Amid all the reluctant truth-telling at the banking royal commission, one big lie has yet to be apprehended: shame-faced witnesses keep admitting they put their shareholders’ interests ahead of their customers’. Don’t believe it.
From the chief executives and company directors to those middling managers who seem to be the main ones being sent into the firing line, it’s not the shareholders’ pockets they’ve been so keen to line, it’s their own.
They’ve been jumping whatever hurdles they’ve had to clear to get the bonuses they were promised. Why would you rip off old people’s life savings for any lesser reason?
It’s a safe bet that everyone from the very top to well down has been “incentivised” with performance targets and bonuses. I reckon only the lowly would be lumbered with key performance indicators unattached to extra moolah.
It’s hard to imagine how so many seemingly ordinary, decent Australians were led to do so many unethical, dishonest, even illegal things for so many years without them convincing themselves it was normal bankerly behaviour – “everyone’s doing it; I don’t want to miss out” – and that by achieving the targets their bosses had set them, they were being diligent and loyal employees, worthy of reward.
But though the financial services industry must surely be the most egregious instance of the misuse of performance indicators and performance pay, let’s not forget “metrics” is one of the great curses of modern times.
It’s about computers, of course. They’ve made it much easier and cheaper to measure, record and look up the various dimensions of a big organisation’s performance, as well as generating far more measurable data about many aspects of that performance.
Which gave someone the bright idea that all this measurement could be used as an easy and simple way to manage big organisations and motivate people to improve their performance.
Setting people targets for particular aspects of their performance does that. And attaching the achievement of those targets to monetary rewards hyper-charges them.
Hence all the slogans about “what gets measured gets done” and “anything that can be measured can be improved”.
Thus have metrics been used to attempt to improve the performance of almost all the major institutions in our lives: not just big businesses, but primary, secondary and higher education, medicine and hospitals, policing, the public service – the Tax Office and Centrelink, for instance.
Trouble is, whenever we discover new and exciting ways of minimising mental effort, we run a great risk that, while we’re giving our brains a breather, the show will run off the rails in some unexpected way.
It took a while for someone to come up with the slogan antidote: “Not everything that can be counted counts, and not everything that counts can be counted”. Not everything that’s important is measurable, and much that is measurable is unimportant.
Trust, which the bankers had a lot of, is hugely valuable but hard to measure. They failed to notice the way their sharp practice – their attempt to “monetise” that trust – was eroding it.
And now they are reaping a whirlwind no KPI warned them was coming. If you work in financial services, don’t try measuring “esteem” or “reputation” any time soon.
I’ve long harboured doubts about the metric mania, but it’s all laid out in a new book, The Tyranny of Metrics, by Jerry Muller, a history professor at the Catholic University of America, in Washington DC.
Muller says we’ve been gripped by “metric fixation” which is “the seemingly irresistible pressure to measure performance, to publicise it, and to reward it, often in the face of evidence that this just doesn’t work very well”.
The glaring weakness of metrics and KPIs is how easily they can be fudged. Since most jobs are multifaceted, and you can’t slap a KPI on every facet, the simplest and least dishonest way to fudge is concentrate on those aspects of the job covered by a KPI, at the expense of those that aren’t.
Everyone from the chief executive to the lowliest clerk understands this. So why does the practice persist? Because bosses are just as busy fudging their targets as their underlings are. So long as your fudging helps your boss with their fudge, what’s the problem?
Schools fudge their performance on standardised tests by “teaching to the test” or even inviting poor performers to stay home on test day. Police services improve their serious crime clear-up rates by classing more crimes as less serious, or failing to record every crime reported to them.
Hospitals improve their performance by declining to admit people with complicated problems; surgeons improve their performance rates by refusing to treat tricky cases. Sometimes this means patients with big problems suffer delays in treatment, and maybe die. But this doesn’t show in the indicator.
Muller notes the obsession with measurement can get everyone focused on unimportant things that seem easy to measure and away from important things that can’t be measured. It can divert resources away from frontline producers towards managers, administrators and data handlers.
Worse, using money to motivate people tends to crowd out intrinsic motivation: taking a pride in doing your job well and giving customers or taxpayers value for money. It can distort an organisation’s goals and stifle creativity.
Measurement’s fine, so long as it’s used as an aid to human judgment, not a substitute for it.
