Where does good decision-making in business come from? Mike Tuffrey debates the role of data and warns that companies are potentially wasting billions in their community investment.
The power of numbers is embedded in modern management…. The numbers speak for themselves. What’s the bottom line? If you can’t measure it, you can’t manage it. We use phrases like these all the time, albeit often with a heavy heart.
Comments this month from my colleagues help us come to terms with this. Mary Ellen Smith calls for quality in KPIs, while Charlie Ashford says radical transparency is both inevitable and an opportunity for companies. My own plea is for us to rediscover the power of balanced scorecards. First popularised in 1992 by Robert Kaplan and David Norton at Harvard Business School, they broaden the focus from historic profit to non-financial and forward-looking aspects. Crucially, they harness the numbers into a decision-making format.
At best, simple numbers can drive action. For example, in the Paris climate change talks, the two degrees tipping point provided the rallying crying for the hugely successful We Mean Business coalition of companies adopting science-based emissions targets. Likewise, if there hadn’t been hard numbers on the eight Millennium Development Goals, it’s doubtful much progress would have been made. (A debate for another day is whether putting indicators on the 17 SDGs and their 169 targets will prove equally effective – or simply topple the whole thing over. The omens aren’t good: the UN working group had a staggering 526 pages of metadata to digest at its March meeting in Mexico City.)
I recently made a plea to put more measurement on what companies are doing in the community. Research from Corporate Citizenship for a new paper on impacts (Hard Outcomes or Hollow Promises? Realising the True Impact of Community Investment) found fewer than half of companies are evaluating the benefits to communities, with barely one in four looking at the business case for such investments. By my maths, that’s tens of billions of dollars potentially being wasted.
Still, numbers aren’t everything. I say that despite my professional grounding as an accountant, very much still in recovery. The real question is what we do with the numbers, which ones we chose and how we interpret them.
So I’ll leave the last word on modern management to Plato, the Greek philosopher who pondered about measurement fully 2000 years before double entry book-keeping was invented: “A good decision is based on knowledge, not numbers.”
Mike Tuffrey is Co-founding Director of Corporate Citizenship.