‘Organizational Linkages: Understanding tho Productivity Paradox (1984) iptv np edioperonesDO09045042hra 15 Hl copy 1684, 2060 The Raa Academy of Seles ih ese 156 +p, ScOnT six av GEORGE 1 SMITH, 1. section of The Race makes an even more relevant point: “We are not dealing here with a change in the foreman’s culture, but a culture con- trolled by how management measures a foreman’s performance” (p, 1325 emphasis added). ‘Why do organizations measure? Many of the references we bave cited and much of our own experience suggests that traditional manag- exs measure for control. However, world-class organizations measvre not for control, but to drive continuous improvement, ‘The manage- ‘ment information system and, in particular, the performance measure- ‘ment and portrayal system that support it are key to total productivity and world-class competitiveness. Foreign competitors of U.S. industry ‘may not have worked out the theory or the underlying mechanisms, but in material velocity management, for example, they have sensed one of the keys to achieving “the goal.” Organizations can put the in- formation system to work to enhance their ability to achieve that goal. We have discussed how the performance measurement system can provide management with information and a mechanism to reinforce behaviors consistent with organizational goals. To achieve these ends, organizations must become much more sophisticated in designing and implementing portrayal systems that display performance. If the por- trayal system encourages local maximization and suboptimization of individual and group performance, the organization’s total productiv- ity falls. Local optimization can occur at the individual or group level. Further, there can be horizontal variation in local optimization (one individual is optimized another suboptimized) and almost infinite varia- tions in next-level performance. This is what makes the linkages issue so complex to model and to analyze. If the system shapes the behavior of the entire work force toward the common goal, total productivity is enhanced. ‘The foregoing observations suggest that an alternative to precise control of direct labor, with its attendant dysfunctional consequences, can be found in the adoption of an organizational perspective that views measurement as an integral part of the managerial process. A key ob- jective in adopting this new perspective is to establish a system of mea- ‘sures that tracks progress toward achieving the organization's strate- gic goals, Why haven't these changes occurred? Goldratt and Cox (1986) see the goal as “making money,” but we regard profitability as a means to an end. Jn the final analysis, Chester Barnard (1938:44) said it most decisively: the only true measure of ‘organizational performance is its “capacity to survive.”