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For 30 years people have been telling me that we should not measure people. Their argument is that as Einstein said, “Things that matter can’t be counted.” At a moral level he is right. But at a business level there is another side. I call it stewardship and it is not only your right, but your obligation.
The basic issue is money. Where does the money come from to run America? It comes from you and don’t you want your money to be used efficiently? When you open an account in a bank you deposit money that is lent to consumers to purchase cars and houses. You don’t want your money to be given to people who won’t pay it back do you? How does the bank predict that they will? It used to be in the olden days that the bank knew their customers. It was like George Bailey in It’s a Wonderful Life. He knew all the people in that little town. Well folks, unfortunately that idyllic 1940s America is now just a fanciful memory. The branch manager at my bank changes every two years or less so she doesn’t know me and must rely on data to make her lending decisions.
When you open a mutual fund retirement account you entrust their management with your money to invest in businesses, including the one you work in, if they see fit. You want your hard earned capital to reward performance; right? How do you reward performance if you don’t have some objective as well as subjective indices? Consider what happened in 2008. The banking community had all manner of metrics. If they had managed by the numbers we would not have suffered the collapse, but human greed over road the data. Too bad there wasn’t an automotive shut off valve when the numbers indicated bad investments. People need to be saved from themselves.
You rail against favoritism in companies and rightly so. How to you get around that? Your company, and hopefully the ones your mutual fund invests in, has a performance measurement system that is designed to monitor pay and bonuses. Why do you get mad when you read about companies that pay mega-millions to executives who perform badly? Don’t you wish their performance measures were more honest and reasonable?
When you pay taxes you give local and federal agencies money to provide services. You may complain that government doesn’t use your money efficiently or effectively to provide fire and police protection, maintain streets and offer needed social services, but how do you know if you don’t measure performance?
At the end of the day we are all stewards of someone’s money. We are morally as well as fiscally obligated to ensure that the money is used properly. To do that, we have to have objective metrics to support our subjective views. Who would claim that their views are always unbiased? Behavioral science has proven time and again that we favor someone we like over someone we don’t like, pretty people over homely ones, tall over short, thin over fat.
Metrics help bring us back to what matters: performance. When you are managing your company I hope you are good stewards of the money that my mutual fund has invested in it. I’m doing my best to help others become good stewards of your investments.
Dr. Jac
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Dr. Jac Blog 
