KM Metrics LO21919

Fred Nickols (
Wed, 16 Jun 1999 06:50:13 -0400

Responding to Mark McElroy in LO21895 --

Earlier, in LO21885, I wrote (in part)...
>> From my perspective, the "bottom line" here is that KM metrics are the
>> wrong starting point. The proper place to begin is with desired business
>> results -- with the business metrics one wishes to affect. The next point
>> in the value chain is to identify the operational aspects of the business
>> that affect those desired results. The tertiary point is with the ways in
>> which people (which is where knowledge is applied) affect the operational
>> aspects of the business and, through those, the desired business results.

Mark, in LO21895, responded...
>First, your line of thought has a troubling "business process
>reengineering" tone to it. I wonder if that's intentitonal and whether or
>not the MBA methodology you spoke of is as linear in its orientation as it

If you detected a "business process reengineering 'tone'" in what I wrote
it's probably because I'm a fan of focusing on business processes in the
pursuit of improvements in business performance. That 'tone' wasn't
intentional in the sense that I was touting BPR but it wasn't evasive
either. BPR wasn't at the forefront of my consciousness at the time of
that writing. Much of what I say and write has an 'engineering' tone to
it. I named my general problem solving methodology "solution
engineering." My question back to you, Mark, is why do you find that

Regarding the "linearity" of measurement-based analysis (MBA), it is very
definitely linear. The architecture of many organizational measurement
systems, especially the financial ones, is decidedly linear -- that is,
this times that, that minus this, this divided by that and so on. Where
the non-linearity or feedback comes in is when action is being
contemplated. If, for example, I decide to increase sales and if I decide
as part of that to spend more on advertising, whether or not sales go up,
advertising expense will increase. Other "loops" and "links" exist as
well but that should do as an example.

Mark continues...
>If there's one thing members of this list have come to appreciate
>by now, it's that we live in a nonlinear world and systems thinking tools
>and perspectives are far more valuable than the traditional reductionist
>view of the world.

I agree that systems thinking and related tools are quite valuable;
indeed, I've made use of them in my "day job" as I call it at Educational
Testing Service. We've made good use of well known system dynamics
consultants such as Jack Homer and we've developed our own SD modeling
capability by virtue of investing a great deal of time and money in one of
our staff members (an engineer, by the way), who has since developed
several very sophisticated and extremely useful SD models of certain
dynamic aspects of our organization. That said, I do not agree with your
broad, sweeping statement that "systems thinking tools and perspectives
are far more valuable than the traditional reductionist view of the
world." Systems thinking is a tool, not a religion. I use systems
thinking, I don't adopt it, swear by it, or let it become my way of
looking at the world. It is a good tool but it is only a tool. Where I
happen to think it is an especially good tool isn't at the upper reaches
of a measurement system or "results architecture" as I call it, but down
much lower, where the action is. There is where the dynamics exist and
there is where systems thinking and SD come into play -- at least in my
current scheme of things that's where they fit best right now.

Mark concludes his direct response with...
>Your argument is rather reductionist in form, but it's
>not clear to me that that's what you, in fact, meant to do. Is it? If
>not, how does a methodology like MBA make the distinction between factors
>that actually influence change versus those that do not, including factors
>that do so disproportionately, or even transparently, thanks to the nature
>of complex system dynamics?

I wouldn't know "reductionist" from "constructivist" (although I might
recognize "behaviorist") so I'll not attempt to answer the first part.
Even if I knew what it was I doubt I'd "mean" or "intend" to mount an
argument that fit a certain class. I'd simply mount the argument and
leave the classification schemes and taxonomies to others.

The second part of Mark's comment -- about factors that actually influence
change versus those that do not -- is answerable in part here and in part

MBA is a way of mapping (i.e., drawing a picture of) what I earlier called
"the results architecture" of a business. Early in this mapping effort
you focus on measures of key business results. These have a more or less
standard mathematical structure (although it should be noted that I have
yet to find two companies that use exactly the same mathematical measure
of return on investment -- and other conventional measures as well).
Generally speaking, one does not affect these because they are calculated
values. You have to get farther down in the structure of the results
architecture to find variables that both affect measured results and that
can themselves be affected through other means. So, let me break this off
here and pick it up in the context of responding to the other portion of
Mark's post.

Mark went on to write...
>This brings me to my own notion of what I call the "KM paradox." The KM
>paradox says that while one can directly influence the behavior of a
>knowledge production system (the "means" in your scheme, Fred), one
>cannot, through such measures, directly influence business results ("ends"
>in your scheme).

What you are calling the KM paradox is better known to me as this simple
statement: "Change is indirect, which is to say you don't change it, you
change something else and it changes as a result." (That is as close as I
can recall to Dave Bower's actual words from a change management piece he
wrote back in 1972 or so.) The whole point of MBA and "solution
engineering" and intervention in general is that change is indirect. You
must intervene over here to have an effect over there. The points of
intervention or action and the points of impact or evaluation are often
far removed from one another in time and in space. Unless you have some
idea of the structure connecting the two, you cannot say for a given
result the actions that will lead to it nor, for a given set of actions
can you say the results they will produce. I happen to believe we can do
a whole heck of a lot better job of analyzing and manipulating the
structures in which we find ourselves toward ends we choose. So, I don't
accept your statement of explanation for the indirect nature of change

Mark concludes his paragraph above as follows...
>This [inability to influence directly] is attributable to the complexity
of human
>organizations, and the enormous variety of OTHER variables that conspire
>together (with knowledge being only one of them) to cause change in a
>decidedly nonlinear fashion. To manipulate only one of them, and to
>attribute whatever change that follows to that singular action, is to
>engage in a form or self deception that I suspect will not last long.

First off, nothing I said suggested manipulating only one variable; it is
frequently the case that several factors must be manipulated in concert
with one another. But, more important, I disagree with the notion that it
is "complexity" that makes change indirect -- unless by "complexity" is
meant the very complicated structural arrangements that link ends with
means and vice versa. I view most structures as having three components:
one or more elements (e.g., income, expense and profit), some kind of
connection (income minus expense equals profit), and some kind of
relationship (profit varies directly with sales and inversely with

Now organizations have a social side that is not nearly as amenable to
examination and analysis through techniques and tools such as SD or MBA.
The network of human relationships that make up an organization is much
foggier than the measurement systems those people use to gauge results in
other areas. That is why it is so often the case that figuring out what
to change is a relatively simple task and getting it changed is such a
difficult one. So I am not presenting MBA or any other analytical tool as
the be-all end-all for any purpose. They are simply tools, no more, no

As for "self deception," I will happily admit or confess to it. I do it
all the time. I think it's part of being human.

>In general, I agree with the content of your statement (copied above),
>but the conspicuous omission of nonlinearity at the level of the whole
>system it references troubles me. What say you to that, my friend?

What I say to that, Mark, is that "the conspicuous omission of
nonlinearity" is your issue, not mine. If you want that axe ground, you
grind it.



Fred Nickols Distance Consulting "Assistance at A Distance" (609) 490-0095

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