Measuring in two ways

Blog

6 April 2018

“What gets measured gets managed”, is a famous quote by Peter Drucker. Only when the management sets itself measurable goals and regularly checks whether they are on the right track, you’ll achieve what you want as a company. It’s also a good guideline for supervisory board members: “what gets measured gets supervised”. A supervisory board member can only supervise effectively if measurable targets have been agreed upon. Based on figures and objectively set criteria you can then regularly check whether the management is on the right track: turnover figures, production figures, absenteeism, costs, profit decrease or growth. These are clear indicators for success. At least that’s what we think.

That’s because all of those figures create a potentially deep pitfall. Measuring is knowing, that’s true. Unfortunately, you only know what you have measured. And that’s never enough. That’s a truth that is bitter and harsh, especially for supervisory board members. It’s also a truth that is rarely acknowledged. Indeed, gradually a narrow-minded habit has evolved to limit supervision to the periodic review of overviews and stats. The insight gained by supervisory board members is thus reduced to a tunnel vision on numbers, which are diligently produced like clockwork. Although this gives insight into the figures, it provides no insight into the organization’s actual progress.

The cognitive psychologist Robbert Sternberg has rightly pointed out that aspects such as wisdom, judgment, ethics and integrity are systematically ignored in the boardroom. These are concepts that don’t seem to suit young, fast-paced executives who make smart decisions in their smart suits based on smart figures. However, numerous social psychological studies show that qualities such as wisdom, judgment, trust and integrity are far more important for successful group behavior than insights into supposedly objectively measured achievements based on statistics. But how do you measure wisdom? What is ethical and what isn’t? How do you assess someone’s judgment? That’s easier said than done!

“What is the message for supervisory board members? Indeed, measuring is knowing. However, the topic of discussion should be what measurements must be done.”

What is the message for supervisory board members? Indeed, measuring is knowing. However, the topic of discussion should be what measurements must be done. When doing so, you should consciously discuss which other relevant elements that are perhaps more difficult to measure are important for the proper functioning of the organization. It must be discussed how these elements can be made measurable. If that’s not that simple, you’ll have to come to some other arrangement to make these crucial elements for healthy business operations part of your supervision. Fortunately there are ways to achieve this, namely by periodically putting these topics on the agenda and simply asking the question: does our organization have integrity? Why? How does that show? Examples please! The same applies to the assessment of directors and supervisory board members. Feel free to ask the director if he or she considers himself a wise person and where’s the proof of that. In other words: measure in two ways!

This blogpost is also available in Papiamentu. Click here to download a pdf version.

Do you have a question about corporate governance yourself? Please e-mail it to governance@ekvandoorne.com and perhaps your question will be discussed in the next blogpost.