MARCUS: Metrics no substitute for management

Isadore Klosd is the guy who advises firms and institutions on the application of modern, rational management techniques. Behind his back, people call him the Metric Gnome.

“I find,” Izzy said one day, “when management has a problem and doesn’t have a clue what to do, they install metrics.”

“You mean,” I asked, “they give up feet, miles and pounds and go metric like most of the world?”

“No,” he said solemnly. “They install systems that measure inputs and outputs; they set quantitative objectives that fit together in support of specified organizational goals.”

“Right,” I said. “That goes by lots of different names, but they all are simply ways for management and workers to be clear about what is being done to achieve given outcomes.”

“Exactly,” Izzy said. “Instead of coming into a staff meeting and saying, ‘Our sales are down. What are we going to do about it?’ management calls in consultants to organize strategic-planning sessions. Then, after weeks of staff time, a set of outcomes is detailed in measurable terms and married to a set of specific staff behaviors.”

“I know,” I said. “I’ve done strategic planning with profit-making and not-for-profit organizations.”

“And what happens to those plans?” he asked.

“Well,” I sputtered, “exigencies intervene that negate the internal and/or external environmental conditions present at the time of the planning.”

Izzy stared at me.

“In plain English,” I said, “the heavy volumes of most plans turn into door stoppers. Not because the plans are inadequate—rather, they are inflexible or administered inappropriately by management.

“What should happen,” Izzy added, “is for management to develop or hire staff with decision-making skills and authority. The military is good at this. Generals draw up detailed battle orders, but good armies have capable field officers who often must react on their own authority to unanticipated unstable circumstances.”

“That’s all very nice,” I said, “but companies and organizations are not like the military.”

“Right,” Izzy agreed. “That’s because firms don’t put their employees through uniform, rigorous training. Most companies select from a work force that has a mixed quality of education. Instead of using this diversity as an asset, management today tries to impose ‘behavioral metrics’ on its workers independent of their individual strengths.

“Is this new? I asked.

“Yes and no,” Izzy replied. “The time clock has been around a long time, but today we ask experienced, responsible, mature people to detail their days on intrusive reporting forms. If they do not behave according to management’s dictates, they are in trouble. Individuality and innovative thought are crushed under such a system.

“Furthermore,” he said, “you see this when organizations impose ‘healthy’ behaviors on their employees. They do that to lower their payouts for health insurance, and become tools of the insurance companies.

“Bosses monitor their workers’ body-mass indexes. Not because they know a definite relationship between BMI and performance on the job, but because the insurance companies want to charge workers different fees for personal characteristics. It all appears proper if there is an observable metric.”

“But that’s what insurance companies do: They charge according to the risks they are assuming,” I said.

“If there were not an antiquated tax advantage to it,” Izzy said, “employers could be freed from providing health insurance and employees free to choose the health insurance they want. Then, if one insurer charges according to a BMI reading, the independent worker can look around for another insurer. But if BMI cannot be shown to affect performance, no company without totalitarian tendencies need know an employee’s BMI.”

I wondered if he was referring to IU’s recent announcement of its health insurance changes, but Izzy had drifted away.•

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Marcus taught economics for more than 30 years at Indiana University and is the former director of IU’s Business Research Center. His column appears weekly. He can be reached at mmarcus@ibj.com.