Michael D. Moberly August 25, 2008
There’s probably little argument among decision makers in the adage ‘you can’t manage what you don’t measure’. In other words, unless you can measure something, you don’t know if there’s improvement or not and you’re unlikely to be able to manage for improvement if you’re unable to determine what’s getting better and what isn’t. (Adapted by Michael D. Moberly from AboutManagement.com ‘You Can’t Manage What You Don’t Measure’ by F. John Reh)
The aforementioned quote (‘you can’t manage what you can’t measure) is often incorrectly attributed to Dr. W. Edward Deming. In point of fact, what Dr. Demming did say was quite the opposite, i.e., ‘running a company on visible figures’ (alone) constitutes one of the (his) ‘seven deadly diseases of management’. Deming realized that many important things that must be managed cannot be measured, or, at least, in my judgement, measured as easily and as readily as say, tangible-physical assets. (Adapted by Michael D. Moberly from ‘Management Thoughts’ by John Hunter)
While the concept underlying the (‘you can’t manage what you can’t measure’) phrase, who ever it should be rightfully attributed, came to serve as one of the foundations for many a MBA program, it’s unclear, at least too me, just how inclusive Dr. Deming intended his ‘running a company (only) on visible figures constitutes a managerial deadly disease’, to be. That is, was he referring only to tangible assets and data, which are certainly Deming hallmarks, or, did he intend to include intangible assets, which, at the time, were hardly on many business decision makers’ or management guru’s radar screens?
I suspect, and most respectfully so, that Dr. Deming may have had little idea, at the time anyway, just how relevant that particular ‘managerial deadly disease’ would come to be in the 21st century when the much acclaimed knowledge economy would spark a global paradigm shift, that is, most company’s value, sources of revenue, and future wealth creation (75+%) now lie in – are directly linked to intangible assets (i.e., intellectual property, proprietary know how, trade secrets, competitive advantages, brand, reputation, goodwill, etc.) rather than tangible (physical) assets.
What matters is, there is no other time in company governance history when measuring, managing, and monitoring the value of assets, especially intangible assets, is more necessary, more integral, or more critical to a company’s stability, growth, profitability, and sustainability. And, this rule applies to start-ups, small, medium, mature, and maturing companies, as well as, large corporations.
Today, as decision makers’ position their company’s to better (and more consistently) measure and monitor (through stewardship, oversight, and management best practices) the value of their company’s intangible assets, they’re also able to identify and assess fluctuations, losses, materiality changes, and equally important, obsolescence of assets. Translated, the counsel I provide to companies is to avoid devoting time, money, and resources to maintaining – sustaining assets that have experienced significant compromise, obsolescence, and/or de-valuation. That doesn’t necessarily mean the only remaining option is to summarily cast them aside for a zero return. Rather, it means identifying ways those assets’ remaining value – use (potential) may still be leveraged, i.e., sell them, barter them, transfer them, license them, hold them, and/or explore ways to bundle them, perhaps with other assets, to extract value!