You can’t run a business on numbers alone

“We know it’s impossible to run a successful business just with numbers because people aren’t predictable. We have to work with complex people, bring out the best in them, make them feel secure, encourage their creativity, inspire them to take responsibility when all the rules and metrics point the other way…”

David Boyle Authenticity (2004)

“What gets measured, gets done.” If you’re in management, you’ve repeated that phrase often. It flies around the world as a universal paradigm, an accepted nugget of wisdom.

Management today is all about scorecards, key performance indicators, critical metrics. The idea is clear: you can measure it all, and therefore you can manage by numbers.

The original idea came from Frederick Winslow Taylor decades ago – he of the famous stopwatch who went around measuring worker productivity. Since then, large businesses have tried to time and quantify every key process and activity, and log the results on scorecards.

Management guru Peter Drucker pointed out the flaw in this: you can’t reduce human activity to a single measure. You have to worry about how imaginative workers are and how much initiative they show – not just how quickly and efficiently they complete tasks. Drucker’s own framework, ‘management by objectives,’ tried to make business measurement more complete and systemic.

David Boyle, in the excerpt shown, points out the essential problem with all business measurement. You’re managing people, not machines. Sticking a bunch of numbers under their noses is not necessarily the best way to motivate them. Making measurement a central feature of management tries to bring pseudo-science to an endeavour that is more about working with emotion and sentiment than goals and targets.

I have watched this at play in dozens of large corporations I have worked with. People are set ‘stretch targets’ and then given financial incentives to achieve them. The result is often a chaotic mess of unintended consequences. Salespeople, for example, start engaging in all sorts of undesirable practices to hit their targets, including targeting the wrong customers, competing destructively against their own colleagues, and front-loading orders to boost current commissions.

Even at leadership level, a single-minded focus on numbers is highly problematic. Leadership is reduced to staring at targets and coercing everyone to hit them at any cost. Promotions are gained and careers terminated simply on the basis of target achievement. This works in the short run, but is immensely destructive over a longer period.

Management is an altogether more difficult thing than a mere tallying system. Have a key set of holistic metrics, by all means – but know also that there’s much more to business. The true drivers of long-term success are often the most intangible. One of the most important is ‘esprit de corps’ – the collective spirit that you can instil in a body of people. Another is the depth of emotional bonding with your products that you can create in customers.

Those two things will never show up directly in your scorecards; measures like staff turnover and repeat purchases will reflect them only partially and tangentially.

As Boyle pointed out, a focus on numbers makes managers look hard-nosed, but “what’s important in life or business can’t be measured. Love, loyalty, happiness, devotion, reputation are just not susceptible to numbers…”

A wise leader knows this, and is a student of human nature more than a devotee of metrics. The things that ultimately drive the numbers require deep insight and nuanced judgement. You have to be able to enthuse the collective and enjoin newcomers into a common mission; you have to be able to get into the minds and lives of your customers and connect with their inner motivations; and you have to be able to show daily wisdom in where to direct people and their energy.

Try putting that on a scorecard.

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