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The ROI Uncertainty Principle
Thursday, December 30, 2004
Statistics and target setting can be a farce, by Kenneth Armitage. Charles Goodhart, former advisor to the Bank of England postulates that, "Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes." Marilyn Stathern boils this down to: "When a measure becomes a target, it ceases to be a good measure."

Armitage concludes:
In the end motivation is not simply about achieving targets and money. In my view very few people are motivated solely by money. Most people want to be able to work in an area that is interesting and that stimulates them, that offers them opportunities for recognition and advancement and that increases their self worth through promotion and pay rises. Part of that process is to belong to a structure, an organization that has clearly defined goals or objectives, that has, perhaps, ethical and moral values and that makes the most efficient use of available resources by not setting too many confusing or unattainable targets.

I may have ‘over-egged the pud’ with examples but this area is important if you are to avoid unnecessary target setting, tie your staff up in red tape and figure chasing and risk alienating employees. Frankly, I have always believed that it is performance, through communication and commitment and not targets that are important and provided your employees are motivated and provided your products are what people want, are competitively prices and promoted then you may achieve what you set out to do. Perhaps one target to set is a reduction in targets and to introduce more active management and leadership!
This is not as mystical as Heisenberg's uncertainty principle; it's human nature.

Set simplistic targets and people inevitably game the system. School students study for the test. Managers work to make their numbers. Tis better to learn and to perform.

See also The Elusive Quest for the Catch-all Corporate Metric.


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