Sunday, March 22, 2009

Managing by Measuring the Right Things

“If you can’t measure it, you can’t manage it.” This popular business aphorism holds much wisdom. But it should come with a warning: If you manage by what you can measure, you better be measuring the right things.

For example, the computer manufacturer Dell was using “handle time”—how long a representative spent per call—as a key metric in managing its call center. In the quest for efficiency, Dell tried to reduce handle time by compelling reps to make calls shorter. The unintended result? Reps simply transferred the difficult calls around.

From a 2007 BusinessWeek article by Jeff Jarvis:

At Dell’s worst, more than 7,000 of the 400,000 customers calling each week suffered transfers more than seven times....

“It was a real mess,” confesses Dick Hunter, former head of manufacturing and now head of customer service. Dell’s DNA of cost-cutting “got in the way,” Hunter says. “In order to become very efficient, I think we became ineffective.”

Dell changed the key metric to the total minutes necessary to resolve a problem. This change aligned Dell’s and its customers’ interests in minimizing the time to solve problems—as opposed to minimizing any single call’s duration, which was easy to measure but ultimately served nobody’s interest.

Although obvious in retrospect, this kind of issue is hard to see within a company while it is happening. If you don’t believe me, let’s take an example that affects everyone in the United States and, to some extent, the world.

Have you ever thought twice about the “hundred days” yardstick that is routinely applied to new presidents? Made famous by Franklin D. Roosevelt’s flurry of activity upon taking office in 1932, a president’s first hundred days is often seen as a predictor for the president’s subsequent success or failure.

Writing in The Wall Street Journal, David Greenberg, a professor of history and media studies at Rutgers University, argues that the hundred days yardstick is problematic:

It places too much emphasis on easily quantifiable early achievements, directing attention to the number of laws passed. Passing laws isn’t necessarily the best indicator of a strong presidency. When a president’s party controls the Congress, it’s easy for him to sign bills that were queued up before he arrived — something that may hearten his supporters but doesn’t attest to great vision or legislative prowess.

Many things can matter more than laws getting passed. Behind Eisenhower’s lackluster debut — he sent no domestic program to Congress — lay an important bureaucratic reorganization and a review of national security strategy that led to his “New Look” foreign policy....

A president may also have a successful hundred days due to events outside his control. Reagan was struggling to pass his tax cuts when John Hinckley’s bullets landed him in the hospital. The outpouring of sympathy, aided by Reagan’s winning bedside humor, buoyed his popularity and helped him win a big victory. But that success didn’t foreshadow any continued mastery of Congress; his relations with the Democratic House and, later, the Senate would deteriorate.

Greenberg demonstrates that incoming presidents since FDR have been acutely aware of the hundred-days milestone. This awareness can push presidents to run before they walk, trying for legislative wins in the time period when they are least experienced at running the machinery of government.

Granted, some presidents take office when major action is necessary. FDR was the prototype, and Obama faces similar conditions, albeit less extreme. But judging even Roosevelt after a hundred days would have shown he did a lot of things, not whether those things were productive. It also would give no indication of Roosevelt’s ability to lead in the geopolitical context that became World War II—something that contributed to his legacy as much as his response to the Great Depression.

So, while judging the first hundred days has become a tradition, it’s worth asking what we really learn from it, and whether we want our presidents to manage to that milestone, especially when circumstances don’t force quick action.

The larger point: The seeming clarity of managing by measuring can mask the subtleties—or sometimes the outright counterproductivity—of the measurements involved.

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