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Not the Grammys or the Emmys–the Trusties: New Most Trusted in Business Lists

Trust Across America & the FACTSFirst of all, stifle that snarky laugh about awards for trust in business. Yes, trust in business is at an all-time low. All the more reason to identify best practices, celebrate them and help us to learn from them. And while most efforts at measuring trust fall short, there’s a new award ceremony in town and it’s looking extremely, well, trustworthy.

Why Most Trust Metrics Are Limited

Most efforts at measuring trust in business suffer from one of two difficulties.

1. Since trust is notoriously hard to define, one solution is to use survey data as a proxy. Trouble is, you can’t separate people’s propensity to trust from changes in companies’ trustworthiness. Bernie Madoff and the SEC didn’t change their trustworthiness overnight—but people’s opinions did.

Furthermore, survey data are extremely short-term. Opinions about institutions and companies are highly focused by the economy and by recent events.

2. The other solution is to get hard, objective data. But then, you’re stuck with the trust definition problem. You may be able to quantify accounting transparency—but is that all there is to trust? You may be able to quantify trusted twitterers—but what if the ‘most trusted’ twitterer turns out not to be the NY Times or Fox News or the President, but Justin Bieber?

Turns out data is cheap, but data that conforms with our common sense definition of trust? Priceless.

Introducing Trust Across America

Jordan and Barbara Kimmel of Trust Across America came up with an elegantly simple solution to the problem. They asked a variety of trust experts (disclosure: I was one) how to define corporate trustworthiness and then built a composite set of metrics to broadly reflect what they heard.

You can see the results here.

In brief, the model they developed is called FACTS: an acronym which stands for Financial stability and strength, Accounting conservativeness, Corporate integrity, Transparency, and Sustainability, with each factor evenly weighted.

The power of this model is that it is objective and quantitative, yet also definitionally rich. Don’t understand a result? You can dig in and find out how it came about. Don’t like the result? Then formulate a better definition yourself that you feel works better for your organization. It is a metric that is useful well beyond simply ranking.

I won’t spoil the fun, you can read the top ten list and top companies in sector. But I will give you a teaser—the top ranked US company, out of a field of 3,000, is from the oil industry.

Is Measurement the Enemy of Management?

Growing up as a cub consultant, billable hours were without question the defining metric in the consulting industry. It seemed obvious therefore, that achieving success would be dependent on increasing my billable hours. I was hardly the only young consultant to come to this obvious conclusion.

Fortunately for me, I found a mentor who took me aside one day and explained that billable hours shouldn’t be seen as a goal; instead, I should see them as the outcome of the quality of my work. In other words, if my work was good, there would be no shortage of hours. From that perspective, billable hours were an indirect and lagging indicator of quality.

His message was loud and clear: I should worry less about my direct output metric, and focus more on the principles, behaviors, and attitudes with which I approached my work. It was, in retrospect, the most important lesson of my consulting career and one too few others are taught.

In that light, two recent blog posts caught my attention. One was by Charlie Green, in which he recounted a fable with a choice between trust and measurement.   Another was by Chris Brogan, extolling the virtues of a trust agent at LinkedIn. The coincident timing of these two posts, with my own experience, drove the title of this post.

Is it possible that, as my mentor warned, we have systemically driven a wedge between the practice of good management and the tools of measurement? Has the relationship between driver and driven been reversed? Has the metric become the goal in itself rather than the outcome it sought to measure? Has measurement become the enemy of management?

 Management and Measurement

Of course, good measurement should serve management. It has always been an important element of managing, it tells the good manager where to look although not what to do. There is nothing intrinsically that sets management at odds with measurement until the manager uses the metric as a substitute for judgment. How many companies established arbitrary targets for reductions in force in the recent recession rather than gaining a broad and deep understanding of where capacity could be reduced without damaging long-term capability?

 I’m beginning to fear however, that measurement is replacing management. Several pervasive and tectonic factors have driven the two apart. One is simply, for lack of a better term, the modularization of business. Business process reengineering, supposedly invented 25 years ago, has taught us to break businesses into many pieces, and to achieve full scale economies (hopefully at a global level) in each of them.

