If gross miscalculations of a person’s value could occur on a baseball field, before a live audience of thirty thousand, and a television audience of millions more, what did that say about the measurement of performance in other lines of work? If professional baseball players could be over- or under-valued, who couldn’t? Bad as they may have been, the statistics used to evaluate baseball players were probably far more accurate than anything used to measure the value of people who didn’t play baseball for a living.
—Michael Lewis, Moneyball, pg. 72, in reference to what Bill James’ Baseball Abstracts revealed.
Think for a moment how often you have heard people say, “Because I know it will work,” or “He just seems to work harder than his colleagues,” or “She puts in more hours and thus is more valuable,” or even “I was told this by x person and therefore y must be the case.”
Like baseball, business is full of mystery and assumptions. Because we feel or think something doesn’t make it true. Because it happened that way in the past doesn’t mean it will happen that way in the future. Because a few customers have that perception doesn’t mean the viewpoint is accurate.
Most people who are misplaced in a job are misplaced either because they were the wrong hire to begin with, or because no one took the time to train them properly. (Note the “most” qualifier—there are certainly exceptions.) But how can we properly train someone if we don’t measure their performance accurately, with statistics that matter and contribute to the bottom line?
These questions can be taken one step further beyond people. If business success is intrinsically connected to profitability, cash flow, and net assets, why do businesses spend so much time talking about sales figures? Is it sales figures that really matter, or if we “win overall”? If it’s really about how much cash you need versus how much you have, then why is the focus on sales figures that are always manipulated by cost (which is a variable)? Shouldn’t the focus be the overall “money plan” that helps achieve the bottom lines that matter for sustainability and goal achievement? (I add “goal achievement” because I think businesses should be geared around some sort of “world change value”; money is only a means to an end.)
If the point of every position in a company is to contribute to the bottom line—both in terms of goals and cash—then employees should be measured that way. If an employee can make a customer happy, that’s a direct link to social capital—which itself should be measured—and connected back to that customer’s future purchases. If an employee ships a product early, that should be a credit to their value—and thus something they could leverage in a review—in the amount that they either saved on its cost or in the amount they contributed to the next product.
But what is Lewis really getting at? Businesses often don’t know the value of these things because they’re not tracked. And when they are, like hitting averages or errors, they’re skewed by the biased judgments used to create the stat category.
In business, performance stats are skewed because the measurements for business success and value are also often skewed. When business deals are examined, it’s often guesswork and it shouldn’t be. Measurable and testable risk management must be a core part of everything in business. For example, when divisions are examined, the focus is often individual products, when it should be the entire division’s contribution to the bottom lines, as well as the value contribution to the business as a whole. This should also be the case for divisions geared around service.
Economic result is what really matters: What does this do overall? I come to believe more everyday that this is the case for everything.
If there is more fundamental knowledge to be found in baseball, as the Oakland A’s proved, is there still more fundamental knowledge to be found in business? Is the greatest way to play the game still yet to be discovered? What are your thoughts?