should indeed be focusing that activity, not worrying about climate change.

The more attention you give something, the more important it feels. The latest catastrophe with your computer, phone, or car will seem more important than climate change. At the time you are thinking about it. Equally so for your sales or production figures. The act of measuring something brings your attention to it.

This is closely related to what psychologists call focalism or the focusing illusion. I've written about it in the Psychology of Risk but briefly, focalism is the tendency to emphasize a single factor or piece of information when making judgments or predictions. It happens when you focus too much on one aspect of an experience or a particular measurement.

That measurement then becomes more important than other metrics. As a result, if that metric is something you can influence, your focus will ensure that new ideas or opportunities for improvement will come to mind.

It seems like an excellent management strategy. But this concept has at least two problems hidden in plain sight:

  1. It can keep you from having an accurate memory of the experience and can lead to dire predictions about future experiences.

  2. If you focus on the wrong metric or a metric you can't influence, attention is focused on the wrong thing, and you are just wasting cognitive horsepower to the detriment of objectives.

Without objectives, we have no criteria to define success

Setting ambition targets works in many ways, not least the competitive instinct. But in this context, two core elements of human psychology are leveraged: focalism and anchoring heuristic.

Anchoring heuristic is a cognitive bias that involves relying (often too heavily) on an initial piece of information (the anchor). A good anchor is a realistic but challenging goal.

Even random numbers have an impact. Anchoring effects have been observed in experiments where social security numbers influenced estimates of the number of doctors in a city. Even experienced professionals such as judges are influenced by arbitrary anchors.

In one experiment, judges with over 15 years of experience were given a description of a woman who had been caught shoplifting and then rolled a pair of dice. The dice were loaded, so every roll resulted in only a three or a nine. After rolling the dice, the judges were instructed to specify the exact prison sentence they would give the shoplifter. Those who had rolled a 9 said, on average, they would sentence her to 8 months; those who rolled a 3 said they would sentence her to 5 months.

Measuring the right metrics with the realistic anchors (targets) becomes all-consuming of our valuable attention in a way that gets results.

Measure what you can influence

Measuring things you can influence can be productive if incentives are linked to the measurements. Simply bringing attention to something by measuring it isn't enough to change behaviour.

Incentives are key. As Steven Levitt and Stephen Dubner pointed out in Freakonomics,

"Incentives are the cornerstone of modern life ... understanding them or, often, deciphering them, is the key to understanding a problem, and how it might be solved."

Incentivise and measure the behaviors you want to see

If you don't know which behaviours you are trying to influence, you won't hit your targets. Sales managers and salespeople know this. On a commission sales management system, the objectives are clear. Profitable sales. Incentives (sales commissions) are also clear, and they exist to drive behaviors (sales calls, being one example).

It's never that simple, however. We need only look at the debacle of the 2008 sub-prime loan crisis. Sales commissions at the expense of long-term viability produced a range of unethical behaviors which brought the global economy to its knees.

Equally, there is no point in measuring accidents on a construction site if the only incentive involves financial bonuses based on the speed of completion. You might see an increase in accidents because the workforce will be measuring the size of their completion bonus. Or you might see a decrease in accidents due to underreporting.

Outcomes will flow from the right behaviors. Desired behaviors will flow from the right incentives. The right incentives are based on bringing attention to the metrics that you want to influence.

Measurements that change behaviors which achieve objectives are worth managing.

I've written a short book on KPIs, which you can find at this link if you want to know more.

 

I've also presented and written about how training changes behavior, which changes attitudes and ultimately shapes culture.


 

[1] No matter who said it first, Peter Drucker usually gets the credit.

#Management #Risk

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