That kind of approach demands that each module fit neatly with the next, the same way that couplers enable railcars to effectively and efficiently hook up and create a train. The “couplers” of choice have almost always been metrics. If we can specify measurements that our suppliers must meet, then we can have the best of both worlds – customization and scale. The more modularized our businesses, the more we manage by measurement.

Question: Did the folks managing the Deepwater Horizon rig think about the revenues and profit BP would gain from a safe and successful well in the Gulf and conversely the risk of a disaster? Or did they think about the bonuses that would go along with meeting budget and timing expectations for getting the drilling done and the rig moved?

Of perhaps more direct importance is that we have simply become more short-term and reward driven in business then we were 100,000 years ago when I was a pup. My fellow consultants who obsessed about their billable hours may not have had as much long term success in their individual careers as those who paid attention to quality and long-term relationships, but it seems that they have won the measurement war. The true tragedy is that the measures that may have merit when looking at a large scale organization, may destroy trust and relationships at the individual level. Charlie wrote about the dangers of measurement focus as it relates to sales and client relationships in his February 2, Business Week article, Metrics: Overmeasuring Our Way to Management.

The dominant belief systems today in business include “maximize shareholder value,” “if you can’t measure it you can’t manage it,” and “what’s the net present monetized value of that.”  Finance is the driving function of today’s business world; in my day, that claim was held by the value producers. Too often we drive for the metric itself, forgetting that the metric is supposed to measure something bigger, deeper, more important and fundamental. To use the consulting analogy, we are all focused on monthly billable hours instead of value for the client. “Pay-for-performance” has become shorthand for lazy management. If you assume that the numbers are everything, then you don’t need to dig beneath the numbers to find out their drivers.

Actually, I suspect it goes deeper. “Pay-for-performance” is also an expression of lack of trust. It comes from an unwillingness to trust others to do the right thing in a business context; what we view as risk mitigation is in fact a form of management by asphyxiation. Managers throughout organizations know that it is the metrics that matter…the overall outcome is incidental. We have replaced “no pain, no gain” with “no risk, no loss” when it comes to developing managers and finding creative ways to add new value.

To go back to Chris Brogan’s trust agents, does your company know who its trust agents are? Does your organization support, value and reward its trust agents? These are the people who chose door number one in Charlie’s fable….choosing to have the highest level of trust while giving up the ability to have it measured. 

So a question for the readers: Has measurement become the enemy of management? Or can we have it both ways?

The Trust Reader Volume 4

Greetings, and welcome to this month’s ebook, Volume 4 of the TrustReader. The TrustReader series announces the publication of new articles on the Trusted Advisor website.

This month, we lead with the effects over-measurement and value can have on a business. From the most recent Olympics, contest shows, and more we seem to be knee-deep in rating systems. But is it possible that the ever-growing need to rank our business practices and relationships can in fact be a deterrent?

The lead article explores this theme by looking directly at measurement itself. The other two articles reflect a similar theme; what we lose when we rely too much on abstract, quantified approaches to business.

In this edition of the Trust Reader Volume 4 we feature:

  • Metrics: Over-measuring Our Way to Management
  • Why Value Propositions are Overrated
  • The Point of Listening is Not What You Hear, But the Listening Itself

GET THE TRUST READER VOLUME 4 HERE

I welcome your comments, and hope your entry into Spring is as welcome as the warmer weather.

Metrics: Overmeasuring Our Way to Management

Contrary to the popular saying (“if you can’t measure it, you can’t manage it”), the ability to manage is not dependent on the ability to measure. 

In fact, overmeasurement has some serious downsides.

TrustMatters readers have heard this theme before, but I’m happy to say this time it’s being published in the Management Channel at Businessweek.com

Read the full article at: Metrics: Overmeasuring Our Way to Management

And have a great Wednesday.
 

Are You a Trusted Twitterer?

Measuring instrumentThose of you who love new social media and are measurement mavens, this blog’s for you.

Ever wonder how you’re doing on Twitter? Of course, you can’t miss the “followers” count at the top of your and everyone else’s twitter page. But, as you tell your fellow-twitterers, it’s not about the numbers. (Not that you’d turn down a doubling of your followership, of course…)

The urge to emulate former New York Mayor Ed Koch runs deep: “How’m I doin’?”

