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Chapter 12 ■ Diagnosing change
Achieving objectives is the accomplishment of the objectives specified by
managers in budgets, targets or corporate plans. These include profit,
turnover, market share, quality, delivery and many more. However, we need to
add resource utilization here. Merely achieving objectives, at any cost, is a
recipe for ineffectiveness, in the long run certainly and usually very much in
the short run in competitive markets or where costs are under close scrutiny
(say a police force in a city in which budgetary pressures are severe and creat-
ing impetus for ‘cuts’).
Maintaining the internal system includes activities and systems such as per-
formance appraisal, management development, training and reward systems.
The ability to attract and retain high-quality staff at all levels is crucial and forms
a useful indicator of effectiveness.
Adapting to the external environment includes marketing, product/service
development and public and community relations. How adaptable is the organ-
ization? What external reputation or image does it create? The ability to adapt
springs from generating income and confidence (through achieving objectives),
and developing invisible assets or learning, and through the attention devoted to
the internal system. Therefore, these factors interact. In monitoring effectiveness
we need to take account of all four factors: achieving objectives, resource utilization,
maintaining the internal system and adaptability. But what should we monitor?
There are a number of quantitative and qualitative measures available. In general,
quantitative measures help us assess the past, although we can establish trends
over time which may help us look at the future. Most importantly, quantitative
measures may have a tempting but rather illusory certainty about them. The
quality of a set of figures on, say, costs is only as good as the data input and the
assumptions (regarding, for example, overhead allocation) involved in the cost
calculations. Yet they can appear to be ‘hard’ data.
However, that is not the key point. All data have their limitations. The most
important thing is to avoid narrow, or even single, measures of effectiveness. A
famous retail store was reputed to assess the effectiveness of its store managers on
‘shrinkage’ (the loss of stock from stock rooms and shelves). Taken to the ulti-
mate, the best way of minimizing shrinkage is to lock the stock room, even to

lock the store. There are no sales but also no shrinkage! There is a famous story
of a Soviet nail-making factory which for many years exceeded its annual target
in successive five-year plans. The factory director was assessed on the weight of
nails produced. He had discovered that with the machinery available to the fac-
tory, output would be maximized by producing nails one foot long. He did so –
millions and millions of them.
Recently I was working in a famous furniture manufacturing company, a
household name worldwide. The company had quality problems with a high rate
of rejection. Most rejection took place predespatch, but after the whole manu-
facturing process was complete; 35 per cent of faults occurred in the first stage of
an 11-stage production cycle. Considerable value added was being built into this
furniture, wastefully. Yet departmental managers were achieving their targets.
They were assessed on volume, not volume and quality!
Narrow approaches can be misleading. What is needed is a broad approach to
assessment. If we are making profit are we making as much profit as we can? How

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