Business schools throughout the world hammer into future business leaders the importance of data, analysis, and techniques to use data to shape behavior. The slogan “what gets measured, gets done” has become more than just an idea but a primary guiding principle for many MBAs who have become managers and executives. Consequently, data driven methodologies using modern digital technology like management by objectives (MBO), balanced scorecards, and six-sigma have gained popularity and wide acceptance. Clearly, behaviors can be influenced through rewards or punitive action taken based on performance data to yield improvement. However, history shows that the problem with action based solely on tangible data, with little regard for human factors, is that the vast majority of change or process improvement initiatives fail (as high as 80% in some studies) to produce long-lasting, permanent results.
- Why does this happen, when we know it before hand?
Unfortunately, too often, an unintended inference to the emphasis on data is “what cannot be measured, is unimportant” has crept into the subconscious collective mindset of many organizations. From my own research and discussions with leaders in business and education, a picture is beginning to emerge suggesting that key leaders seem to be either unable or unwilling to appreciate the value of intangibles that drive behavior and performance. Several recent studies of my own in illustrate this point.
Our study to gain insight into how national culture affect the success or failure of cross-nation ventures involving companies from different countries yielded insight into how executives factor cultural differences into due-diligence and implementation phases of a merger or acquisition. Results from this study indicated that executives were very aware of the importance of culture on the success of the venture. Yet they focused attention almost exclusively on data driven financial and operational issues. Vast amounts of effort was expended to analyze financial, operational, and market data in the due-diligence phase and to set firm, measurable, financial and operational goals for managers in the new venture with little actual effort dedicated to addressing the cultural differences. Despite knowledge that national cultures play a vital role in the success of cross-national ventures and that historically as many as 80% of these types of ventures fail, executives tended to ignore the intangible elements when it came to implementation.
- How can we explain this behavior?
I suggest that one possible contributor is that college graduates are being indoctrinated with an overemphasis on data-driven decision-making models and technical elements that emphasize memorization and regurgitation of data rather than the why, how, the big picture. A 1997 study by the California Commission on Teacher Credentialing found that 89% of high school and college faculty identified critical thinking as a primary objective yet only 9% included tasks in class that were clearly designed to promote it. Critical thinking involves identifying, analyzing, synthesizing, and evaluating information to yield actionable knowledge to make effective decisions. Colleges are turning out excellent technicians but poor innovative problem solvers who are conditioned to rely on digital data that defines the boundaries for thought. With the 90% who are conditioned technocrats, businesses are forced to try to train them to think beyond textbooks in finance, economics, computer programming, etc. to use their knowledge to generate action. For this 10/90 ratio to change, university curriculum must change to teach future leaders to connect the data dots between digital and human solutions.
Another contributing factor is the seduction of “big data”. With modern technology, companies collect massive amounts of data with the apparent mindset that more is better. Therefore, we struggle with the very human weakness of information overload that degrades information processing. Presented with the availability of massive amounts of data, people who have been conditioned with the notion of “what gets measured gets done” naturally fall back on what feels comfortable and familiar. So, business leaders ignore the “touchy, feely” because it makes them uncomfortable and cannot be measured, preferring to focus on hard data. The result is that correct data interpretations of data without considering the big picture organizational inter-relationships and intangibles contribute to the 80% failure rate.
- If critical thinking is so important then why aren’t colleges and universities doing more to develop it?
- Is “big data” really improving decision-making?
Another intangible getting much attention is employee engagement. Multiple studies have shown that organizations with employees who are committed personally and emotionally to the success of the organization enjoy superior success and superior value. They are better at digesting relevant data and creating something new from which emerge ideas and innovation. Yet, discussions with numerous business executives suggest a fundamental lack of understanding of what employee engagement is and, more importantly, how to develop it. In another study in which I am involved, we found that only 22% of the companies in the S&P 500 have the skills, or internal environment, needed to create new knowledge that translates into greater market valuations. Apparently, many companies are failing to create the environment that elicits the emotional commitment from employees from which emerge ideas for innovation, improvements, and teamwork. Therefore, many companies waste the vast resources committed to digital technology and “big data”.
- What can be done?
Peter Drucker promoted the concept of the knowledge worker but educational institutions appear to be failing to train future leaders how to THINK. College faculty should dedicate the time to employ techniques proven to help develop critical thinking like challenging logic on papers and actively embrace technology to engage students in online discussion forums to extend and deepen the thought process. Executives give lip service to intangibles like “culture” and “employee engagement” claiming to recognize the potential yet fall back on familiar processes and training that focuses on hard data. Executives must embrace intangible elements to develop initiatives designed to address them using creative, indirect, measures if need be.
The 21st Century world is and will continue to be increasingly driven by knowledge. Successful organizations in the 21st Century will commit to understanding that knowledge is multi-dimensional and considering intangibles alongside data with the confidence that long-term results will emerge in tangible terms of success and value creation. What you can’t measure … matters!
About the author:
Herb Nold is a professor of business administration at Polk State College, USA, and managing director of AgilityINsights USA, LLC.
2 thoughts on “What you can’t Measure…. MATTERS!
by Herb Nold”
Amazing insight on current skills/internal environments of many S&P 500 companies is limiting their ability to create new knowledge.
Big data does seem to be that “shiny object” that keeps attention diverted from the intangibles that can make the difference. At VLT, we’ve recognized the difference between organizations with too much focus on the measures and those that focus on tangible and intangibles. It’s an opportunity that many leave on the table.
This is an extremely timely piece and serves well to explain some of the ‘odd’ interactions I have had with various different organizations. It’s not just US firms that are suffering from this – how would you describe this adequately in a single phrase? – mental constipation? I frequently come across the ‘I know all that’ generation, who’ve read a little bit, think they understand but cannot apply more holistic and critical thinking. The recent stories about Amazon’s employment practices and the unbelievable level of appreciative support these received in one leading professional social media forum says it all.