Well, courtesy of the Edelman PR agency  you can now measure your, well, your Tweetlevel. An interesting choice of words, because, well it’s hard to say just what’s being measured.

Measuring TweetLevel

Mechanically, you get a blended score of four attributes: Influence, Popularity, Engagement, and Trust. You can also get not only your own score, but the score of anyone else as well.

They tell you exactly how they compute each factor, and the total Tweetlevel. They also let you look under the hood, and and invite users to help improve the survey.

So let’s start by giving props. I’m no psychographic or statistics expert, but I’ve seen a few surveys, and this looks good. Note too that Edelman is perhaps the world’s leader in commercial trust measurement, authoring the Edelman Trust Barometer  for a decade now. CEO Richard Edelman builds conferences and speaking engagements around it. There are questions about any measurement of trust, but these guys are pros at doing trust surveys. It is a solid piece of work, and at the very least will raise good discussion questions.

Now for the fun.

Measuring Trust

Somebody hands you a ruler, the first thing you do is measure yourself. I clocked in at a TweetLevel of 43 (on a scale of 100). Higher than some, lower than others.

This blog is about trust, so that’s the one component on which I focused. My trust score was 39.9.

Now, just because I write about trust doesn’t mean I’m trusted. Oprah beats me. Her trust score is 64.5. OK, I can get with that.

Yet Oprah is surpassed by–Britney Spears! Spears sports a trust score of 68.7 Riddle me that one!

Now hold on to your hats; clocking in at third place, with a trust score of 95.7 is—Perez Hilton!  Of course. I should’ve seen it coming.

And hold on, in second place is—wait for it—John Mayer!  (In fairness, the NYTimes is number 5).

Why Measurement Mania is Death on Trust

It’s easy to lampoon surveys like this, but that’s only partly fair. The metrics for trust rely heavily on retweets, and on “via’s” (think of them as retweet derivatives, if you’re financially inclined). That’s not so crazy: number of citations is a decent metric for being ‘trusted’ in academia, for example.

I’ve written before  about measurement mania, the tendency in business these days to literally define management in terms of measurement (e.g. the silly phrase “if you can’t measure it you can’t manage it”). And I’ve written about the hazards of measuring trust in particular. 

The biggest problem comes not in the measurement, but in the subject matter.  So it is with trust. In the TweetLevel tool, trust is largely a function of how many people cite you. That’s perfectly reasonable. People definitely hang on Perez Hilton’s words a lot more than on mine.

But it does beg a huge trust question: trust Perez Hilton to do what? To say what? To behave how?  What is it that we trust about John Mayer–and is it the same thing as for which we’re trusting Oprah?

I trust my dog with my life–but not my ham sandwich. I trust Perez Hilton to tell me the straight poop in Hollywood–but not to show my daughter a night on the town. What is the object, the referent point, of the trust being measured?

Comparing trust metrics without defining the trust object is like comparing love metrics between a monastery and a brothel. By a perfectly obvious definition, the brothel gets a whole lotta lovin’ more than does the monastery.

In a sense, that’s right. And in another, ridiculous. Do we say a man with 5 marriages is ‘more loved’ than a man with one?  Is a parent with 5 kids more loved than a parent with one?  What is it that we’re measuring by using such metrics?

At this point, the numbers inevitably end up kind of looking like a popularity contest. There seems to be no referent point beyond the counting of incidents. Quality is overwhelmed by an onslaught of quantity. TweetLevel’s advice to increase trust scores is to get people to retweet you more. If everyone took this advice, Twitter would drown in derivative re-tweets. We’ve seen that movie before, on Wall Street.  It ends badly. 

On twitter, the mania to measure drives more empty-calorie retweets, which decreases original content, which ends in more retweet inflation as people try to game the game. 

It’s not that trust is ineffable, it’s just that it’s so contextual. Trust is a bit like obscenity; we know it when we see it, but that doesn’t mean we can easily define it, much less measure it. This is tail wagging the dog stuff.  The measurement system has a bad feedback loop to the content system; the mania for measurement ends up destroying the content it purports to measure.

