Managing by numbers will ruin companies

(written by Lawrence Krubner, however indented passages are often quotes)

This is sort of in the category of people craving simple rules, like “zero tolerance”. It’s similar to the craving that leads to religious fundamentalism — a desire to ignore how complicated and messy real life is.

At HP, we were highly focused on results. As with the situation at Netscape, some things that you want to encourage will be quantifiable and some will not. If you report on the quantitative goals and ignore the qualitative ones, you won’t get the qualitative goals, which may be the most important goals. Management purely by numbers is sort of like painting by numbers—it’s strictly for amateurs.

At HP, the company wanted high earnings now and in the future. By focusing entirely on the numbers, HP got them now by sacrificing the future.

Note that there were many numbers as well as more qualitative goals that would have helped:

Was our competitive win rate increasing or declining?

Was customer satisfaction rising or falling?

What did our own engineers think of the products?

By managing the organization as though it were a black box, some divisions at HP optimized the present at the expense of their downstream competitiveness. The company rewarded managers for achieving short-term objectives in a manner that was bad for the company. It would have been better to take into account the white box qualitative and quantitative issues and reward only those managers that hit their numbers while readying the company for a strong future.