I am always amazed at what executives (senior and junior) do to “manage” their organizations.  Are they brain-washed into a command and control mentality?  Or maybe it is a gene that has not been mapped yet.  Regardless, targets are the principle tool that executives use.  Maybe it is something in the leadership development program.

Budgets become the basis of all decision-making.  Executives claim that this is to ensure shareholder value.  In reality, it creates more unstable systems and sub-optimal performance.  Middle managers stuck with objectives that if achieved (by all) don’t guarantee that the company will make money.  Business improvement based on managing costs will almost always increase them.

Measures become focused on targets that are related to productivity and activity instead of purpose.  Management edicts of these top-down measurements/targets usually result in cheating.  For example:

“When I was the corporate purchasing manager for an industrial distributor.  I had the opportunity to increase my bonus based on soemthing called GMROI (Gross Margin Return on Inventory).  I could more than double my salary based on a high gross margin and a low inventory level.  I was not able to effect gross margin (sales function), but I was able to lower the inventory around bonus time.  I achieved an 80% bonus one year, but almost put the company out of business.  We had no inventory, customers were pissed.  I achieved my target at the expense of the organization.”

Unless measures are related to purpose they have no use and the purpose has nothing to do with the top-down, “command and control” hierarchy.  People’s engenuity is engaged in survival, not business improvement.

A better way is to take a systems thinking view, starting from the outside-in (customer view) they can then begin to see waste in their current system.  Systems thinking leads to an approach that allows design against demand instead of demands from the executive suite.  As waste is removed, flow improves lessening costs and providing opportunities for growth (innovation).

A systems view creates a compelling case for change and better design of work, measures and the elimination of targets.  Why eliminate targets?  A lot of reasons . . . they distort the purpose of the organization, create sub-optimization, prevent cooperation, promote cheating, and are typically focused on activity (wrong measures).