In Life, You Get What You Measure
Why ESG is the death of everything
I remember way, way back to 2019. The economy was booming under the steady, albeit “Twitter” happy fingers of President Trump. Interest rates on commercial loans were under 5% and the National debt was a mere 16.2 trillion. My company had just posted the best year of operations and 2020 started off roaring like a lion. By February of ’20, I was already planning my winter vacation in the Maldives with the bonus I anticipated receiving at the end of the year. In the United States, the Invisible Hand of enterprise had perfected the art of “just in time inventory” and customers could expect prompt service at low to no inflationary prices. Business was good for both producer and consumer in those wonderful, halcyon days of 2019.
The debate is open as to whether it was God or governments that decided we had too much of a good thing and that it was time to punish the unrighteous occupants of Earth. For all we knew at that time is that one of the two G’s unleashed a plague upon the world and the simple prosperity of 2019 abruptly came to an end. What is sure since the Covid-19 outbreak of 2020 is that the horrendous actions of governments in the wake of the pandemic was 100% responsible for the turn of fortunes for the post-pandemic economy that emerged. Record inflation, clogged supply lines, worker shortages and staggering national debts are all the results of governments and foolish leaders poorly educated on known sciences and economic principles. I could certainly argue the punishing scenario that ensued was the work of God. The God the sent his only son to be executed by Roman pantheists at the behest of the very Pharisees of his chosen people could very well put in motion a pandemic knowing that once again our government leaders would turn towards their own deities instead of Him for salvation. It kind of makes sense to me that this may be the case since we meat bags on earth are incredibly slow learners, so slow that I don’t think God dare mix it up with a new style analogy since we haven’t figured out His simple message of Christ lo these 2000 years.
Regardless of who the great mover was in launching the plague among us, the resulting reset ushered in an entirely new thing; the reset gave us unholy ESG (Environmental, Social, Governance) standards. And our economy is now suffering from measuring the wrong results that are ESG targets verses customer service, shareholder value and sustainable profit. For one universal truth of life is, we get precisely what we measure.
In the world managing organizations, you get what you measure. If you like to see cash in bank accounts, and you measure it daily, you will find you have cash in bank accounts. If you are a company built on managing time and tasks, you will find that you become very good at managing time and tasks. Colleges and universities used to measure knowledge. At the end of a four-year degree, students were measured for abilities to not only recite facts but defend broad and esoteric and scientific topics. Presumably that still occurs in medical school whereby graduating doctors still must complete their oral examinations, but for undergrad coeds, that ship sailed when diversity and equity administrative positions replace academic scholars in prominence on university campuses. For me, when it comes to measuring what I desire as a business leader, I choose not to measure time and tasks, I choose to measure profits.
Many have studied 3M’s 15% rule over the past decades as it has been in practice since 1948. This is a program whereby 3M encourages its employees to dedicate 15% of their time playing with personal interest projects instead of assigned duties. Post-it Notes, a billion-dollar idea, is one such project that emerged from the 15% rule. 3M’s position on this is that, though “play time” is impossible to measure in a time and task style of management, overall, the policy produces profit making ideas. Specifically, giving employees 15% unregulated time means that some people on the payroll could be playing solitaire on a work computer, surfing the web for home improvement ideas, or simply sleeping off last night's MN Wild victory over the Chicago Black Hawks! My point is, if a business culture is a time and task measurement endeavor, even though the 3M 15% rules has proven to be a positive policy because the marketable products that emerged from the practice out stripes the cost of potential idleness, a company will fail in such a policy implementation if its culture insists that time and task measurement supersedes profit and growth measurements.
Other companies have tried to emulate 3M's "free play time" policy hoping for the same types of game-changing successes. Google, Apple, and Patagonia have all implemented similar “free-thinking” rules with varying successes. Are these, and other companies successful at free time projects? Well, it depends on what their companies chooses to measure. If they are measuring results, especially results that develop into increase market share, and profitability, it's easy to measure the success of free time policies. If, however, the measurement is on time, tasks, and labor hour percentages, 15% rules will utterly fail.
