Between 2005 and 2008, it has been estimated that failings across the board at Stafford Hospital led to the deaths of between 400 and 1200 people due to a failure to provide adequate care and poor conditions in the hospital.
A 2013 public inquiry into this found that the hospital’s neglect of patients and failure to resolve an ‘insidious negative culture’ was in part down to the targets which the management focused on. These targets emphasised achieving financial balance and reaching national access targets without appropriately monitoring the quality of the service offered, whilst overlooking negatives and causes for concern that were raised.
Through the late 1990s and early 2000s, innovation in global financial markets boomed. One particular investment instrument that became popular was the CDO (Collateral Debt Obligation), which bundled debt into packages to sell on. By mixing lower tranche debt with higher tranche, more valuable debt, the investments were de-risked and could be sold on for more.
At least, that was the plan. As time went on, more and more lower tranche, risky debt, was included in CDOs, including US sub-prime mortgage debt. And yet the world’s financial regulations authorities, as well as the banks who were issuing these bonds, failed to properly measure and monitor what was going on, as the market boomed and profits grew.
When markets faltered in 2008, suddenly it became all too apparent that these ‘safe’ investments were filled with junk debt and the bottom fell out of the market, leading to the 2008 financial crash.
Both these examples show the danger of measuring the wrong thing. In particular, short term focus can be at the expense of the long term. It’s very easy to have a sheep mentality and follow the herd without looking ahead, because everything’s ok – until it’s not. The 2015 film, The Big Short, shows how easy it is for people to be blind to what’s really going on, by thinking that the status quo will simply continue forever.
The fallout of bad decisions can take some time to reveal itself, but when it does unravel it can be catastrophic. In the case of Stafford Hospital, that failure was, tragically, deadly – on a massive scale. In the case of the financial crisis, who can say how many lives have been destroyed as a result, how many homes have been repossessed, and how many jobs lost. It’s incalculable.
If you see a storm is brewing on the horizon, you can take steps to mitigate its effects. If you’re only thinking of the here and now, whilst in the meantime the storm is growing, when it suddenly breaks over you that could well be the end for your business.
Measurement is – or should be – about recalibration based on immediate and long term opportunities and challenges. Looking at just one ‘horizon’ can make measurement useless or even destructive.
By contrast, success comes from a combination of continual improvement as well as risk management; the micro and internal as well as the macro and external.