The mismeasure of management

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The mismeasure of management

The mismeasure of management

When neither facts nor intuition will do

Perhaps the best hope for purposeful action based on a meaningful approximation of the truth is to abandon the pointless quest for a single version of it.

As with so much of the human condi­tion, wisdom defies a single summarizing bromide and instead finds expression in the collision of contradictory aphorisms; here’s but one example: “He who hesitates is lost,” while “haste makes waste.”

So it is with the question of measurement. Although, as William Thomson, aka Lord Kelvin, observed, “to measure is to know,” Einstein’s observation that “not everything that matters can be counted, and not every­thing that can be counted matters” also compels our attention.

It’s not difficult to find examples of this divide in the world of management. We accept that, despite our best efforts, management remains as much art as science. Of late, however, this longtime equi­librium is in danger of transforming from a state of mutual respect and ap­preciation into the kind of partisan warfare that loses sight of the issues and becomes about nothing but winning.

At the Cartesian end of the spectrum lies the rise of analytics in response to demonstrated failings of intuitive deci­sion making. For instance, one of the most fa­mous behavioral economic experiments asked physicians which response to a hypothetical outbreak of a fatal disease affecting 600 people they would prefer: (1) 200 people would be saved, or (2) a two-thirds chance that everyone would die and one-third chance everyone would be saved. The physicians chose the first option over the riskier alternative, despite the same expected outcome. But when option 1 is reframed as a response that leads to 400 deaths, the over­whelming preference shifts to 2, the previously rejected alternative.

It is to help correct for these inescap­able limitations of personal judgment that we are increasingly turning to decisions based on “the facts.” Fact-based decision making has be­come an antidote to everything from the evolutionarily imposed handicaps of our natural endowments to the or­ganizational blights of sycophancy and groupthink.

But for every demonstra­tion of the power of number crunching and dispassionate analysis, there is an equally compelling illustration of the putative superiority of the knee-jerk. We are told that complexity and uncertainty limn the boundaries of fact-based decision making, and that the rigors of the scientific method leave answers to the most compelling questions forever beyond our reach. Yet if we trust our spider sense whenever the object of our in­quiry won’t fit neatly into falsifiable hypotheses, we give unjustified prece­dence to a cognitive apparatus evolved several ice ages ago that is easily mis­led by the complexities of today.

Result: we find ourselves on the horns of a dilemma. The big questions that command our attention lie beyond reliable methods, while the questions we can tackle with confidence leave our most profound itches unscratched. How shall we respond?

Perhaps a good place to start is in accepting the limits of reductionism. For now, at least, attempts to understand an organ­ism, ecosystem, or organization solely in terms of its cells, niches, or functions are doomed to fail because we cannot describe complex systems in terms of their parts. We must build a narrative—a layered, nuanced story of the inner workings and interdependen­cies that account for the behaviors and outcomes we observe. We try to make sense of the world around us, explaining everything from years-long trends in market-share shifts to yester­day’s stock-price fluctuations, based on what we think we know.

Determining whether or not these narratives are “right,” in whole or in part, is not the sort of thing that traditional scientific hypothesis testing admits. It is rare that one can collect or even imagine the kind of evidence that would cause us, at a stroke, to abandon one carefully constructed framework for another. If you believe that your orga­nization has been successful for the last 10 years because of its differenti­ated position in the marketplace, it will—justifiably—take more than two or three quarters of poor performance to convince you that a change in strat­egy is required.

However, by the time the data are convincing, it is often too late to respond effectively. And if neither our intuitions nor the facts can reveal what is happening in a sufficiently timely manner, the horns of our dilemma are pointier than ever.

I have provisionally settled on the view that rather than believe that we need a single narrative that unifies our experiences, we should carry multiple narratives simultaneously, continually updating our assessments of which is most likely to be right as new data points become available. Need to understand why your company is successful? En­tertain the possibility that you’ve just been lucky, as well as acknowledge your carefully constructed and dili­gently executed strategy. Think about what sorts of future events would lend more credence to one explanation over the other, and interpret what happens through both lenses. Never fully aban­don either narrative, and be willing to entertain new ones.

In short, maybe the best hope for purposeful action based on a meaningful approximation of the truth is to abandon the pointless quest for a single version of it.

About The Author

Michael E. Raynor

Michael E. Raynor is coauthor of The Three Rules: How Exceptional Companies Think (Portfolio/Penguin, May 2013). Raynor is a director with Deloitte Services LP and the Innovation theme leader in the firm’s Eminence function. In addition, Raynor is an advisor to senior executives in many of the world’s leading corporations across a wide range of industries. His client projects and research focus on questions of strategy and innovation.

The mismeasure of management