Saturday, February 02, 2013

Measurement is important if joined with good management

This is a plog post commenting on Bill Gates support for measurement in international development programs and projects. It supports the general point that change is the cummulative effect of many innovations. Proper measurements enable managers to select for useful innovations and against destructive ones. However, it is the management that counts. Indeed, measurement without managerial use is waisted effort, and will soon provide bad information.

In his 2013 letter, Bill Gates emphasizes the importance of measurement in international development -- that the success of the development process depends on being able to detect which changes improve results and which do not. Measurements are key to that recognition.

Let me underline that point. Think of evolution. Most mutations are harmful, only a few are beneficial. It is natural selection that weeds out the deleterious changes and promotes the beneficial. Managers need measures to allow them to do the weeding and replication in development programs.

Here are some thoughts on reading his letter:

A physician once told me that a fundamental rule of medicine is not to order tests if the doctor will not use the results. Tests cost money and almost always involve risks. If they are not likely to benefit the patient, they ought to be avoided. So too, measurements that will not be used in managing development efforts should be avoided. Measurements always cost money, can mislead the manager, and should be justified by potential benefits.

I am reminded of Henry Wallace's recognition that the competition for the best corn crop in American county fairs led American farmers astray. For generations, prizes were awarded to the most beautiful ears of corn. Farmers grew more and more beautiful ears of corn as the winners provided seed for the next year and as the practices of the winning farmers were copied by their peers. Unfortunately, pigs and cows don't much care for the human aesthetics of the appearance of an ear of corn, but simply want to eat a lot of the stuff. Farmers who can produce more and more nutritious feed for their animals make more money. Measuring the visual appeal of the ears was the wrong metric. Measuring animals fed adequately per acre devoted to corn was better.

We have seen recently that in the financial services industry industry, managers made huge mistakes by focusing on the measurement of profits while failing to measure risk (accurately). Many firms got bitten badly by running high risks while maximizing short term profitability, and some of their managers lost their jobs. The point is that depending on a single indicator to measure success can be very dysfunctional. (Of course, many of them cried all the way to the bank as they had received huge salaries and bonuses for years based on those short term profits, consequent increases in stock prices, and remuneration based on both.)

I have suggested that the maximization of investor profits is bad management based on a poor measure. In our society, the corporation is a major institutional form. Corporations should be managed to provide good returns on investment. But there are many kinds of investments that go to making a corporation work, including the human capital of the employees that they devote to their work, the social capital in the markets for their inputs and outputs, the public capital in the infrastructure on which they depend. Managers of corporations maximizing return to a single source of capital, and ignoring other forms of capital as well as costs and benefits to consumers seems to have gotten us into many problems. (Not as many as that management practice did during the time of the robber barons, a time that lead to the Progressive movement and the rise of state regulation of corporations.)

Perhaps Gates might have focused more on management. Measurement in development programs is not enough, progress demands good management based on good measurement.

Perhaps the first challenge of management is to break the universe into bite size pieces. The health sector is itself a portion of the field of action of development programs. Within the health sector, there are traditional fields of action such as child survival, maternal health, and communicable disease control. Gates has chosen to focus on advancing child survival by promoting improved coverage of immunizations. This makes a lot of sense since it is probably the most cost effective approach to increasing life expectancy, since there is great support for saving the lives of children, and since experience has shown that increasing the chance that children will survive results in parents choosing to have fewer children, slower population growth, and eventually an improved rate of growth of per capita income. However, this is only one priority for national public health services, which in turn is only one management area in the health sector, which is only one of many management areas for government.

Gates mentions problems with the polio eradication program in northern Nigeria. The program was failing because maps were so bad that program managers didn't know where many villages were, and indeed did not even know of the existence of some villages that held children that should have been immunized against the disease. Clearly managers need to plan for where services need to be delivered and how providers and supplies are to get to where they are needed. As Gates implies, managers need to measure the distances involved, and I would add that they need to find the right metrics for those distances. The time needed for a health promoter to walk a jungle dirt path of several miles is quite different than the time necessary for a doctor to drive the same number of miles on a paved road in his car. The problem in the Nigerian program were reduced using satellite maps to locate villages and giving the people doing immunizations phones which GPS capability allowing supervisors to measure whether the workers actually arrived in the villages that they were supposed to visit.

Gates also describes efforts that led to increased success of a DPT immunization program in Ethiopia. Initially lots of kids were dying from these three preventable diseases. Measuring death rates (even roughly) indicated that there was a major problem. Measuring the percentage of the children who had actually received the necessary shots provided an indication of the magnitude of the problem. Note however, that if nothing was to be done to solve the problem, the quality of the data would quickly have deteriorated -- people quickly stop collecting data that will not be used.

Citing a comparable success in Mozambique, Gates notes that the success was due in part to assuring that health posts had adequate stocks of all the vaccines that they needed, and that the cold chains needed to maintain the utility of the vaccines actually worked. Again, it was necessary for managers to have access to accurate measurements of the stockout rates and the failures of cold chains, but not sufficient. Managers needed to take effective action based on the information that they received.

I do agree that it is important to make good measurements of the right things in order to make development programs work better. One of the important advances was the introduction by the World Health Organization of "Disability Adjusted Life Years" as an index for use by health services. That helped to change the focus from life expectancy to include illness and disability. That and many other improvements of indices and measurements can help managers improve the efficiency and effectiveness of development programs.

I recommend that you read the entire Bill Gates letter as it is short and informative.

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