Last week, Bill Gates published his annual letter, along with an editorial in the Wall Street Journal (link). In it, he discussed the way his philanthropic efforts have applied measurement to improve their effectiveness. In doing so, he brought one of the most important management innovations of the twentieth century to bear on the problem of solving human suffering. But measurement alone isn’t going to solve the world’s problems, and it won’t solve your organization’s either.
Management Without Measurement Is Stupid
Smart management applies rational, objective decision making to the inherently difficult tasks of making critical business decisions. Measurement makes management smart because it provides an objective feedback system that informs those decisions: without it, even smart people make stupid management decisions.
When you manage anything, you need an accurate gauge of success so that you can know if the changes you make are yielding real improvements. The major change introduced by the Gates Foundation and other similar NGOs is the application of a management approach that focuses on continuous improvement and clear objectives. Measurement allows them to learn and refine their techniques along the way, becoming more effective at each step. They can cut programs that don’t work and expand those that do because they have a feedback loop to tell them which initiatives are the most effective.
But that management technique isn’t effective without the right measurements. As Gates discusses in his op-ed, one of the first thing their foundation did was make sure to get metrics that were tied to outcomes rather than outputs:
Historically, foreign aid has been measured in terms of the total amount of money invested—and during the Cold War, by whether a country stayed on our side—but not by how well it performed in actually helping people.
For measurements to be effective, they need to be tied to outputs, not inputs. In the case of international development, that means reducing childhood mortality, not spending more on healthcare. For professional services firms, it means focusing on client outcomes, value delivered, and firm profitability, not billable hours.
Measurement Without Management Is Suicidal
Measurement is important because it informs management – it helps you learn and make decisions. But if you only use the measurement, you’re going to get precisely what you can measure, not what you want. That’s why the Gates Foundation is advocating for more well rounded teacher evaluations, that include direct observation, feedback, and actual management , rather than rigid accountability standards based solely on tests. Tests are a tool, they aren’t an outcome.
Without management systems in place like direct observations, conversations to provide nuance, and a focus on the broader picture, measurement alone will drive a company into the ground. Managing to short term profits pushes firms to under-invest in employees or research and development. Managing to client satisfaction scores instead of actual client satisfaction leads teams to game the survey rather than work on service, to the detriment of those relationships. And while managers are focused on the numbers, they’re neglecting the real management challenges they face, the strategic choices they need to make, and the micro-level experiments that will improve their firm. The measurement should inform the conversation, but it shouldn’t be the conversation.