Published August 2006

To improve, we need
to measure performance

Editor’s Note: This is part one of a series on useful measurements of performance for smaller businesses. Part two will address some specific tools and methods.

Unless you count Count von Count, from Sesame Street, no one loved to count things more than W. Edwards Deming. One of his best-known observations regarding business is, “What counts is what gets counted.”

Math is hard for most people, and we tend to prefer our management theory presented without numbers, formulas or mathematics of any kind. We certainly remember Deming for his keen insights into management, and not least of all for his recommendations — embodied in his “Fourteen Points” — which are now committed to memory by every good management student. But because his work is usually presented in a math-free format to make it more palatable, it is easy to forget why he and his work were so important.

In terms of understanding the fundamental relationships between quality, profitability, performance and growth, American management came late to the table. Had it not been for the shock of U.S. automobile and electronics industries being nearly devoured by their more efficient Japanese counterparts, whose restructuring Deming had engineered, our management might still be fixated on the idea that mass-production can solve any problem.

Deming’s ideas had never really developed an audience in U.S. management. But when it came to light that it was Deming who had engineered the restructuring of the Japanese economy from one best known for cheap copies to one capable of taking on any competitor in the world, including the United States, he suddenly acquired legendary status.

Legends in business share one characteristic. Everyone knows what they did; almost no one knows how they did it. And that certainly was the case with Deming. We hadn’t a clue. He most certainly did not transform the Japanese economy by standing on street corners loudly reciting his “Fourteen Points,” but beyond that, who knew?

The award that the emperor of Japan gave Deming in appreciation for his work actually says it quite simply. The Medal of the Sacred Treasure was awarded “for improvement in quality and of the Japanese economy through the statistical control of quality.” In short, it was all about the math. What counts is what gets counted.

In a business organization, perhaps in any modern organization, it is virtually impossible to focus on and manage anything that is not measured. While this is most obviously true in large corporations, it is also true for even the smallest companies.

A friend who worked with me on a project once told me of occasionally seeing his next-door neighbor’s kid throwing a football at a tire suspended from a tree branch in his yard — trying to toss the ball through the center of the tire as it swung back and forth. The project work frequently involved long hours, and my friend came home late one evening, and there was the kid, still throwing footballs at the swinging tire, which was now barely visible in the light from the street lamp and the nearby house.

My friend asked the youngster why he was still out there, and the boy answered that he had set a goal for himself of 20 throws through the tire before he could quit and go to bed. Later, according to my friend, when achieving that goal became routine, the boy began changing his goals so that they involved an unbroken string of successful throws — first 10 in a row, then 20, until he hardly ever missed.

The young neighbor had talent to match his dedication and went on to be a consensus All-American quarterback for Notre Dame and to play in the National Football League for several years. But from our management standpoint, what was critical in his development was his decision to measure continuously the precision of his passing arm. As a football player, you cannot rely on game statistics to improve your individual quality any more than a business manager can rely solely on sales numbers. In both cases, we need more.

In today’s economy, it is mighty rare to be in a business that has no competitors. And our only hope for survival is to do the job better than they do — a better product, better value, better service. Unless we are better than our competitors, we don’t deserve to win, and we won’t.

For most small businesses, the problem with the usual financial numbers is that they do not lead to useful comparisons with competitors or to improvement strategies. Our sales go up or down, but it is rarely clear whether our performance had anything to do with it.

Smaller businesses need straightforward ways of counting, measuring and improving our own performance. What we need, really, is a way to count how many times we throw the football through the swinging tire — so we can learn and improve.

James McCusker, a Bothell economist, educator and small-business consultant, writes “Your Business” in The Herald each Sunday. He can be reached by sending e-mail to

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© 2006 The Daily Herald Co., Everett, WA