Do You Want Meaning?  Or Measurement?

We can have meaning, or we can have precision. This is exactly the case in sub-atomic physics, where (as per Heisenberg) the act of measurement itself alters the thing being measured. It’s a perfect metaphor.

• You can say that you trust Perez Hilton to dish dirt, and Oprah to get real with you
• Or, you can say that Perez Hilton is 48.3% more trusted than Oprah
• But you can’t say one without rendering the other silly.

In accounting, there’s an age-old debate about how to define ‘profit.’ My finance prof Pearson Hunt said it the best: “Profit is–the bottom line of the income statement.” In other words: give it up; there is no one answer.

All you metrics mavens out there: when you get into the soft stuff, ask yourself: what is it you’re measuring? Is it the thing itself? Or is it some reflection of metrics in an infinite mirror? 
 

Meeting Your Customers’ Value Metrics

This weekend I read two things. Each influenced me, but the combination kicked me hard.

One was a post by Chris Brogan on website best practices. In it, he critiqued his own website, concluding that he had some work to do.

In my experience, most good professionals have good things to say, though they (we) are not very good at persuading their clients to listen to them. And the toughest client for all of us to convince is—ourselves. We are great at diagnosing issues in others; not so good at seeing the pattern in the mirror. Bravo Chris.

The other piece was by Jeff Thull. I’m honored to be one whom Jeff asked to review the 2nd edition of his classic Mastering the Complex Sale. I was impressed the first time I read it, and reading it on a plane ride Sunday brought on that same rush of ‘oh wow’s yet again.

To grossly over-summarize: Thull has written the book on how to sell (and buy, and manage) in an era where needs identification itself is too complicated for the buyer alone to determine.

Brogan plus Thull: what a combination. And that got me on the subject of value metrics and customer benefits.

What My Customers Ask Me: and What I’ve Been Answering

Most of my customers ask me ‘can you point to results of increased trustworthiness in your client organizations?’ And reading Brogan and Thull today, I had to admit: I’ve done a poor job of answering that question.

First, if I’m honest, I generally don’t raise the subject. If it does come up, I have as often as not steered the discussion elsewhere. “Trust itself doesn’t even have a universal definition, how can it be measured,” I say. “Over-measurement of trust can destroy trust; metrics are overdone; and if the trust is working, you’ll know it through some major metrics like revenue, cost and speed.”

Yeah, I know. All true; but I wouldn’t find it too satisfying either. It sounds defensive. What it isn’t, is collaborative and useful.

Ouch: hey Chris, was it this hard for you to admit your website could be improved?

What I Should be Answering

Great insights, I have found, are usually simple: rarely easy, but usually simple. Jeff Thull’s Big Insight is that most sales these days assume the client knows what’s wrong, and largely how to solve the problem. Hence most sales processes aim at teasing out needs statements from clients.

That is profoundly wrong, and has been for some time. David Maister said years ago that ‘the problem is never what the client said it was in the first meeting.’ The problem definition has to be developed collaboratively. And problem definition is just the barest beginning. Thull’s work is the mental and process roadmap for redesigning supplier-buyer relationships in their entirety.

In my simple small example, what I need to do is to engage my potential clients in discussions about how they measure value; what their metrics are; and whether (or not) my service offering affects those metrics. If there’s no match, it’s my job to explore with them whether the issue is their metrics or my service offering—all done with an attitude of curiosity and a willingness to be agnostic about the outcome.

So, one of the battlegrounds is measurement. I’ll start by getting rid of the ‘battleground’ metaphor and remember this is all about a joint exploration of how to fix the world, one little product and service offering and organization at a time.

Thanks Jeff for the structured big-picture thinking, and Chris for the cold water in the face. Once again, I have met the enemy and it is me.

To present, past and future clients of mine: let’s talk about how you think about the value of trust.

The Perils of Measuring Trust

 

The desire to measure trust is busting out all over. Some of it is due to management myths (“you can’t manage it if you can’t measure it”), and some of it is due to natural curiosity.

Do People Trust the Government More Under Republicans?

