The Unmeasurables

Pick a typical action-oriented decision:

1. Whom will you choose as your next partner?
2. Whom will you vote for?
3. Which CD will you buy next?

How are you likely to make that decision? My guess is that no-one would make any of these decisions on entirely numerical criteria. You might have included some numerical factors—e.g. 'height greater than 150cm' or 'jazz band with at least two lead instruments'—but I would imagine that you would also include at least one personal judgement criterion, such as 'personality that I would rate at least 8 out of 10' or 'any new CD by an artists whose previous albums I have been at least 70% satisfied with'.

If you're committing your future or your money to a decision, you wouldn't leave it to entirely numerical criteria. You might let Amazon recommend a CD purchase, but you wouldn't let a computer make your purchase decisions without consulting you first.

This refusal to make personal decisions on entirely numerical criteria makes me highly suspicious of any business decision-making tool which uses only numerical criteria. Would you buy or divest a business on purely numerical criteria? I hope not—there would presumably be many qualitative factors, such as your judgement about the degree of fit with your existing business and the calibre of its management.

But in my job, I see an increasing number of tools being proposed for internal usage which aim to produce a composite number out of a series of purely numerical factors. Some of these tools generate a number, and others produce a 'traffic light' colouration of cells in which the decision to go for red, amber or green is based on a number. Other tools promise to create a 'heatmap', whatever that is. Many of them lhave a passing resemblance to a half-hearted GE multi-factor Matrix.

What they all share is the implicit message that if you can't measure it, it shouldn't be a consideration in the invest/divest decision. They don't trust the client management to supply qualitative judgements on unmeasurable factors (such as 'quality of indirect channels') because they fear that these managers will adjust their input to get the result they require.

And yet proper use of the GE multi-factor matrix should always involve some input criteria which require qualitative judgement. People seem to think they can include what they like in these tools, without realising that their proper construction has some intellectual basis. For instance, the 'Boston Box' arose out of the Experience Curve, though I can't recall the precise connection at the moment. It must be time to finish.

Tomorrow I'll discuss these matrices further, or something similar, or perhaps something quite different.