Andrew Hill in The FT
If there were a tournament for Peter Drucker’s best-known dictum then “what gets measured gets managed” would make it to the finals, even though nobody seems able to pin the saying directly to the Viennese-born management thinker. Repeated misattribution has gilded the truism and propelled it into the Management Maxim Hall of Fame.
En route, unfortunately, the assumption has taken root that everything can be measured. Worse, anything that does not submit to mathematical evaluation need not be managed, or is simply unmanageable.
This is the most prominent example of a widespread phenomenon: the tendency to pay more attention to hard facts, targets, outcomes and initiatives than to soft factors that are equally, or sometimes more, important.
Big data is hard. Culture is soft. Financial goals are hard. Non-financial targets are soft. Gender quotas are hard. Workplace inclusivity is soft. “Stem” subjects are hard. Humanities are soft. (Drucker himself described management as a liberal art.) Machines are hard — very hard. Humans are all too soft.
The Harvard Business Review tries to reconcile the hard-soft tension annually in its ranking of the “best-performing CEOs in the world”, measured over their whole tenure. Jeff Bezos wins every time. Except he doesn’t, because in 2015, the publication changed its methodology and added soft environmental, social and governance factors to its hard financial assessment, knocking Amazon’s founder from first to 87th. Mr Bezos has crept back to 68th in the latest ranking, topped by Pablo Isla, chief executive of Spanish retail group Inditex with its (soft) family values. I bet, though, that most investors would allocate capital on the hard measures of Mr Bezos’s and Mr Isla’s success.
The dominance of hard over soft is not uniform, though, and in a few areas it is receding. Would-be leaders aiming for MBAs have for years set equal, even greater, store on the value of the difficult-to-measure human networks they build during their studies. The hard MBA qualification itself has started to crumble, while employers increasingly stress development of executives’ soft skills.
Elsewhere, companies have finally begun to realise that feedback (soft) trumps forced ranking and even bonuses (both hard) when it comes to appraising and motivating staff. Governance codes now place emphasis on long-term success, healthy cultures and corporate purpose, offsetting boards’ longstanding deference to pure shareholder value.
Many of these pairs should coexist, of course. Too frequently, though, when a balance of two approaches would be best, the hard solution wins out as soon as pressure is applied.
In the classic tussle between long-term sustainability and short-term returns, too many directors and executives still obsess about hitting close-range targets. Purpose makes way for profit. The demand to compete overcomes any impulse to reap the benefits of collaboration.
Even if Drucker did not utter the “what gets measured” axiom, he had plenty to say about measurement. In 1955, he wrote in The Practice of Management how more sophisticated ways of gauging performance would enable managers and workers to direct their own work. But he also warned that if this ability were used to impose control from above, “the new technology [would] inflict incalculable harm by demoralising management and by seriously lowering the effectiveness of managers”.
Persuading executives to take greater account of soft factors requires a concerted effort. One approach is to play to their utilitarian preference for hard facts and try to measure the unmeasurable. The mania for measurement has extended beyond the production output and profit margins that could be assessed in the 1950s. Start-ups and consultancies frequently pitch to me with new ways of quantifying corporate culture, for instance.
Putting a number on the nebulous is one way to give soft achievements a hard edge. Reminding directors of the hard landing that awaits those who ignore, condone or contribute to rotten cultures is another.
At the same time, managers need to comprehend elements that cannot yet be recorded in 0s and 1s: the strength of team relationships, the importance of empathy, the value of intuition. Ingenious machines may one day put all the mysteries of human behaviour into a spreadsheet. I doubt it, though. This week’s Drucker Forum, in honour of the writer, will explore “the human dimension” of management. At least some of that dimension will always be difficult for chief executives to collect, crunch and codify on their digital dashboards. As a result, they must resolve to try harder to manage the things they will never easily measure.