A great example is last Friday’s op-Ed in the New York Times, Imbalance of Trust, by Charles M. Blow. 

Says Mr. Blow:

…Americans seem to trust the government substantially more after a Republican president is elected than they do after a Democratic one is elected — at least at the outset.

Since 1976, the polls have occasionally included the following question: “How much of the time do you think you can trust the government in Washington to do what is right — just about always, most of the time, or only some of the time?”

The first poll taken in which this question was asked after Ronald Reagan assumed office found that 51 percent trusted the government in Washington to do the right thing just about always or most of the time. For George H.W. Bush, it was 44 percent, and for George W. Bush it was 55 percent.

Now compare that with the Democrats. In Jimmy Carter’s first poll, it was 35 percent. In Bill Clinton’s, it was 24 percent, and for Barack Obama’s, it was only 20 percent. (It should be noted that the first poll conducted during George W. Bush’s presidency came on the heels of 9/11).

The implicit assumption Mr. Blow makes is that trust changes quickly, and that polls reflect it; that the selection of a Democrat quickly results in low trust scores, while the selection of a Republican quickly results in high trust.

Or Do Democrat Administrations Build Trust in Government?

Let’s challenge Blow’s assumption.  Let’s assume that social trust–as many academics suggest–changes much more slowly than Mr. Blow assumes.  That in fact, questions like “do you trust the government” shift over a matter of many years–not a few months.  (See, for example, Professor Eric Uslaner, whose studies suggest that many forms of social trust evolve not only over years, but over generations).

Now let’s rewrite Blow’s paragraph—same facts, different implicit assumption:

…Americans seem to trust the government substantially more after a prolonged period of Democratic leadership than they do after Republicans have held the office—and the effect even carries over into the next administration for a few months.

Since 1976, the polls have occasionally included the following question: “How much of the time do you think you can trust the government in Washington to do what is right — just about always, most of the time, or only some of the time?”

The first poll taken in which this question was asked was when Carter had taken office, after eight years of Nixon and Ford.  In that poll, only 35 percent trusted the government in Washington to do the right thing just about always or most of the time.  Carter restored trust in government; when Reagan took over, that number tested at 51%.

However, after 12 years of Reagan/Bush, when Clinton had moved into the White House, it had been driven down all the way to 24% (Reagan did, after all, preach that government itself was the problem, not the solution).  By the end of Clinton’s two terms, that number had gone back up to 44%, of which George W. Bush was the beneficiary 8 months into his first term.

But with Republican Dubya at the helm for 8 years, trust in government dropped precipitously (Iraq, Katrina, et al); so far that the score early in Obama’s term was only 20%. 

Same facts: different assumptions. Who’s right? It depends. It depends on partly on how people interpreted that question, and even moreso on how long it takes people to shift their viewpoint on that particular question.

Trust is tricky. It’s not like measuring the temperature, or even political polls. The interpretation contains a lot more art and a lot less science than most simple surveys would suggest.

Interpreter beware.

Managing Trust Metrics

Trust is hot; particularly in the last year.  Measurement has been hot for the past 10 years.  So it shouldn’t be surprising that lots of people are getting excited about measuring trust.

The question they should ask themselves is: why?

One knee jerk management mantra these days is, “You can’t manage it if you can’t measure it,” or “what gets measured gets managed.”  Well, yes—and no.

Early (by which I mean 5 years ago) trust measurements included things like buyer ratings on eBay, and they made sense.  Today, measurement/management mantras get applied in undiscriminating ways.

Trust Trends: Precisely Measuring—What?

Consider the statement: Trust in CEOs is down.  Does it mean that people are less trusting these days? Or that CEOs are less trustworthy?  Or both, and the second interpretation caused the first?

And what do you do about it?  If people are less trusting, then fixing CEOs won’t much help.  If untrustworthy CEOs are the problem, then it will.  But which is it?

My accounting professor, Richard Vancil, when asked the definition of “profit,” replied, “it’s the last line on an income statement.”  Meaning it was a question with no good answer.

I think longitudinal trust attitude questions are much the same: what they measure is the shift in answer to a given question over a period of time.  The question itself isn’t clear, nor does it suggest clear policies.

