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23 June 2018

Targets

Tag(s): Business, Current Affairs
This is my 400th blog. I started writing them nine years ago on the 20th June 2009. I have written 575,000 words on a variety of subjects, possibly enough material for five or six books. Indeed I have published two books using material from these blogs and may publish more. In the beginning my purpose was to seek to drive traffic to my personal website and that to some extent has happened but in the process the blogs have taken on a life of their own. A regular readership has developed and I sometimes get feedback from total strangers who have found them somehow on the internet.

Which brings me to the subject of targets. I had an original purpose or objective but may have achieved a different result. My first proper job was as a Sales Representative for Procter & Gamble, not counting singing in the church choir, delivering newspapers, filling supermarket shelves, preparing airline meals , assisting at a NATO conference and delivering the Christmas post, all paid jobs I did as a school boy and a university student. One of the first lessons I learnt at P&G, a better business school than any university, was a process we called BOMMB. This was simply a restatement of the immortal Peter Drucker’s Management By Objectives. First you establish where you are. This is your Base. Then you set the Objective. Then you decide the Method by which you will achieve the Objective. Then you work out the Measurement criteria by which you will know that you have achieved your Objective. And this will bring you to a new Base where you can start the process again. Thus:-
 
                           Base
                           Objective
                           Method
                           Measurement
                           Base
 
 
 In the process of Managing By Objectives we must concentrate on outputs not inputs. Thus we assess the cleaner’s work by observing that the house is clean, not by watching her/him swish the duster and wield the broom. It is the absence of dirt that is our evidence. However, New Labour, obsessed with target setting, failed to understand this, no doubt because the people implementing the changes were not themselves experienced in the process. Thus Sir Christopher Meyer, former ambassador to Washington, writes in his book Getting Our Way: 500 Years of Adventure and Intrigue: the Inside Story of British Diplomacy, “In Washington as ambassador, I had to engage in an annual objectives setting exercise. I was instructed by London to put into my personal objectives a set number of public speeches for the year. There was no interest in their subject or audience. I plucked the number 35 out of the air. Fine, was the response.  At the end of the year I duly reported that I had met my quota. Well done, was the response.”[i]
 
 At least the objective was measurable. Setting objectives is easy in the sense that we are talking about the future and so anything is imaginable. But it is difficult in that an objective must follow certain criteria to be of any use. I was first taught the acronym SMAC which stood for Specific, Measurable, Achievable and Compatible (with other objectives). Later I learnt a more helpful acronym, SMART and this is what I now recommend. An objective should be Specific, Measurable, Achievable, Relevant and Time-based.
Thus:

Specific
Measurable
Achievable
Relevant
Time-based
 
We can combine our two acronyms as follows:
 
S
BOMMB
A
R
T
 
 If for example we are setting an objective in volume sales we might say: Objective: Increase volume sales of widget X. This would be measurable only after the event. It is not specific. And we can only know if it’s achievable by reference to other factors. Is it relevant? Probably, but only after a study of the status of this product. And is it time based?  Not so far. Then if we say, Increase volume sales of widget X by 20% over next calendar year this is specific (though a specific quantity would be even clearer). It is Measurable. It is Time-based. The other criteria again can only be answered in context.
 
 I have followed this process at various times in my career and have usually found it rewarding. When it wasn’t it was either because I did not follow it closely enough or I forgot to consider the other criterion in planning which is to follow your Plan B when Plan A for whatever reason does not work. After all as Mike Tyson said Everybody has got a plan until they get punched in the mouth.”

But setting targets over too short a time period can also be very damaging even if they are Specific, Measurable, Achievable, Relevant and, of course, Time-based. The public stock markets measure company performance over quarterly periods. This is simply stupid and very dangerous.  In both national policy and business, effective long-term strategy drives economic growth and job creation. Who says so? Well, for a start Jamie Dimon and Warren Buffet in a recent article in The Wall Street Journal. [ii]Along with Business Roundtable, an association of nearly 200 CEOs from major US firms, they are urging public companies to move away from providing quarterly earnings-per-share guidance. Although only about 4,300 of America’s 28 million businesses are publicly owned, these companies account for 33% of all private sector employment. They drive ‘job creation, opportunity and economic growth’. But companies often hold back on technology spending, hiring and R&D to meet quarterly earnings forecasts that may be affected by factors outside the company’s control, such as commodity-price fluctuations. The pressure means some companies with a long-term view avoid going public, to the detriment of the economy and retail investors. Eliminating the forecasts won’t eliminate all short-term performance pressures, but it would be a positive step.

Even more serious is the way targets are set in the health service. In a week when we learnt of the possible murder by Health Service staff of hundreds of patients in a NHS hospital it is salutary to learn the terrible way in which the private industry practice of managing by objectives has been badly adopted by the public sector in areas like the Health Service. I referred earlier to the Foreign Office’s incompetent adoption of this idea but at least no real harm was done. But in the Health Service, which mystifyingly the British Public seems to think is wonderful despite a new scandal every week, the practice is very harmful indeed.

Our doctors are paid very high salaries, and much of their pay is target based. If they put you on a new prescription they get paid more. So they prescribe too many pills. In just fifteen years the number of prescriptions issued by family doctors has increased almost threefold – an additional 600 million each year. Four times as many now take five drugs or more – almost half in their seventies and beyond; three times as many take ten or more.

Of course, most of these drugs are effective but none of them are without side effects. And while all drugs are tested before being licensed there are no tests of the effects of multiple drugs other than the experience in practice. Life expectancy is now declining after decades of increase and one reason is the potentially fatal, drug –induced complications (falls, confusion, bleeding from the gut).

The pharmaceutical companies must also take their share of the blame. They repeatedly exaggerate the benefits of taking their products. While a few may benefit by lowering high blood pressure or cholesterol the vast majority get only marginal benefits. There is widespread anecdotal evidence that many people regain previous levels of vitality and vigour by the simple expedient of forgetting to take their medicine on holiday and feeling much better as a result.  These companies are also driven by a target culture and have the problem of balancing the need to take a long term view in developing new products while satisfying the short-term demands of their investors. They are also more interested in developing products that patients will take for the rest of their lives rather than products which actually cure a condition.

But the real trouble set in in 2004 when the catastrophic Blair-Brown government agreed a deal with the GPs that they would in future be ‘paid for performance’. So the practice of oversubscribing became normalised as GPs’ income was dependent on their success in hitting over fifty targets for the numbers of patients diagnosed and treated for a given set of conditions. 90% of doctors believe this practice should be reversed though I am unsure if they also feel their income should drop as a result.[iii]


[i] Christopher Meyer (2009), Getting Our Way: 500 Years of Adventure and Intrigue: the Inside Story of British Diplomacy, Weidenfeld & Nicolson
[ii] ‘Short-Termism is Harming the Economy’ Jamie Dimon and Warren Buffet The Wall Street Journal June 6, 2018 
[iii] Source: ‘All those pills could be making you ill’ James Le Fanu The Oldie June 2018
 
 
 




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12 Rules for Life
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The Academy Awards
10 March 2018

Wellbeing in the City
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Small States
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The Circulatory Gap
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Carillion squillions
20 January 2018

Productivity (2)
13 January 2018


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