Corollary to Problem with Measurement Focus

There is an interesting corollary to my view that the more important something is, the harder it is to measure. That corollary was stated here in an economic context:

There may be less here than meets the eye because of the application of what economists call Goodhart's Law, i.e. once an economic indicator itself becomes the object of policy, it losses the information content which qualifies it as an indicator. In the context of China's goal of maintaining GDP growth of at least 8%, this means that China will misallocate capital and pursue sub-optimal policies just to hit that target. This results in asset bubbles and wasted resources in the long-run.

These distortions are common in management as well. Engineers spend all of their time copying receipts for expense reports and filling out time cards, while the company lurches towards bankruptcy.

Software Developers Understand that People are not Machines

Some of the best ideas on management that I have read have come from the software development community. A large class of bad management practices insists that "what gets measured gets done" and assumes that management is as simple as measuring some variables and then tweaking the organization to get better numbers.

I wonder if the fact that software developers spend much of their time working with machines helps them see the differences between machines and people. If something is wrong with a program, I can attach a debugger and see what is going on. I have perfect information about the program and the program has no feelings as I inspect it and change it. For most programs, every time I run it with a certain set of inputs I get the same outputs.

All of this stands in stark contrast to working with people. The act of measurement itself has consequences even before the outcome is known.

I also wonder whether people in other fields that create or repair machines share the same insights. Maybe it is only people who don't work with machines that think people can be treated like machines.

How NOT to run a business

The Wall Street Journal has an article on How Bosses Stay in Charge. It describes how not to run a business. In this downturn, businesses have an opportunity to bring in very qualified people that they would otherwise not have a shot at. There is no such thing as overqualified. For a refreshing contrast, see this post. Relevant excerpt:

Phil Eagan recently reminded me of an investor meeting we did early in Viking’s history with one of our largest and most astute investors. I was asked about the commitment of Viking’s founders. I assured the investor that I was committed to our business. I also said that I believed that businesses must choose one of two paths. In the first path, the organization exists to serve the needs of the founders. In the second, the founders exist to serve the needs of the organization.

In the former, the founders maintain control. While they may delegate tasks, they make the key decisions. The founders may hire talented people to support them, but turnover will inevitably result as these individuals realize the limitations of their careers.

In the second path, the founders continually ask who in the organization is best able to fulfill each responsibility, without regard to title or tenure. As the talented new employees demonstrate their abilities, the founders will invite these individuals to share in the organization’s decision making process.

There is an irony in how these two paths are perceived by investors and other outside constituents. In the path where the organization revolves around the founders, constituents will take comfort in the perceived stability of the organization that, they believe, results from the consistency of the founders’ roles. But, I believe an outsider will underestimate the instability that exists at the levels below the founders.

In contrast, on the path where the founders exist to serve the organization, outsiders may perceive a level of instability. They will periodically be confronted with news that a founder has changed his role, ceded responsibility for some decision making, potentially reduced his work load or, possibly, left the organization altogether. However, if the organization has attracted talented individuals, helped to develop their skills and judgment, and established a process in which an individual’s merit determines the level of responsibility given, then the organization likely will endure. I believe Viking is this type of organization. I fully expect that, in the years to come, all of you will prove me right.

Management is the nervous system for the corporation

In a corporation, management serves the function of the nervous system in the human body--sensing what is going on and relaying information to the necessary parts. When a company skimps on management, you see pathologies that are analogous to nervous system disorders in humans.

It is easy to dismiss management as unnecessary overhead and therefore strive for a "flat" organization. But that makes as much sense as arguing that the nervous system is unnecessary overhead. Unlike muscle, it can't lift anything. It doesn't provide structural support like the skeleton or transport vital nutrients like the circulatory system. But when it is diminished, many challenging symptoms develop.

Hiring People Who Are Smarter Than You

Many people claim to hire people who are smarter than themselves; but what is the consequence of doing so? It is that they will be right more often than you are. So if you find yourself shooting down their ideas or correcting them,

1. You didn't give them the information they needed
2. This is one of the rare cases where you are right and they are wrong
3. You are wrong and don't realize it, because they are smarter

Find Out What's Going On In Your Organization

In order to effectively lead and manage any organization, it is imperative that the leader/manager knows what is going on in his/her organization. This feedback allows for for mid-course corrections when things aren't working out as planned. It also let's you know when your initiatives are being misinterpreted or ignored. When the organization is not implementing your plans, you have to find out why and figure out whether there is a problem with the plan or with how the plan was communicated.

Receiving quality feedback up through the chain of command is an age-old problem that can never be fully solved. There are fables of kings dressing as commoners in order to learn the true state of their kingdom. While this approach does not often work in modern organizations, there are many techniques that can help.

Culture. Try to create a culture that rewards accurate feedback. You can't make good decisions with bad information.

Channels of communication. Create multiple channels of communication for feedback, some of which should be anonymous. These can include blogs, email, voice mail, suggestion boxes, small group meetings, informal hallway chats, informal lunches, and the best of all, impromptu visits to various work areas. Pick a few of these and practice them regularly so that everyone begins to feel comfortable with them.

Response to feedback. When you receive negative feedback, model the appropriate behavior consistent with the culture you wish to create. Recognize that the lack of negative feedback indicates a serious problem in part of your organization.

Corporate Training and Culture

One thing that is often overlooked in corporate training is that, for better or worse, it is an important medium for conveying culture. It amazes me how little attention is paid to how mandatory internal training, especially for new employees. Don't tell me what your corporate values are--I can hear them loud and clear. Don't tell me how innovative your new product is going to be, and then harangue your developers for 90 minutes on the consequences of filling out their timecards incorrectly. If you are a manager, you must audit these courses to find out what your people are being told and whether the proper values are being conveyed.