Ailment #10 – The Power of Not Doing

The saddest of all ailments is the one we call the Power of Not Doing. We recently observed a case of it at a Fortune 50 company. A senior manager was demonstrating what a great job her company had done on establishing measures. Company executives had signed up for a seminar to learn how to apply the Balanced Scorecard and had hired a consulting firm to help them create a world-class scorecard. They had invested more than $1 million in an automated scorecard solution to capture and graph performance. All of the supplier scorecards were posted on an internal Web site. One could quickly click through to look at the current measures and performance.

As she pulled up a scorecard, we randomly pointed to a measure and said, “This metric seems to be in the red [their scorecards used a color-coded system in which red indicated poor performance]. When was the last time your team discussed this performance with the outsource provider?” The response? She looked us straight in the eye and answered honestly that she had no idea. She knew the company had quarterly business reviews with its “top” suppliers, but the dashboard in question was not for one of these suppliers. We went on to ask, “How rigorously do you adhere to quarterly business reviews?” She was embarrassed to say that company executives were lucky if they met with their suppliers once or twice a year.

This case of the Power of Not Doing is not unusual – many companies have fallen into the trap of establishing measures for the sake of measures, and have not thought through how they will be used to manage the business. We’ve all heard the old adage that “you can’t manage what you don’t measure,” but if you don’t use the measures you have to make improvements – you should not expect results.

A variation on this ailment – harking back to Penny Wise and Pound Foolish —involves activities that the service provider does not perform, usually linked to common perverse incentives. For example, consider that fire departments often are funded according to the number of fire calls made. Obviously, this approach is intended to reward the fire departments that do the most work. However, it may discourage them from fire-prevention activities, which are not measured or compensated (according to Chapter 5 on “Fire & Rescue” in Local Government Finance Formula Grant Distribution – A Consultation Paper, published in 2002 by the UK Department for Communities and Local Government). In an article titled “Reinvention of Health Insurance in the Consumer Era,” published April 21, 2004, in the Journal of the American Medical Association, James C. Robinson pointed to another discouraging practice: paying medical professionals and reimbursing insured patients for treatment but not for prevention discourages early discovery and increases total costs.

Comments

  1. I like this point a lot. In the IT Support Outsourcing world we see a similiar dilema.

    When a company pays it’s technicians by billable hours, but pays nothing for preventative hours. The technician puts off preventative maintenance and works on customers that are having problems. This gaurantees the technician gets paid, but also gaurantees the highest to fix problems.

    I think of it like waiting until the engine smokes before changing the oil in the car.

    it’s important to measure and reward behaviour you are wanting to happen. In this posting, you share a great example of creating a system that gaurantees failure.

Speak Your Mind

*