How’m I Doing?  Measuring Trust Improvement is Tricky

New York’s Mayor Koch was known for asking ‘How’m I doing?’ at every juncture.  I don’t know how it worked for Koch, but it doesn’t work so well for trust.  

You can often measure things like quality (defects per million), or efficiency (output over input) with great precision, and with great frequency.  But try asking your significant other whether (s)he loves you, in myriad ways, every hour.  It won’t take long for the process flow approach to measurement to ruin the love you were so intent on measuring.  Not to mention: just how did you define ‘love’ anyway?  What would you do with the answer?

Measuring Trust to Drive Motivation Can Backfire

A common way to use metrics is to reward certain outcomes.  Applied to trust, this can generate perverse results.  Trust is partly about unselfish attitudes and actions–think about the ethical schizophrenia that results from using monetary incentives to encourage unselfish behavior.

The Best Trust Measurement Encourages Diagnosis

If measuring ‘trust’ alone is like squeezing air; if the act of measuring alters the measurement; and if incentivizing trust metrics can destroy trustworthiness itself; then what are trust metrics good for?

I think they’re good for a great deal—if defined in terms that respect the inherent breadth of meaning of trust, and in ways that allow concrete actions to be taken to improve trustworthiness.

Want to measure trust? 

Start by defining what you’re measuring: the capacity to trust, the quality of trustworthiness, or the presence of both.  (See Trust, Trusting and Trustworthiness). 

Then clarify whether you’re evaluating personal trust, organizational trust, or social trust.  (See Realms and Manifestations of Trust)

Then ask whether respondents will gain practical insights and actions from the measurement to improve their trusting-ability, or their trustworthiness.

At the risk of appearing self-serving, the Trust Quotient is an example.  It measures personal trustworthiness in 20 inter-related ways that provide self-insight to the test-taker, as well as offering practical suggestions for self-improvement. 

The Trust Audit  is another example, this one measuring trustworthiness at the organizational level.   It too uses 20 inter-related measures—not one—that together suggest specific opportunities for improvement. 

Measuring trust is not like other measurements: it’s less like measuring liquid flow or efficiency than it is like measuring love.  It deserves its own metric system.  
 

Day Trader Management

The NYTimes’ Joseph Nocera  wrote Saturday about the closing of Neil Barsky’s hedge fund, Alston Capital.  Barsky, it seems, is one of the good guys. (The same issue has an article titled “Hedge Fund Manager Accused of Fraud,” just so we keep things in perspective).

One of the reasons Barsky left the hedge fund biz after seven years was:

[he was] “tired of the ways the business had changed. “When I first started in 1998, we used to send out quarterly numbers. Now investors want weekly numbers. Professor Louis Lowenstein” — the iconoclastic and recently deceased Columbia University business law professor — “has a great line in one of his books: ‘You manage what you measure.’ ”

I for one wouldn’t call it a ‘great line,’ but the practice has certainly become widespread—and we are generally the worse for it. Let me explain.

If Measurement is Good, How Much More Measurement is Better?

Nocera provides another example of change, in his fascinating book Good Guys and Bad Guys.  In the mid-1970s (not that long ago for some of us) investors couldn’t be dragged out of bank savings accounts into new-fangled money market funds. Too risky, doncha know.

Fast forward to 1987, the go-go ga-ga days when everyone was focused on—daily mutual fund prices. Awfully risque.

But it’s not just finance. MBA programs and systems consulting firms have been pushing a hot product for some years now. It’s sold as efficiency, liquidity, process outsourcing–but at its heart is Lowenstein’s ubiquitous link between measurement and management.  More measures, more frequent, more detailed: equals better management.

If you can measure it, you can manage it; if you can’t measure it, you can’t manage it; if you can’t manage it, it’s because you can’t measure it; and if you managed it, it’s because you measured it.

Every one of those statements is wrong. But business eats it up. And it’s easy to see why.

I just got an iPhone app that lets me check my QuickBooks account. Now, of course, I crave my receivables data updated instantly, constantly, 24-7. Because I can. And because more is better. Isn’t it?

