15 Unmeasurable System Conditions
Not Everything that Matters for Managing Well Can Be Reduced to a KPI
It is wrong to suppose that if you can’t measure it, you can’t manage it — a costly myth.
Deming, Dr. W.E., The New Economics, 3rd ed. (p. 26)A numerical goal accomplishes nothing. Only the method is important, not the goal. By what method?
Ibid. (p. 23)An unhappy customer tells his friends. The multiplying effect of an unhappy customer is one of those unknown and unknowable figures, and likewise for the multiplying effect of a happy customer, who brings in business (see p. 121).
Dr. W.E. Deming, Out of the Crisis, p. 12.
THE AIM for today’s newsletter is to share a brilliant post I came across on LinkedIn by Zuleika Marine about things you can’t measure with a KPI, yet are vital for determining the output quality of your organization’s products and services. Her point is on-point with a Deming view on leading and managing: not everything that matters for managing can be reduced to a KPI on a dashboard. Some of the most important conditions cannot be measured with figures, yet must be managed for nonetheless.
NB: This also has implications for those who are using OKRs…
I’ve reproduced them below with some comments and links to past newsletters where I expand on related aspects of Dr. Deming’s theory of management. If you’re new to this newsletter, it’s a good way to become familiar with the back-catalog of articles I’ve written.
So, let’s dive-in:
Fifteen Examples of Unmeasurable, Yet Vital, Conditions to Manage for in Your Organization
You can’t measure commitment, but without it, there’s no real quality. It costs you in errors, waste, and zero improvement.
CRC: This doesn’t just apply to the employees, but top-management. If there isn’t a commitment to a whole-system view of improvement, you’re reduced to frustrating cycles of local sub-optima.
You can’t measure technical judgment, but without it, defects get approved. It costs you in rework and customer risk.
CRC: To me, this means you have employees with significant depth and breadth of knowledge in how to create products and services that actually help customers. This is the outcome of creating an environment that respects their talents and rewards them for learning and sharing learning across the organization.
You can’t measure real learning, but when it’s absent, mistakes repeat. It costs you in stagnation and operational failure.
CRC: Following on #2, this requires diligent effort on the part of top-management. It doesn’t just happen, it takes deliberate effort and needs to be demonstrated from the top. For a good example, see this HBR article about how fast-food chain, Pal’s Sudden Service, builds learning into new manager training.
You can’t measure culture, but a weak culture normalizes mediocrity. It costs you in lost excellence and disengaged teams.
CRC: An old expression in my line of work goes: “Culture follows structure.” In other words, if you have poor management “bones”, no amout of laquering-on cheap fixes that don’t address system issues will hide the dysfunctions holding you back. The solution, as always, lies with top-management transforming themselves first.
You can’t measure workplace climate precisely, but when it’s toxic, performance drops. It costs you in absenteeism and attrition.
CRC: This follows #5: a big factor here is the corrosive effects of fear and adversarial competition that creates distance between people and results in a low-trust environment. Recently, a colleague wrote about being physically assaulted on an engagement, which is directly attributable to the climate that top-management allowed to build and go unaddressed. Someone had a bad day because they saw my colleague as someone who would negatively affect them by introducing changes they viewed less about help and more about control.
You can’t measure effective leadership with a KPI, but without it, chaos thrives. It costs you in turnover and lack of direction.
CRC: If top-management is guided in their decisions by poor theory, ie. relying on visible figures alone, they will become forever mastered by them, and their reactions will oscillate with changes in the figures. Effective leadership means an appreciation of how to lead an organization as a system, and everything that comes from this realization. See my series on the New Leadership Competencies for more insights.
You can’t measure ethics, but when it’s missing, people hide failures. It costs you in integrity, trust, and exposure.
CRC: I find this one aligns with how much fear is in the workplace that would motivate people to hide mistakes that could be systemic rather than report them so they can be corrected. I’ve written previously about an example from Katie Anderson’s book Learning to Lead, Leading to Learn, where she describes an experience her mentor, Isado Yoshino had early in his career at the Motomachi Paint Shop where he mixed paints with solvents causing them to not stick to cars. How you react to mistakes is a strong indication of your approach to management and leadership.
You can’t measure trust, but its absence leads to control overload. It costs you in time, bureaucracy, and duplication.
CRC: Deming classically explained this as the devolution of managers into inspectors of defects among their employees. This is driven from a visible-figures-only mindset and the belief that employees need to be strictly supervised or they will deviate from processes. A quick review of the Lessons of the Red Bead Experiment will help to dispel this myth.
You can’t measure adaptability, but without it, teams get stuck. It costs you in inefficiency and strategic delay.
CRC: This one is vital, and it reminds me of the concept of anti-fragility that was in-vogue a number of years ago, which is the paradox of systems increasing their capabilites in response to special causes of variation in their inputs. This comes from deliberate efforts to build feedback loops that promote learning and discovery of these effects instead of locking-down and avoiding them.
You can’t measure service mindset, but without it, customers walk away. It costs you in complaints and lost market share.
CRC: This goes directly to the quote I mention above where Deming speaks to the multiplying effects of an unhappy customer. This extends well beyond sales or service: poor policies that lead to being disinterested in helping customers creates problems throughout the system, where there is a lack of care or understanding in how others will use my work, which creates gaps. This also relates to Deming’s definition of quality, ie. a product or service that helps somebody and enjoys a good and sustainable market.
