Measures of Management

As a line worker, your contribution is easily measured. Assemblies per hour. Forms moved from "inbox" to "outbox." Daily trading P&L. As a manager, however, your contribution is nebulous. Imortant, contributory, difficult, yes. But easy to measure, generally no. Yet managers are perhaps the biggest fans of productivity metrics. Reporting. Dashboards. These are the same people who have to sit their own staff down periodically and explain why their bonus isn't what the other guy's is. Unfortunately, when measuring themselves (or the managers reporting to them), the de-facto metric is simply calories burned. How many hours they were active for the business and how hyper they were during those hours. How many people they talked to, conference calls and meetings they popped into, and emails they read. How many fires they fought. How many tasks they assigned. All of this measures activity, but managers are compensated more than line workers, not just because they work harder. They are compensated for their rare ability to make good decisions. In my days as a manager, I've always measured my contribution in the number and dificulty of good decisions made per day. Retrospectively bad decisions should count for zero, but those decisions that were neutral to good should be multiplied by their difficulty factor, which in tern is a combination of several components including % of necessary information available, amount of analysis done, parties to be satisfied, and value at risk. The result of this calculation gives us a "business contribution factor." Sum this BCF across time and you get a standardized measure across all managers of the organization which is comparable. Moreover, plot it over time for all your managers and you can build yourself a "manager of managers" dashboard to monitor how each is doing. As managers develop, their BCF should appreciate just like a good equity.