Where I believe companies fall flat in these types of creative and potentially profitable endeavors, is focusing measurement on time and task instead of measuring the overall benefit to the company. I once worked for a company that had very rigid office hours. We were to be work at 8:30 AM and stay until precisely 5:30 PM. No questions asked, no leniency given, no excuses allowed. In fact, if one was five minutes late to the 8:30 start time, an official write-up hit your employee file that most definitely came out in the annual review. While I was at that company, many an afternoon, when I was completely out of work to do, I merely sat at my desk playing Solitaire or Hearts as I watch the minutes mercilessly tick away for the last hour of the day. However, if the job required me to stay late to work on project or come in on a weekend, there was no flex time given to the rigid 8:30 to 5:30 Monday through Friday schedule. That particular owner’s priority was to measure time and tasks, not activities and outcomes. If some read my recent post on Gravity Problems, this rigid time requirement was a gravity problem. There was simply no moving that innate mentality of measuring time. Managing time for this owner was simply more important and superseded the notion of improving efficiencies and profitability.
Running with the time and tasks management scissors for a moment, let's talk about another failure. Many have asked me what my opinions are of Work from Home (WFH) policies models? A quick search of my past writings on the subject will reveal that I have been somewhat critical on the subject. If I post my concerns for WFH models on social media sites, I immediately receive a deluge of hate from WFH advocates, mostly criticizing my fossilized type of thinking. My criticism of WFH was never directed towards workers working from home. It was always meant for the leaders of companies implementing such WFH policies while not adapting their measurement methods. Covid forced many companies to adopt a work from home environment as an effort to thwart the “existential threat” of that virus. My concern was not toward the employees but to the companies that did not modify their business plans to this entirely different working model. The companies did not modify their business models to foster collaboration outside the four walls of their stone and mortar buildings nor did that alter the measurement of work to accommodate the new paradigm. Sadly, these companies are blaming the WFH employees and calling them “lazy” when the real problem is in the company culture and measurement tactics.
I was merely pointing out that if the companies are in the mode of measuring time and tasks and have no means of collaboration internally with their own employees or externally with their customers, work from home will be a dismal failure. Now if a company has mastered a work from home support system for collaboration, for meeting company objectives, for ensuring profit, and for taking care of the customer, hells bells, have at it. Have at it, striking every resounding note on your way to customer satisfaction and profitability. But we know success isn’t the case in all WFH transiting companies so that is why the CEOs are calling workers back to the physical offices. WFH is failing at most companies because they cannot overcome the old standards of measuring time and tasks instead of achievement, growth, and profitability.
As company leaders march into a fresh new year, take time to focus on what priorities you are measuring. Because I guarantee you, that what you measure, will be your results. As the C-Suites are trying to put the WFH genie back in the bottle because they have realized that their culture is incongruent with their measurement strategy, a new and far more devastating measuring standard is emerging. ESG standards are all the rage and corporate board members now demand new measurement metrics for ESG compliance.
As companies start measuring their business activities for how they perform on financial incentivized ESG (Environmental, Social and Governance) standards, they further take their eye off customer and profitable objectives. Corporate boards across the globe now resetting their missions to measure how ESG affects “stakeholders.” Kings, Queens, Dictators and Tyrants of old had “stakeholders” as well within their realms but they simply called them “subjects.” But since Klaus Schwab started performing his annual Triumph at the World Economic Forum (WEF,) where he rides towards Davos in a gilded chariot as a conquering hero, business leaders have acquiesced to his worshipfulness as if he were a head of state.
To illuminate the lengths that corporate boards are going to measuring what they now deem as success, look no further then this recent post on LinkedIn:
Chief Diversity and Inclusion Officer, Chief Delivery Officer, Chief Growth Officer, and Chief People Officer? I haven’t a clue what these officers do, but I can guess that it has nothing to do with shareholder value, customer service or generating profit. But I do know that each of the vaulted positions comes with a new set of measurement metrics that justify their existence. ESG will not be our salvation from greedy corporations, it will be the death of everything. Because in the end, not only we will be measuring the systematic dismantling and decline of Adam Smith’s vision laid out in the “Wealth of Nations,” we will be documenting how ESG standards will return a free nation to serfdom.