This year, 2011, is the centennial anniversary of the publication of Frederick Winslow Taylor’s autograph work, The Principles of Scientific Management. According to Taylor, almost every challenge management faced could be solved through the application of science. This view has become the staple of business schools for the better part of the last century, as a result.
Most small businesses—which, by the way, constitute the majority of all businesses in the U.S.—found the application of “scientific management” to be unduly burdensome. Many entrepreneurs lacked the training in the application of statistics or the time and energy to conduct “time and motion” studies when they knew—by the proverbial “seat of their pants”—that they could make a profit if they took this action or that one.
By the middle of the 20th century, another great voice in “scientific management,” W. Edwards Deming, was beginning to clear the air on the subject, a bit. While Deming certainly believed in gathering data and analyzing statistics in order to improve operations, he was also unequivocal about the limitations of “metrics” in achieving business success.
It was Deming who pointed out, for example, that “The most important figures for management of any organization are unknown and unknowable.” (Emphasis added.)
“The most important figures for management of any organization are unknown and unknowable.” – W. Edwards Deming
However, in the 1980s, along came the introduction of the “Personal Computer” (PC) and a plethora of software that enabled small businesses to collect, analyze, store and recall hundreds of thousands or even millions of data points. With the growth of computing power and falling costs of computer hardware and software, the collection of volumes of business data was soon within the reach of even the smallest of small businesses.
Even before the dominance of the Internet as a means for sharing data and collaborating across huge distances, many small-to-mid-sized business executives and managers had become enamored with the ability of computers to store and retrieve data. Even if they were entirely unaware of the pronouncements of Frederick Winslow Taylor, these executive and managers came to believe something along the lines of: “If we can collect and access enough data about our operations, we will be able to manage flawlessly.” The obsession with metrics had, indeed, come of age.
The mantra of the “Obsession with Metrics” crowd: “If we can collect and access enough data about our operations, we will be able to manage flawlessly.”
Another all too frequently heard proverb from the metrics-obsessed crowd is this: “You can’t manage what you can’t measure.” This, of course, has a tincture of truth to it, but is misconceived. There are all manner of things in which management is involved in “managing” in some way or other that are not not subject to objective quantification.
Here is a (non-exhaustive) list for your consideration:
- Corporate culture
- Customer relationships (we even have software that is supposed to do this!)
- Employee relationships (we have both software—human resource management applications—and entire third-party firms that engage in this kind of “management”)
- Customer loyalty (some companies even have “teams” or “departments” engaged in “managing” this aspect)
- Creativity / innovation
- Leadership
- Ethics
- Supply chains (especially the ‘relationships’ that really make them work; not just the inventory ins-and-outs)
Now, let me very clear here: I do not oppose the application of sound scientific principles to business when the application of such principles is done in an environment where cause-and-effect can be reliably demonstrated.
The correct statement is this one: “If you cannot define the ‘process’ and the theory underlying the cause-and-effect relationships in the ‘process,’ then you cannot manage it.” More importantly, if your theory is wrong, you will not get the results you expect.
“If you cannot define the ‘process’ and the theory underlying the cause-and-effect relationships within the ‘process,’ then you cannot manage it.”
This clear and correct statement explains why some companies actually see significant improvements in their business results after implementing new supply chain “management” (SCM), customer relationship “management” (CRM) or human resource “management (HRM) applications” while the vast majority of companies see little or no improvement.
Understanding your existing business processes (hint: it is likely they are NOT what you think they are) and tying them to a theory that will help you understand the cause-and-effect within your processes is not as hard as it seems. Nevertheless, most businesses fail to do so simply because they don’t know they need to do so! They think they already understand them—but do not.
That’s why no matter how many “metrics” they throw at the problem and—sadly—no matter how much money they throw at “fixing” things, they typically see little or no improvement in the things that really matter—like making more money!
There is a better way!
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