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Managing By Measurable Metrics Leads to Immeasurable Losses
- American economist Milton Friedman’s shareholder primacy approach made profit maximization the firm’s primary goal.
- This approach pays off today but hits hard later and has destroyed many businesses.
- In an effort to boost profits, Boeing’s CEOs squeezed its suppliers and believed that they should receive more value from employees and suppliers than they gave.
- Running a company on visible figures alone is like raising kids based just on their school grades.
- Ignoring everything that can’t be measured may be inappropriate, unethical, and impractical and it can destroy long-term value for the company.
- Creating value for customers and capturing value from them isn’t measurable. The value captured is measured in money while the value created is immeasurable.
- The additional value from employees, suppliers, and customers can’t be measured but it exists in the form of enthusiasm, creativity, loyalty, and support.
- Surrogates like customer satisfaction or employee engagement tell little about those real people’s thoughts and feelings.
- In order to capture this additional value, create extra value in the form of attention by talking to customers and employees.
- Never rely solely on numbers when it comes to people. You can’t measure them with a flat ruler.
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