Measuring Managerial Firepower

A new business ratio, called return on management (ROM), measures the efficiency with which managers spend their energy. Calculating ROM-in which "productive organizational energy released" is divided by "management time and attention invested"-produces a qualitative, rather than a quantitative, answer. But it is a valuable tool for evaluating organizational effectiveness.

A company can, by answering the following five questions, discover whether it has high or low ROM: Does everyone understand which opportunities the company will not undertake? It is not enough that all managers and employees know the firm's mission; they must also recognize activities that, if pursued, would be distractions from the mission. Are personnel evaluated according to vital strategic factors (i.e., those conducive to the firm's success or failure)? Too often companies get bogged down in a type of "political correctness": gauging employee satisfaction, for instance. Personnel then get confused about priorities, and ROM falls. Can managers recall all of the firm's key diagnostic measures (i.e., sales growth, renewal rates) ? Most people can memorize no more than seven such measures. (Not all managers need be assigned the same seven.)

Is the company swamped by paperwork and processes? Some firms have their managers so deeply involved in process evaluation (e.g., filing TQM reports) that they have little time or energy left over for turning out the firm's products.

Do all company personnel recognize and share the boss's priorities? High-ROM managers pay close attention to one or two vital diagnostic measures (meanwhile assigning subordinates to watch the others) and insist that everyone else keep an eye on them, too. Understanding priorities, employees will be highly focused on goals; they can also warn the boss about any dangers they may see on the horizon.

From Robert Simons and Antonio Davila, "How High Is Your Return on Management,D Harvard Business Review, January-February 1998, pp. 71-80.

Copyright Catholic Health Association of the United States May/Jun 1998
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