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The news is full of Wells Fargo’s follies since they got hit with fines totaling $185 million last week. What happened was a case of management by measurement. Wells Fargo employees were heavily pressured – including threats of job loss – to rack up customer “solutions,” which translate into selling additional services to the bank’s customers that included additional bank accounts and bank credit cards. In order to meet the strict quotas that management had imposed, employees opened accounts for customers without first receiving customers’ permission or informing them.
Though this practice was widespread (some 5,300 Wells Fargo employees have been fired since 2011 for opening fake accounts), it does not appear to have been the result of a conspiracy. Rather, it was an example of spontaneous order that emerged from employees acting in their own best interests — in this case, reducing the pain of management pressure — given the incentives and constraints imposed by the system. In an article appearing on Bloomberg, Matt Levine explains how this sort of thing happens:
Two basic principles of management, and regulation, and life, are:
- You get what you measure.
- The thing that you measure will get gamed.
Really that’s just one principle: You get what you measure, but only exactly what you measure. There’s no guarantee that you’ll get the more general good thing that you thought you were approximately measuring. If you want hard workers and measure hours worked, you’ll get a lot of workers surfing the internet until midnight. If you want low banking bonuses and measure bonus-to-base-salary ratios, you’ll get high base salaries. Measurement is sort of an evil genie: It grants your wishes, but it takes them just a bit too literally.
I’ve run into the same sorts of unintended consequences of the “if you can’t measure it, you can’t manage it” mindset. For example, getting support from our IT department required that a “ticket” be opened describing the issue or problem. Management decided that ticket count was a good way to measure productivity, so IT supervisors put pressure on analysts to boost ticket numbers. One result was that tasks that used to require a single ticket were suddenly divided into multiple “sub-tasks,” each requiring its own separate ticket. As a result, IT work entailed a lot of unnecessary overhead. It got so bad that you needed a ticket just to talk to your database administrator, whose office was a couple of doors down the hall.
Do you have any examples of “mismanagement by measurement”?Published in