Wednesday, May 12, 2010

Yardsticks: The Concept of the Corporation Chapt 2

Software has brought an age of accountability. We can gather lots of information about organizations and use that material to judge the operation of any unit. I have been involved in many such exercises. The problems with this work is two forld. First, you want to establish something that is objective and cannot be easily manipulated. Second, you need to find a measurement that truly fits the overall goal of the organization. The simplest example is sales. The overall goal for the company is profitability. High sales tend to produce more profits. However, sales are usually measured on a short time frame while profit is considered on a longer term. You can easily make short term gains in sales that are detrimental to long-term profit. You can drain the potential customers for the next two years, sell products that require too much support, create backlogs in service and production. The list goes on. Finding good yardsticks is not as easy as it sounds.

Early writers on software – Goldstine for example – felt that software would carry expertise to companies and factories. In some ways, it has fulfilled that promise in the managerial context. We sell canned software to small organizations, which they use without modification, even when the software includes implicit yardsticks or targets.

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