Back when I watched Fox News, before deciding that they are just a mouthpiece for the Bush administration, I regularly watched their Saturday morning economic shows. Even a few months ago, the people on those shows, all of them smart people, were saying things could get worse before they get better, but they never hinted at anything like what we have seen this week. The key reason they didn’t hint at it is that they didn’t see it coming. I don’t think anyone did, except maybe Warren Buffett, who was calling this a recession before anyone else did.
How could we not see it coming? Don’t the rules of corporate governance require accurate accounting techniques? Shouldn’t corporations be required to have performance indicators that can tell them where operations are weak?
The fact is that lots of companies have performance indicators, but those indicators often do not reveal the real picture. Before I retired, the company I worked with evaluated the performance of several organizations throughout the US (and internationally), and our teams dug deep into the performance data of our clients. One thing we observed was that the companies that were the most self-critical, the ones who did thorough self-assessments and who had in-depth performance indicators, were the companies who performed the best … generally by far the best.
It’s way too easy to have a set of indicators that give too rosy a picture. And, it doesn’t help that the incentive bonuses of many managers are tied to performance indicators, so there is a tendency to make those performance indicators look as good as possible. And that doesn’t mean outright lying … I only found that once in over 25 years of looking at performance data. It often just means giving the benefit of doubt to a borderline call, where a more in-depth indicator, or better trending, would make it clear that giving the benefit-of-doubt is the wrong call.
We humans aren’t born being good at self-assessments or at picking performance indicators that give us a good picture of how we are doing. It takes a lot of practice to do a good job at this, and it generally means having someone look over your shoulder to help you see what you didn’t see in doing a self-assessment. I think that’s pretty much why regulation became an important part of our economic stability for so many years. And then came deregulation, and it seems to me that it led to poor performance indicators and nobody to check up on whether there were better indicators. And now we are paying the price for it.
So, it makes me wonder if we should have more regulation. I never thought I would hear myself say that because government regulation generally means regulating to low standards: everything in government is a compromise, as a result of party differences and lobbyist influence.
What are your thoughts on this?
One final thing to think about: in your personal life, are you assessing your performance adequately? This is something I have always tried to do: to really dig into whether I am doing as well as I should be doing. It’s hard isn’t it? But, it is important. I know I should do a better job of it.