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What’s So Wrong About Managing By the Numbers? March 21, 2012

Posted by Tim Rodgers in baseball, Management & leadership.
Tags: , , ,

I think many people have an innate bias against the idea that performance can be quantified and businesses can be managed “by the numbers.” I can only guess, but maybe this derives from a fear that this would leave no room for subjective and non-quantifiable considerations, and thereby reduce all management to reading a measuring stick. When faced with unfavorable or ambiguous numbers, these people reject outright the whole idea of objective measures and ridicule another failed effort; or at least become passive aggressive, ignoring the numbers and going back to what they “know works best.”

Businesses are complex systems and it shouldn’t be surprising that it can be extremely difficult to build a model that relates some number of controllable measures to “success” (in whatever way that may be defined). We would like to be able to say that if these numbers move in the right direction and exceed certain goals, then we have achieved success. The value in using numbers is that they are inherently objective.

But more than that, we we would like everyone in the organization to understand how their actions directly contribute to moving the needle in the right direction. That’s why divisions and departments and functions create lower-level performance metrics. In theory, if everyone meets their measurable goals, then we’re all pulling in the same direction. (In practice, the cumulative effect may be multiplied, not just added.)

If we don’t see the expected success at any level in the organization, that’s not a reason to reject the idea of a quantitative model to guide management. If managing by the numbers doesn’t work, isn’t that because the model of the business isn’t well characterized or understood? Shouldn’t we try different measures, analyzing the results and tweaking until we get a better model? What’s wrong with trying to express business performance on a less subjective basis?

Each team in U.S. Major League Baseball is scheduled to play 162 games during the regular season (not including playoffs). Regular position players who avoid serious injury can expect to have 400 to 700 plate appearances during the season, and starting pitchers can expect 20 to 30 starts with as many as 100-120 pitches per start.  Unlike most other professional sports, baseball’s relatively large number of events and statistically significant sample sizes makes the game amenable to using numbers to measure, compare, and predict performance.

Over the first 100 years or so of baseball history, team owners, general managers, field managers, players, and fans used measures that reflected a poor and incomplete understanding of what contributes to the desired goals of scoring runs, preventing runs, and ultimately winning games. The recent history of baseball has witnessed the growing popularity of more rigorous statistical analysis (sabermetrics) which now makes it possible to estimate the financial value of a player and the contribution of a single in-game decision to the probability of winning that game.

The problem wasn’t that baseball couldn’t be analyzed and managed with numbers, the problem was that the wrong numbers were being used.



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