RESEARCH-BASED CRITIQUE 7
Everybusiness utilizes numbers and statistical figures to record itsprogress and evaluate what it needs to do to improve its operations.An organization’s use of metrics should, however, occur only whennecessary, and not because the management thinks that it is rationalin all situations. Susan Webber has the opinion that a lot ofcorporates have an obsession with business metrics, and this couldinterfere with other development goals in a firm. This essay willevaluate the business theories that made Webber come up with herconclusions, the theory’s relation to business practices, and itspractical application.
BusinessTheories Indicating a Fixation on Business Metrics
Webberpoints out that most organizations overlook business fundamentalswhile paying a lot of attention to figures and metrics. Althoughcompanies rely on math-based techniques, due to the order andpredictability they have in some situations, there could be adverseconsequences when the conditions are non-linear (Webber, 2006).Webber identifies the Taylorism theory as one whose intention was theimprovement of economic efficiency in the development of hugemanufacturing enterprises. However, while maximizing on laborproductivity, this principle adversely affected the productivity inmany industries since it devalued the employees.
Theother theory that Webber attributes to the corporate addiction withmetrics is Fordism. Despite the limitations of this managementconcept, it brought about significant benefits to the manufacturingcompanies including the standardization of mass production throughassembly lines. The enterprises that heavily relied on thisproduction system were, however, fixated on numbers, and thisresulted in the loss of strategic flexibility (Webber, 2006). Thesetheories led to the broad application of mathematical techniques evenin situations where they were not necessary, and Webber uses them asthe basis for her argument.
Webber’sTheory and its Relation to Business Practices
Businessescannot operate without management data, and this is the reason thatfirms attach a high degree of accuracy to the use of mathematicaltechniques. Statistical inferences could, however, be inaccurate, andthis illustrates the danger of being overly reliant on businessmetrics. When an organization decides to improve its performance byconducting an analysis of the market and using the obtained figuresonly to make the appropriate changes, failures could result.Inaccurate measurements make it difficult to rely on scientificfindings alone (Webber, 2006). This result is accurate because somebusinesses only rely on statistical inferences when conducting marketanalysis, and they end up disregarding other significant findings.
Webber(2006) notes that many firms that seek to come up with new productstend to increase their spending on R&D. Smaller organizations aremore likely to allocate more funds on their R&D budgetsespecially when they consider making innovative products would givethem a competitive advantage. According to Webber (2006), there is nostatistical relationship between the success of a business and itsR&D expenditure levels. However, allocating more funds to R&Dfor the creation of new products could make a business successfulwhen a firm considers factors such as cultural influences and anorganization’s age (Rosenbusch, Brinkmann, & Bausch, 2011).Webber’s conclusion on this issue is not entirely accurate sinceenterprises can apply it and become successful.
Asa business focusses on statistical inferences while making managementdecisions, it might end up ignoring the aspects that requireattention while spending considerable effort on insignificant issues.Many companies fail to frame their problems in the correct manner,and when they use the wrong metrics to measure their progress, theyend up ignoring the important issues (Webber, 2006). This pointillustrates strength in Webber’s theory considering that businessesbecome competitive when they understand what the market needs. Firmscan create value by monitoring their competitors, as well as theircustomers (Jaruzelski, Loehr, & Holman, 2011).
Webber’stheory also posits that the management should not prioritizemisguided incentives and reward only the highly visible behaviors.This issue is quite relevant to current business practices since somecorporates establish their systems with the aim of seeing immediateresults and short-term profits. An organization’s environment has avariety of incentives, and each organizational actor has differentcriteria and preferences for evaluating the firm’s actions(Berglund & Sandstrom, 2013). The top management has a betterchance of making a company successful when it lets the middle-levelemployees get to work without a fixation on high short-term earnings.
Feedbackloops also pose a danger to a company’s success, and as Webberindicates, this is another reason that a firm should not focus onbusiness metrics. When a firm relies on measurement systems fromother companies as a reference to their operations, it is evidentlybound for failure. Webber’s proposition is that company executivescan still use business metrics, but they have to consider them as aninput, and this implies that they should review other options beforemaking decisions.
Modificationof Webber’s Theory for Application to Business
Webber’sapproach has highlighted most mistakes that firms make as theyheavily rely on numerical data in their operations, but it stillneeds modification for its meaningful application to current businesspractices. For instance, Webber (2006) affirms that there is norelationship between a firm’s expenditure on R&D and its growthin sales or success. However, a company may still increase its salesby allocating more funds on R&D when its strategic assets areflexible and when making external collaborations (Rosenbusch,Brinckmann, & Bausch, 2011). This approach would, however, suitsmaller companies since they do not yet have established routines andcultures, and they can easily partner with other firms.
Webberalso suggests that the use of feedback loops results in the failureof an enterprise. Although a company should not rely on measurementsystems only when making financial decisions, the management canstill apply the technique by modifying it. A firm’s attractivenessas an employer is one of the core case drivers for businesses(Schaltegger, Lüdeke-Freund, & Hansen, 2012). Therefore, anenterprise can still utilize measurement systems to evaluate what thecompetitors offer to their employees, and use this as an input whendeciding the appropriate compensations. By paying the top managementand other staff well, their performance would also improve, and thisresults in a company’s success. Moreover, the employees can stillwork under a performance contract in such a situation.
Whenan organization decides to improve its performance by conducting ananalysis of the market and using the obtained figures only to makethe appropriate changes, failures could result. Allocating more fundsto R & D for the creation of new products could make a businesssuccessful when a firm considers factors such as cultural influencesand an organization’s age. Many companies fail to frame theirproblems in the correct manner, and when they use the wrong metricsto measure their progress, they end up ignoring the important issues.Although the use of feedback loops might result in the failure of anenterprise, a firm can utilize measurement systems and use this as aninput when deciding the appropriate compensations.
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