The Tyranny of Metrics

by Jerry Z. Muller

Performance metrics as a measure of accountability help to allocate blame when things go badly, but do little to encourage success,28 especially when success requires imagination, innovation, and risk. Indeed, as the economist Frank Knight noted almost a century ago, entrepreneurship entails “immeasurable uncertainty,” which is not susceptible to metric calculation.29 Thus, even in business and finance, metric fixation takes its toll. Businesses must be judged by more than one indicator of performance. Profit surely matters. But so, in the long run, does reputation, market share, customer satisfaction, and employee morale, which makes it possible to adapt and to find solutions to the new problems that will inevitably arise in the marketplace. In an economic world characterized by unpredictable change, there is a need for ongoing innovation, small and large, that is not readily reducible to a single performance target. Performance indicators can certainly aid, but not replace, the key functions of management: thinking ahead, judging, and deciding.