35. Peter Drucker in his own words interpreted for small business 7
“What is measured improves”. Peter Drucker built this into a manegment system – Management by Objectives – but of course people have always set objectives. One early business example of using the principles of ‘what is measured improves’ is Alfred P Sloane at General Motors in the 1920s. He was an advocate of management by walking about, and he would walk around the production lines and began chalking the output volumes from each line on the floor. He did not have to explain and announce a new initiative; gradually the numbers started to go up as each production line saw that it was being outperformed by others.
This illustrates a further point: it is not just a matter of measuring, but those measurements have to be communicated. UK Government for some time, and probably overall quite rightly, has bought heavily into the philosophy of ‘what is measured improves’ and has introduced targets extensively. But in many instances these have become difficult to communicate either because they are not clear, too complicated and/or there are just too many. For instance I read an article recently about targets for local authorities which have over 1,000. Even allowing for departmental sub-sections this is far too many to be meaningful operationally, and with so many targets how likely is it that some will be in conflict with others?
But it is what you target which is critical too; anyone who has had to set a sales incentive scheme will know how easy it is to create unintended outcomes. If targets are the priority, people will distort what they do to achieve the target, whether the outcome of this is in line with or against organisational objectives. If you set a target for sales growth without any regard for profit, for instance, – and your sales staff have some control of pricing – then do not be surprised if you grow your sales but see no growth or even a reduction in profit.
We can all think of some targets that have had these unintended consequences – like the old saying: ‘Be careful what you wish for’. But the difficulties do not obviate the fact that setting clear and meaningful objectives will help you achieve the results you want – whether those objectives are for others or just yourself. If you work back from clear business goals through the priorities needed to achieve tham, it should be possible to set effective targets.