Monday, 13 April 2009

How benchmarking success can lead to failure

A rich man decided to go on sabbatical.  He called is three employees together, gave them each custody of a third of his wealth and explained that he would be back in a year.

The first employee went to the casino and bet everything on red.   The second employee followed him to the casino and bet everything on black.   The roulette wheel spun, and the first employee lost everything whilst the second doubled his money.

In the meantime, the third employee carefully vetted potential projects, monitored their progress, and worked hard to ensure the delivered results.

At the end of the year, the rich man returned and asked each of his employees how they had got on.

The first employee explained that he had unfortunately lost all of the money entrusted to him.   The rich man fired him on the spot.

The second employee explained that he had doubled the money entrusted to him.  The rich man was ecstatic.   He immediately promoted the second employee, making him his most trusted advisor, and said that he would make no future decisions without first consulting him.   He berated the first employee for not being more like the second.

The third employee explained that he had earned a respectable 15% return on his investments.  The rich man was unimpressed.   He told him he could keep his existing job, but that from then on he would report through the second employee, and would have to do everything that the second employee told him to do.

Our society idolises success.   Often at the expense of understanding what causes it.   We often fail to analyse when it is driven by "common causes" (hard work, discipline, etc.) and when it is driven by "special causes" (good luck, etc.).   We try to emulate the outcomes of success without understanding inputs.  We look for quick and easy solutions to complex problems.   We fail to account for survivorship bias in our analysis of the results.

A university professor of mine once described a piece of research  he'd done where he'd analysed which companies had used which methodologies (balanced scorecard, six sigma, lean manufacturing, etc.) to see if the methodology used could be correlated to their success.   He concluded that it could not.   However, he noted that some companies seemed to be successful with any methodology they used, whereas other companies seemed less successful regardless of which methodologies they used.   He concluded that some companies were simply more deligent, disciplined and better at executing than others.

You will probably recognise that the story above is (quite heavily) adapted from the Bible (if you can recall the reference, please post it in the comments).   A better analogy would probably be to the story of the hare and the tortoise.

We need to stop celebrating the few brilliant successes, and start understanding the many, ongoing, regular, repeatable, less glamorous successes.   It may not make for attention grabbing headlines, or be easily reduced to 140 characters, but in the long run, it will deliver the results that we need.