Seek simplicity, and distrust it — Alfred North Whitehead
The hackneyed phrase, “if you can’t measure it, you can’t manage it”1, points to a profound flaw in managerial thinking. Our obsession with measurement is based upon the erroneous belief that numbers can tell a story about the workings of an organisation. But they cannot. Measures are merely nouns. Stories need both verbs and nouns.
Consider the key metrics that executives use to formulate strategy: sales revenue, customer satisfaction, customer acquisition cost, productivity, gross margin, profit and loss, customer lifetime value, etcetera. They are all quantitive nouns — a rate of something, an amount of something, a percentage of something. As such, they can not describe processes or relationships. For that we need verbs.
Verbs describe actions. And organisations are teeming with actions. Sales revenue doesn’t suddenly materialise; it is a consequence of complex interactions, conversations, processes, and negotiations. Likewise, customer satisfaction is not some disembodied variable; it is a relationship between a buyer and the organisation, which can be enriched or trashed in an instant. And so on for every metric.
Interpreting the world only through nouns distorts it beyond recognition. A novel comprising only of nouns would be complete gibberish. Reducing organisational stories to just nouns is equally absurd.
In his brilliant essay, Economics in Nouns and Verbs, W. Brian Arthur2 describes some of the distortions that noun-restricted interpretations produce. Although he wrote about the problem of nouns in economic theory, his insights map almost perfectly to the microcosm of an organisation. I’ll introduce a few of them.
Anything to do with formation or process is left out
In reducing our discourse to nouns, we exclude important information about processes and formation. In noun-worlds we only see the quantitive changes in something — rises and falls — and build models around them. But noun-based models are mostly algebraic: if we change the variables x and y then we can change the result z. Subsequently, our thinking becomes algebraic.
For example, if we see sales dip, we might instinctively react by increasing advertising spend or replacing the lowest-performing salespeople: twiddling the variables. But sales are a result of complex causal chains. Many things can affect them, from changes in the product’s fitness landscape to negative interactions with other parts of the organisation. The simple ‘sales revenue’ noun does not capture any of the formative processes that lead to a purchasing decision in a customer’s mind. Those essential factors get excluded from the analysis.
Actions become hidden within unspecified linkages
When we link the relationships between an input and an output with a function, we obscure the story of the process. For example, the output of a manufacturing process can be expressed as a function of its inputs: its raw materials, its energy requirements, and its labour. If we want to increase the output, we just increase the input quantities — right?
Perhaps — but we have ignored most of the story. Most of the activity of manufacturing occurs within the domain of technology. By subsuming technology to a function, by always talking in terms of ‘productivity’ and ‘efficiency’, we unconsciously ignore the potential of innovation to increase output.
This is well understood by practitioners of Lean who go to great lengths to force verbs into managerial discourse. The vertical lines on a value stream map (above) represents the ‘story’ of a person or workstation whilst the horizontal line represents the ‘story’ of the product being created.3
Nouns become idealised conceptual objects
When we build our models with nouns we want those nouns to be generalisable. In doing so they become conceptual objects, not real things. For example, ‘the customer’ becomes an abstract object, a data point in a report, or a dashboard. The individual customers, the actual human beings with their myriad idiosyncrasies, are stripped of everything interesting about them and homogenised into a single noun. By obscuring the inherent complexity, meaningful analysis becomes impossible. The same can be said about an ‘industry’ or a ‘market segment’.
Discourses based on idealised conceptual objects will typically gloss over nuances. But the nuances, as Clay Christensen famously pointed out, are precisely where opportunities for innovation and disruption are the ripest: listening carefully to customers, tracking competitors’ actions carefully, designing and building higher-performance, higher-quality products for a particular niche.4
Including verbs in managerial discourse
To state the obvious, nouns — measures, metrics, KPIs, etcetera — are important. This piece is not a call to discard them. Far from it. Just as a novel comprising solely of nouns would be gibberish, so would a novel comprising solely of verbs.
The call is for executives to talk mostly in stories. Verbs and nouns.
This will require re-thinking the information that informs decision-making. Information is required that captures the complexity and intertwinedness of organisations — the processes and relations that give rise to events.
In its most cardinal form, such information is dialogical. Rich, ongoing discussions with employees, stakeholders and customers that reveal underlying causal processes, essential relationships, behavioural drivers, heuristics, non-rational actions, dynamics, tensions, conflicts, patterns ... information that tells a story about what’s really going on.
The measure of information quality is story precision: why are sales really dropping, why are some customers disgruntled but not others, what new technologies could best help us increase output, and so forth?
If our information is not telling us the story about what is actually happening, or what realistically might happen if we change something, then it is of little use to us.
W. Brian Arthur’s brilliant essay, Economics in Nouns and Verbs, can be found here
He also talks about the subject on the Complexity Podcast, here
This related paper by Tilman Hertz, Maria Mancilla Garcia, and Maja Schlüter is also worth a read: From nouns to verbs: How process ontologies enhance our understanding of social-ecological systems understood as complex adaptive systems
Ask via terimakasih0
Value stream map via Daniel Penfield
W. Brian Arthur, 2021. Economics in Nouns and Verbs, Papers 2104.01868, arXiv.org, revised Apr 2021
Shingo, Shigeo (1985). A Revolution in Manufacturing: The SMED System. Stamford, Connecticut: Productivity Press. pp. 5. ISBN 0915299097.
Christensen, Clayton M. The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. Boston, Mass.: Harvard Business School Press, 1997