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When We Measure The Wrong Things
By Claus Schafhalter | July 19, 2010
Today I read a report by Bloomberg Businessweek that the Senate climate bill, which aims to cut greenhouse gas (GHG) emissions 17 percent from the 2005 level by 2020, could cut U.S. gross domestic product (GDP) by $452 billion , and cost the average household $206 annually from 2013 to 2035.
I do not want to discuss the merits of the Senate climate bill in its current state — if there are merits at all, but I cannot wonder if we are really measuring the right things.
The problem that I see is that GDP calculation measures and weighs everything the same way, without accounting for effectiveness. A simple example: After we change a power generating process to use less coal to put the same amount of energy into the grid, GDP goes down. Being more efficient means a negative impact on GDP. Because we consume less, even if we get a better outcome.
GDP rewards waste. Once we increase waste, GDP goes up. This is totally contradictory to any lean management approach, where we try to reduce waste to get more efficient, and where we measure the output of a process by its effectiveness.
To do more with less is sane, responsible and should be rewarded. Measuring the wrong things punishes otherwise useful initiatives. Should we not come up with other metrics than plain GDP to make sure we go into the right direction?
Your thoughts?
Claus Schafhalter, Management Consultant @ Sunogos
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