You can’t measure respect, but when it erodes, conflict takes over. It costs you in morale, turnover, and legal risk.
CRC: If you create a culture of adversarial competition and inspection of defects through performance appraisals, you will create a low-trust environment where conflicts will arise. Once people understand it was never about their performance in the first place, it will be very difficult to regain trust and respect. You will get loads of cynicism for the effort, however.
You can’t measure communication quality, but when it breaks down, so does everything else. It costs you in misalignment and execution errors.
CRC: A common misunderstanding about a Deming view on quality is that it only pertains to the products and services you make. It is equally applicable to the quality of communication between and among management, employees, vendors, and suppliers. This is the realm of operational definitions and how we share knowledge.
You can’t measure team cohesion, but without it, silos form. It costs you in rework, friction, and miscoordination.
CRC: If you don’t view your organization as a system, the prevailing thinking of management will cause you to see parts absent of their interactions. A simple antidote is to draw a map of your operations, much as Dr. Deming did for the Japanese in 1950, of how everyone fits together as a system, rather than a hierarchy of direct-report relationships. The strength of a system lies in how well its components work together to satisfy its aim. Are you a bowling team, or a sophisticated business system?
You can’t measure sense of ownership, but when it’s missing, quality suffers. It costs you in carelessness and disengagement.
CRC: This cuts to the core of Deming’s view on Joy in Work, which is a direct consequence of top-management providing not only the fuel for intrinsic motivation of different employees, but also an understanding of why their work is important, and how it will be used by others in service of a customer need. Complementary to this is providing ways for employees to work with management to solve problems together.
You can’t measure sound judgment, but without it, poor decisions multiply. It costs you in wasted resources and strategic drift.
CRC: My interpretation of this is decisions made without the benefit of “profound knowledge” that Dr. Deming captured in his capstone theory, the System of Profound Knowledge, and his contemporary Peter Scholtes explained as the Six New Competencies of Leadership. Without this guidance, you’ll succumb to the Nine Faulty Practices of Management and the Seven Deadly Diseases.
What do you think?
Can you come up with additional unmeasurable yet vital things that must be managed for to add to Marine’s list? Have you observed any of her fifteen items in your own organization? What’s being done to address them? To what effect?
As always, drop your thoughts in the comments below — I’m always interested in learning from all of you, too!
Chris, Don Berwick once said, “No measurement has ever been about what we really care about.” Here in Brighton, MI it is time to renew our condo associations' landscaping contract. We have had a long-time relationship with our current service provider. A "freshman" fellow board member asked why we shouldn't put the contract out for bid. My response (below) which focused upon the "price tag only" approach, also points out the difficulty of quantifying key aspects of our (Board & Vendor) relationship, mirroring much of what you and Zuleika Marine wrote. Here is my note to my fellow board members:
"Our responsibility is not to pursue and obtain low initial cost, but to deliver the lowest total cost wherever possible. Many who purchase goods and services neglect the fact that what we pay for is the total costs that are incurred over time and not simply the initial price tag of the contract.
If we do put out a request for bids, we should, at a minimum, be sure to evaluate the costs associated with all of the following:
- A service that has been count-on-able, never missing a day
- A service that has learned our entire property and has learned how to manage it in both summer and winter conditions
- A service that delivers all of the scheduled mowing, trimming, hedging, chemical treatment and clean-up in all areas of the property
- A service that pays attention to predicted weather conditions, and does things such as send out crews to perform work early in the face of inclement weather salt before storm conditions reach us when appropriate
- A service that delivers prompt snow removal service throughout the entire winter season
- A service that prepositions snow removal equipment on our property to ensure faster snow removal times
- A service that rents equipment to be pre-positioned
- A service that is extremely responsive to owner, board and management company inquiries and requests (when salt prices spiked one year ESG had to pass along the higher costs. In the next year, they sheltered us from additional price increases because they had purchased extra salt supplies the previous year. Without our good relationship with ESG, we would have paid more)
- A service that is used by all associations in the area (except for NRH2, who is not known for maintaining long-term relationships with vendors)
- Investing years in establishing a good working relationship between management company, board and homeowners.
Before we go out for bids with any unproven and untested (by us) vendors, we should first determine the value we place on all 10 of these items and ensure that they are included in our total cost calculations.
From our own experiences and from the experiences of others, we know that the damaging effects of playing off vendors against each other include:
- Inferior quality performance
- Higher incidences of required re-work and thus higher costs for the management company or board
- Higher total costs in the long run
- Erosion of vendor efforts to continually improve
- Adversarial supplier relationships--vendors learn that we are not loyal to them
- Lack of trust--why should a vendor trust us if they know we do not value their good work and commitment?
- Supplier churn--once we go down the low-cost provider path, all there is is looking for vendors who bid-low and deliver what we pay for
- No loyalty--no more looking out for our interests like ESG did with salt prices
- Missed opportunities for collaboration and innovation--like pre-positioning snow removal equipment around the property
Acting in the best interests of our homeowners requires us to consider total costs and not simply price tag."
This is an excellent post. So much of this resonates with me. I have lost count of the number of times I've told people that then must be prepared to manage what they cannot measure (usually in response to the fallacy "you cannot manage what you cannot measure").