Sales, Marketing, Banking – the measure is the rule and are we right?

I have just come across a piece of information that I have known to be right but due to MBA’s and Executive pressure surrounding me I have never managed to push through the misguided principles. Groupthink is a known problem in business, the passion to have consensus is so great that finding a fast path using short sentences is key, regardless of whether all alternatives have been explored or whether the strategy even exists.

The piece I read that cause me to write is:

“The most important figures that one needs for management are unknown or unknowable (Lloyd S. Nelson, director of statistical methods for the Nashua corporation), but successful management must nevertheless take account of them.” [24] Deming realized that many important things that must be managed couldn’t be measured. Both points are important. One, not everything of importance to management can be measured. And two, you must still manage those important things. Spend $20,000 training 10 people in a special skill. What’s the benefit? “You’ll never know,” answered Deming. “You’ll never be able to measure it. Why did you do it? Because you believed it would pay off. Theory.” Deming is often incorrectly quoted as saying, “You can’t manage what you can’t measure.” In fact, he stated that one of the seven deadly diseases of management is running a company on visible figures alone.

Now I hope you, the reader have read that more than once as it takes a bit of sinking in to realise that this is an incredibly wise observation. The likes of Peter Drucker and Steven Covey took on the misquote, that is taught in management schools and now even vendor relations managers have a quota and a commission target.

When I was at AMD they insisted that the technical staff flew coach from Europe to Hawaii for the annual conference. The caused the personnel to fly out a few days earlier and use the additional time to try to handle the 12 or more hour time difference. Now, there are two ways to look at this, one that the visible costs were lower so the conference costs contained or two the additional team building that happened from the two days of fun were priceless for the business on the return to the day job. I very much doubt the accountants had a thought to the latter, and in this instance the actual value to the business of the lost weekend for the staff attending was immeasurably huge.

However, those were the days when Jerry ran AMD and his mantra was “People first and profits will follow” and the commitment the company he saw from all the employees was exceptional. Taking on Intel was not easy in later years (AMD had over 80k products and did not really join the PC era with full energy until the 80286 despite having 8088 and 8086 products) and that passion to drive as a global team was huge. It was truly work hard, play hard and all to the same ends.

There was a hiccup when Tony Holbrook took the reins for a while, but Jerry returned, pink suit and all and recaptured the passion to push on to the next hill. If an ex-AMDers from those days read this I am sure they will comment.

Then Jerry put Hector Ruiz into bat. At the handover, at some expensive location in the USA, Hector said that he would drive the company using “shareholder value”. At the time I heard this I was instantly deflated. The sales teams went back from that conference with little or no energy, no passion to make it happen, not va, va voom. As time went on it was about quarterly figures, making the analysts happy (something Jerry rarely did) and soon the checks and balances were in place and the SAP system funded at huge expense and the HR processes in place and the weekly reporting and the measure became the rule. No long term vision, the people were treated as automatons and simply given quartely targets and goals and measured on them alone. As Deming states, one of the seven deadly diseases of management is running a company on visible figures alone.

In my role as a consultant I have met many companies, just yesterday I met another who was panicing about the end of this month, its the end of a quarter and the push to close, to pull in, to stuff the channel, to drop the price, to promise the world is on. The customers have been trained to leave it until the end of the quarter, the sales people are measured by the end of the quarter and the measure makes the rule.

I suggest that the banking business went awry for this very reason. The personnel were being rewarded on achieveing their measures, measures that had no consideration for the immeasurable, and it was the immeasurable that defaulted and impacted a very measured result.

I would like to propose that, as per my earlier posts on an unrelated subject, that “Those who cannot remember the past are condemned to repeat it” – George Santayana, circa. 1906 p.28 Reason in Common Sense.

It would seem we really should look back to the past, take less notice of the management books of the present and re-establish that businesses are about people doing business with people and not doing business to meet a measure set by a capitalist financial system mainly run by bankers … did I say bankers, … oh, yes I meant bankers.

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