Ever heard of the "McNamara Fallacy"? Be careful what you measure

Don’t presume that what can’t be measured isn’t really important.

What is it?

The McNamara fallacy involves making a decision based solely on quantitative metrics and ignoring all other observations. It’s quite common in corporate decision making: the big picture can be lost because of an obsession for one (or more) metric.

Robert McNamara (1916-2009) was the US Secretary of Defense between 1961 and 1968. He can be said to have been the architect of the Vietnam war. Before he was recruited to join the John F. Kennedy administration, he was one of the Whiz Kids, a group of ten US Army Air Forces veterans of World War II who became Ford Motor Company executives in 1946. During the war, these “whiz kids” implemented “statistical process control”, a method of quality control, to help coordinate all operational and logistical information and improve the conduct of the war. They can be said to have contributed to the logistics revolution of the following decades that deeply transformed large organisations.

As Secretary of Defense, McNamara sought to replicate the methods that had been so successful at Ford. He brought new methods to the conduct of the Vietnam war. The fallacy refers to McNamara’s quantification of success in the war. Ignoring all other variables, success was measured in terms of enemy body count, i.e. the number of dead Vietnamese.

Today the McNamara legacy is very controversial. The use of chemical weapons in the war (including the infamous agent orange) was justified by this obsession with the pursuit of one goal—to kill as many Vietnamese as possible. The US army lost track of the war’s strategic objectives. They failed to notice the growing determination of the enemy. And they failed to see that the war was causing chaos in US politics.

What does it mean for human resources?

To focus on one metric to the detriment of other strategic objectives is a mistake that’s common in large organisations, including in HR departments. Indeed HR departments are the product of the managerial revolution that the Ford Whiz Kids embody. It is through the use of new metrics that “human resources” became more professional. Alas this professionalisation also became a drag on agility and innovation. It’s made HR departments more bureaucratic.

Large corporations aren’t the only companies that can fall prey to the McNamara fallacy. Growing startups are particularly at risk too! One example is startups that claim their goal is to hire hundreds of new employees before the end of the year. As if employee growth and user growth were perfectly correlated! Rather than focus on users or revenue, these startups use employee growth as a proxy for success to signal to future investors that they are worth investing in. This is all the more paradoxical as a startup is supposed to aim for scalability, i.e. to be able to serve more and more users with identical resources.

How can it be overcome?

HR objectives should not be disconnected from larger business objectives. When that is the case, the McNamara fallacy is all too common. According to Patty McCord, former Head of People at Netflix, all employees (including HR people) should fully understand their company’s business model and strategy. They should be trained to always focus on business and strategy.

Also all managerial incentives should reflect the real objectives of the company. And be questioned on a regular basis so as to avoid the fallacy.

To go further, read our must-read article about Powerful: Building A Culture of Freedom and Responsibility by Patty McCord.