Yesterday I posted a chart showing the total debt per person at the end of each administration going back to Eisenhower. Between my email inbox and the blog comments, I received a number of well-intentioned suggestions to 'improve the accuracy' of the chart. The problem is … every 'improvement' would have degraded the basic thing I was measuring.
Adjusting it for inflation, laying it out relative to GDP, average household income, netting it against savings and investments, netting mortgage debt against the value of the property, breaking out debt for entitlements versus discretionary spending … all have some value. All of them, however, cloud the answer to the important question: How great is the debt? It is a simple question; and it is an important question. It requires a straight answer.
If I am the CEO of America, Inc, I want debt per person to be low and to trend lower. Data that ignores some of the debt because I don't have complete control over it, rationalizes it, or data that seeks to blame it on my predecessor, or data that is more analytical in that it compares the debt to something in the form of ratios, or is adjusted for anything just makes it more difficult for me to know the essential truth.
Oh, I expect my VP of Government Spending and my VP of Consumer Spending to slice and dice and further parse the data – but only because such arithmetic may help the VP take action to improve the bottom line. But I don't really care about anything but the 'what' at the end of the day. He needs to care about the 'why'.
Five years ago I wrote an article called Manufacturing's Five Golden Metrics. Of all the things I have written it is far and away the most downloaded and read. It gets at this very same issue. There are five basic questions that need to be answered: How much did we spend? Did we deliver when the customers wanted us to? How was our quality? How well did the factory flow? Did anyone get hurt?
Most companies measure these things, but very few can give a straight answer to them. Consider the first question: How much did we spend last month? Can there be a more basic and more important question to ask of a business than that? In most cases, the top guy and the CFO have an exhibit buried deep in a stack of financial documents that goes to the board with a cash flow statement that they can find if you are willing to wait while they dig it up. No one else in the organization has a clue. Instead they have financial statements and budget variance reports with "actuals" that are actually a collection of allocations, assignments, accruals and transactions washing through the balance sheet that bear no resemblance to money actually spent.
Quality and delivery are usually adjusted numbers to take into account things people have determined are exceptions or beyond their control – delivery is to promise dates instead of request dates, customer returns are not counted against quality metrics because someone has determined they meet specs even if the customer doesn't agree, or the customer's customers have returned something for no good reason. Shipments made on Tuesday are not counted as a day late if the customer order came in after the UPS guy left on Monday … the list goes on and on For one good reason or another, every metric is 'adjusted', has complicated math and a lengthy explanation behind it.
Injuries are clouded with frequency/severity indices. If the injured employee gets first aid then goes back to work the injury gets one value; if he goes home for the rest of the day but comes back to work tomorrow, another value; and if he loses a full day of work or more yet another value. The answer to the simple questions of how many people got hurt, and is it more or less than last month, requires adding this number form this column and that number from another column, then flipping to the back of the report and adding in this other number, then doing the same with last month's report and comparing the two sums.
Cycle times are not measured at all. Instead inventory turnover – a cost weighted average is used as a surrogate for flow.
Look at it this way: Baseball is probably the most statistics-obsessed endeavor ever concocted, and sometimes you lose because of a bad call, because your star player was injured or because the other guy made a miraculous catch. Every manager knows, however, that having a very good explanation for losing is not the same as winning, and all that really matters is how many games you won. Adjusting the won-lost record for factors beyond the manager's control may make him feel better but it won't help him keep his job. And all of the baseball statistics are meaningless if they aren't used to help the manager make better decisions resulting in winning more games.
Pure, straight, simple bottom line results in the few areas that are important are metrics. Everything else is just data.