Beware the bean counters

If it gets measured, it gets managed is one of the enduring myths of our time. It doesn’t matter that Joseph Stalin had targets for everything during his five-year plans, yet succeeded in making millions of products that didn’t work. No. In the UK today, the government plunges on, making targets for everything and then – as the A-level regrading affair has shown – it often comes unstuck.

The target mentality is not confined to the UK public sector. It began, of course, in US firms. Ever since 1992, when Robert Kaplan and David Norton introduced the idea of the balanced scorecard, measures of corporate performance – financial and non-financial – have been all the rage.

But something new has happened. Measures of innovation, like the number of products developed in the past five years or the time it takes to get them to market, have receded in importance. Instead, the corporate mindset has become as neurotic about putting a financial value on everything as the public sector is neurotic about the Public Finance Initiative or the borrowing capacities of foundation hospitals.

From brand equity to the cost of poor employee health, every dollar and pound must be entered into the ledger books. Result: an enormous expenditure of effort is required to keep those books. But there is worse news yet. Bean-counting threatens to take over the world of IT.

Today’s economic slowdown, though exaggerated by some, seems to have brought us a new generation of what the Financial Times calls “the grey men” – financially trained chief executives, asset-strippers and experts in corporate recovery. As a result, mainstream financial directors insist that IT departments look at return on their investments and the total cost of owning all their computers. That is why Microsoft has put such an emphasis on these issues in its revived sales campaign for Windows XP and Office XP.

Yet bean-counting will affect IT much more widely. In the wake of Enron, international accounting standards will shortly mean that every corporation must know exactly where all its money and assets are on a minute-by-minute basis. That’s a boon to storage-system providers, and a development much more important than the trend towards outsourcing IT to large suppliers.

Meanwhile, outsourcing continues to transfix the IT world. IBM’s Global Services group, new home to PwC Consulting, accounts for 40 percent of IBM’s revenues, and much of its business is in outsourcing. Some interpret its third-quarter results as a sign that the travails of rival outsourcer EDS have spread, and that outsourcing is on its way out. Others think the difficulties of EDS have provided IBM with an opening. Either way, IBM’s record in hardware and software innovation is not on the public agenda. The only thing that we are told to concern ourselves with is the jiggery-pokery of the outsourcing market.

It is all very tiresome. Over in Bangalore, by contrast, there is something to celebrate – even if the West’s nervous cutting of costs partly explains it. In the past three months, Infosys, an Indian software services group, has added Porsche, 17 other clients and 1,865 new workers to its business.

Now those kinds of numbers really are interesting.