A consultant friend was about to be hired to help improve engagement survey scores for an executive’s team.  He tells me::

“In no time, you heard middle management’s attitude evolve; ‘OK, this group is going to meet its goals; we are not going to be the ones lagging behind on these numbers. We will be able to show measurable improvement in engagement.’ And so they were about to turn ‘engagement’ into another meaningless exercise in meeting the numbers.”

The ubiquity of measurement inexorably leads people to mistake the measures themselves for the things they were intended to measure. It doesn’t have to be this way–but it too-often is.

Even Malcolm Gladwell feeds the measurement frenzy. In his current New Yorker article How David Beats Goliath, he cites Vitek Ranadive. Ranadive has made a career of turning un-integrated batch processes into aggregated real-time processes—faster, more data-rich, integrated. He suggests the problem with national economic policy is that the Fed has to wait weeks for data.  Presumably if the Fed worked with real-time data, we’d have better economic decisions. Call it day-trading national interest rate policy.

If Barsky thinks weekly investment numbers for his hedge fund are too short-term, let’s hook him up with Ranadive. Set up the databases right, and we could all be day-trading hedge funds! And of course, there’d be an app for that.

Management by Measurement Isn’t Just a Financial Disease

If MBMM—management by massive measurement—actually worked, day-traders would outperform Warren Buffett. I think they don’t.

The US mortgage industry morphed from a web of relationships (banks, bankers, home-owners) into a global impersonal market of short-term transactions. More liquid? Yes. More efficient? Yes. Lower cost of funds? Yes again.

But today’s meltdown arose precisely because replacing lengthy relationships with multiple transactions, substituting markets for relationships, and metrics for management leaves nothing but short term, impersonal money at the heart of business.  The saying on Wall Street became, "I’ll be gone, you’ll be gone–do the deal."  On Main Street, it translates as, "just tell me you’re going to meet next month’s metrics."  It’s seductive, and it’s addictive.  And not good for business.

When hooked up to its kissing cousin incentives, MBMM is a powerful drug.  As incentives critic Alfie Kohn says, "Incentives work.  They incent people to get more incentives."  Like I said, addictive.

There’s nothing inherently wrong with measuring. Or transactions. Or markets. They’re fine things.

But undiluted and without moderating influences, they become not just a bad deal; they can be a prime cause of ruining the whole deal.

 

 

Success – and Measuring Success

How do you measure how much a loved one loves you?

Maybe by the flowers they send. Or the attention they pay to you. Or the look in their eyes when they talk to you, or their curiosity about what you’re doing lately.

You could, in fact, measure each one of those things. Some are easy, like flowers. Others, like curiosity, need decomposing into second-level indicators – how many questions they ask you, the operative pronoun in those questions. The point is, you could do it.

But would you?

Would you ever mistake the measure itself—roses, say—for the love they purport to measure? Of course not. It seems silly to equate the two; the poor sucker who does so is sadly self-deluded and likely unlucky in love.

Roses may be the measure of love–but are not love itself.

Now switch to business. How do you measure success in business? How about by the profits you make? After all, if you create great products that meet real needs in the marketplace and add real value in a customer-delighting manner—well, you’ll get rewarded for it, in the form of profits.

Profits are to business what roses are to love–measures.

So, would you ever mistake the measure—profits—for the success they purport to measure? Do profits really equal success?

Unlike love-and-roses, all too often our answer is ‘yes.’ Yes, we say, the whole point of business is to make profits. Success consists of making money. It seems silly, we say, to differentiate between the two–the poor sucker who does so is sadly self-deluded and likely to get fleeced by sharper competitors.

In amore, we know the difference between love itself and pale trailing indicators of its recent presence. But in business, we confuse the yardstick with length itself; we’ve lost the ability to distinguish maps from reality.

When did profit move from being a measure of success, to being iconized as success itself?

Thinking that the point of business is to make money is like thinking the point of living is to eat. Profit is a byproduct of doing great business—an indicator. Not a goal.

If all you focus on is roses, you’ll at least have flowers at the end of the day; but you’ll fail at love. In business, if all you focus on is profits, you won’t even get that. Because, simply, we don’t trust people who are only in it for the money.