Nobel laureates in economics, economists, and strategy consultants. They have spent many years thinking about how society today measures success. They all suggest that today’s “obvious” measures of success miss huge amounts of value. They leave most of the value on the table. They even plain miss the mark. Basically, we are measuring the wrong things, in that the things we measure don’t tell us what we want to know.
We want to know both how well something has done and its capacity to keep doing this. Its performance and its health. Our current measures of performance focus mostly on performance–how well we did. We made money, we scored a goal, we got a 10/10 on the exam, we were promoted. This performance data only tells how we did. It doesn’t tell us anything about how we got the resources we used, how well we used them, or whether we can continue to get them. In other words, these performance measures don’t tell us whether we extracted all of the value out of the system to get our past results, or we have nourished an even richer system from which we can continue to produce great results. Did we extract value from the future to get results in the past, or did we generate a rich future while performing well in the past?
A common measure of sustainability looks at the net value an ecosystem generates today and its capacity to continue to do that in the future. In simple evaluation, this is called the net present value. The value generated now plus the potential values generated in the future, discounted by the risk of getting to that future. The performance these authors look at measures what we have done. The health they look at measures what we will be able to do. To know whether we are better off, now, we need to our performance and health. These authors plow through massive amounts of data, from the very macro to the very micro, to show how measuring performance and health leads to far better outcomes and far higher well-being.
McKinsey consultants Keller and Schaninger show that a robust, comprehensive organizational health index guides an organization towards strategies and actions that generate greater performance over time. This provides a way for aligning the organization internally, with higher quality execution and constant renewal. The practices that support organizational health also lead to greater awareness of one’s environment and the capacity to respond to changes in it, leading to more probable and greater performance.
Economists Stiglitz, Fitoussi, and Durand show that macro-economic initiatives guided by well-being are far more successful than GDP-only designs. They use data to show why we need to move beyond GDP, compiling many examples of how different countries are integrating well-being into their measurement systems.
Economist Phelps finds that prosperity is best measured by flourishing, the ability of people to engage their fullest capacities in a a task, as well as their ability to express themselves creatively, growing into their greater potential. While these factors are critical to understanding what has driven past growth and technological development, they are not usually included today in economic thinking. They need to be.
To measure our success, from the very micro level of individuals to the very macro level of whole societies, we are better off when we understand and evolve the systems we have that drive our performance, managing them in ways that continuously increase the health of these very systems. Performance and health are not tradeoffs, extracting the value from one for the other, rather they are indicators of the generativity of the system, and indicative of the underlying agreements than support that performance and health. These are great reads, full of data, with clear frameworks for what we can measure going forward.