The McNamara fallacy: Measurement is not understanding
Quick story: I was the CFO for a company that sold to a private equity group (PEG). I took over as the CEO as the founders retired, leaving me to deal with the PEG. It quickly became apparent that the PEG managers looked at everything through the lens of an Excel spreadsheet.  These guys were brilliant attorneys and analysts but lacked experience building businesses and managing teams.    Ultimately, they couldn’t add much value in terms of operations or strategy, but they were great at financial modeling/quantitative analysis and forcing us to justify expenses.  That may sound good at first—eliminating wasteful spending—but it ultimately led to the gradual erosion of the company culture and employee loyalty.  It’s easy to cut benefits and pay given that many workers lack the leverage to do anything about it, while it’s much harder to reduce hard costs like materials and equipment.  That meant employees just kept getting squeezed, and it was surprisingly difficult to quantify the impact that terminating an employee or cutting benefits would have on morale/culture/performance.<p>The moral of the story is that people with analyst mindsets play an essential role in our economy, but sometimes giving those people power over large organizations can have disastrous consequences.  There truly is a disconnect between measurement and understanding.