Michael D. Moberly March 16, 2012
There’s probably little argument among business decision makers and management teams as to continued relevance of 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 above quote is widely attributed to Dr. W. Edward Deming. In point of fact, what Dr. Deming did say was a little different, 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 are not easily measured in an objective and replicable manner. (Adapted by Michael D. Moberly from ‘Management Thoughts’ by John Hunter)
While the premise of the phrase ‘you can’t manage what you can’t measure’ evolved as one of the lynchpins to many, if not most MBA academic programs, it’s remains unclear, at least too me, just how inclusive Dr. Deming intended his ‘running a company (only) on visible figures’ constitutes a managerial deadly disease. Was Dr. Deming 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, and I underscore may, have had little appreciation, at the time anyway, just how relevant that particular ‘managerial deadly disease’ would become in the 21st century when the much touted knowledge-based global economy would spark a such a significant shift. That is, most company’s value, sources of revenue, and building blocks for growth and sustainability (65+%) evolve directly from intangible assets rather than the conventional tangible (physical) assets.
What ultimately matters is, there is no other time in company governance history when identifying, unraveling, assessing, managing, and monitoring the value and materiality of intangible assets is more necessary, more integral, or more essential to a company’s stability, growth, profitability, and sustainability. And, this applies to start-ups, small, medium, mature, and maturing companies, as well as, large corporations regardless of sector or industry.
Today, as business decision makers and management teams endeavor to continually position their companies to remain competitive through stewardship, oversight, and management, the ability to identify and assess asset value fluctuations, losses, materiality changes, and asset obsolescence are important virtues.
With respect to the latter point, I counsel companies is to avoid devoting time, money, and resources sustaining assets that have experienced significant compromise, obsolescence, and/or de-valuation, unless, of course such problems can be effectively mitigated, reversed and recouped. That doesn’t necessarily mean the only remaining option is to summarily cast those 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 as much value and competitive advantages as possible.