The McKinsey Maxim: "What you can measure you can manage." HOKUM!

In mid-18th century London a mathematical prodigy called Jedediah Buxton was taken to see David Garrick perform in Shakespeare's Richard III at the Drury Lane theatre. When asked whether he had enjoyed the play, his reply was that it contained 12,445 words. His analysis did seem to miss some significant things.

Have you ever had one of those Twilight Zone moments? I certainly did when I read the above opening paragraph. It's from a speech given in September, 2006 at the Annual Conference of the Australian Institute of Judicial Administration by New South Wales Chief Justice James Spigelman, entitled "The autistic school of management," (published October 9, 2006 in the Lawyers Weekly from Australia).

What's amazing about this speech is it contains the exact same thesis of my most recent book, Measure What Matters to Customers. In fact, the similarities are uncanny.

Here is what Spigelman says in his next paragraph:

The purpose of my address is not to deny the beauty of numbers. Nor their utility. My purpose is to emphasise, as Jedediah Buxton's reaction manifested, the inability of numbers to always identify what matters. Today Jedediah would be diagnosed as autistic. What I will be discussing could be called the autistic school of management.

I wrote practically the same thing in the opening paragraph to Chapter 10, entitled Measures That Matter:

Modern-day businesses are built on an edifice of numbers. The rationalists with MBAs and CPAs continue to widen their numerical abstractions of how a business should be managed, imposing this worldview on executives until management has transmogrified into an autistic science, dominated by numbers, rather than adding value and serving the needs of flesh-and-blood human beings.

A few of my colleagues who read the initial manuscript thought I should remove the autistic reference since it might offend someone. I certainly did not intend to offend anyone, but was trying to make a point about how obsessed the modern-day business is with measuring for the sake of measuring. Spigelman, apparently, struggled with the same issue, saying:

However, as that will, no doubt, offend somebody, I will revive a word that has fallen into disuse: pantometry, which means universal measurement—the belief that everything can be counted.

I introduced readers to this word in Chapter 5: Pantometrists: Counting for the Sake of Counting, writing:

In the sixteenth century, a new word appeared in English dictionaries—pantometry, which means universal measurement. Ever since, man has been obsessed with counting things, from people and sheep to the amount of cars imported and the number of McDonald's hamburgers served. Being able to count and measure is another one of the traits separating man from animals.

The famous quotation of Scottish mathematician and physicist Lord Kelvin (1824—1907) is inscribed—slightly inaccurately—in the stones of the Social Science Building at the University of Chicago:

When you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind. ...It may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the stage of science.

The problem for the pantometrists is the same one facing businesspeople today: what should be measured? Facts and figures do not provide a context, or reveal truth; we still need our imaginations and creativity. Lord Kelvin's statement cannot be expressed in numbers, but that does not automatically make it "meagre and unsatisfactory." If everything important has to be quantified to be comprehended, how are we to understand art, music, poetry, literature—indeed, our own human feelings? Indeed, one could argue the more valuable something is, the more likely it cannot be quantified.

Spigelman then presented his central proposition, which was precisely the inspiration for writing my book in the first place:

My central proposition is really quite a simple one—not everything that counts can be counted. Some matters can only be judged; that is to say they can only be assessed in a qualitative way. In some spheres of governmental decision making, the things that can be measured are the important things. In other spheres, the things that are important are simply not measurable. The law is at the latter end of the spectrum.

He's arguing against the metric mania as it has been applied to measure the "efficiency" of the court system in Australia, while I am arguing against the same mania in terms of what to measure in a professional knowledge firm (PKF). In a PKF, it's obvious that a judgment is far more important than a measurement, since the most successful characteristics of a professional cannot be measured.

How does one measure a doctor's bedside manner? Communication and listening skills? Pride, passion, professionalism? All of these have to be judged and inferred based on behavior and attitude. We kid ourselves if we think we can substitute measures for judgments, creating a sort of Greshman's Law: Useless measures drive out good judgment.

You do not change your weight by having a more accurate scale, or by weighing yourself more frequently. The purpose of my book is to provide Key Predictive Indicators, which allows firms to peer into the future. A KPI, in this context, is not just a measurement, it's a measurement guided by a theory—that is, a statement of cause and effect.

A traditional Key Performance Indicator is simply a measurement, like your weight. But a KPI actually says if you do this—diet, exercise, etc.—you can actually change the measurement. You don't become a better golfer by only keeping score. You have to change the process—your swing, attitude, timing, etc.—that produces the score.

Too many firms think by measuring a lagging indicator they can affect its outcome. Yet this is folly. This is the famous—I would say infamous—McKinsey maxim: What you can measure you can manage. This is not just nonsense, it's nonsense on stilts.

A measurement only allows you to look backwards. The only way to peer into the future is with a theory, and if you tie measurements to a theory, then you have a fairly powerful way to predict, control, or prescribe the future. The problem with all accounting information, especially the financial statements, is that it's a lagging indicator. As Reid Buckley (William F. Buckley's younger brother) pointed out in his wonderful book, Sex, Power, and Pericles:

Yesterday's profit and loss statement is as useful in foretelling what tomorrow may bring as poking about in the entrails of birds or dipping tea leaves.

I once met a consultant in Las Vegas who argued with me that everything can be measured in a business, and should be, since that's the only way to stay in control. I was baffled by his attitude, because we at VeraSage know that firms with more trust actually have less measurements, since their people do the right thing without micro-supervision.

So I pressed him, and asked: "How do you measure the success of your marriage?" He gave an answer that still makes my head hurt when I think about it. I'm paraphrasing here (trust me, I wish I would have had a tape recorder to capture this answer since many of you will find it unbelievable—hell, even I do to this day!):

Well, actually, I do measure the state of my marriage. My wife and I have a prenuptial agreement, whereby for every year we are together, 20% of our individual assets will be put into community property. So I guess you can say we are measuring the state of our marriage on an annual basis.

I asked him: "So, does that mean after five years, you've achieved marital bliss?" He replied, "Yeah, I guess so."

Not exactly Romeo and Juliet. But what do you expect from a metric-mad consultant?

Not everything that counts can be measured, and not everything that can be measured counts, as Einstein said. The United States of America's Declaration of Independence reads: "Life, Liberty, and the Pursuit of Happiness." These are not measurable goals. That doesn't mean we cannot strive for them, and make progress towards them.

Professional knowledge firms of the future need more understanding, trust and communication. To the extent they work on these processes, they will need even less measurement, since all who work there will do the right thing. To think you can control people with measures is to treat them like bags of cement you can manipulate at your will. It didn't work for the Nazis, and it won't work for partners in PKFs.

The most important things in life cannot be measured, and the more important they are, the less you can measure them. Rather than try to struggle against this basic truth, firm leaders should embrace it and unleash the potential of their knowledge workers.

The McKinsey maxim is hokum. I'm honored to be on the same page as Chief Justice James Spigelman. I only hope more of our colleagues will become more comfortable with judgments over measurements and thereby reject the folly of the McKinsey maxim.