Harvard Business Review September/October 2019

METRICS ARE A FACT of business life—essential to measuring performance and executing strategy. But they can be pernicious. In “Don’t Let Metrics Undermine Your Business,” Michael Harris of Kenan-Flagler Business School and Bill Tayler of the Marriott School of Business demonstrate that performance management is frequently conflated with strategy—producing all sorts of unwelcome consequences. The problem is that business metrics are inherently imperfect; most are used to quantify an intangible goal. Even earnings, the most common measure, represents an abstract concept. As the authors say, “Your performance management system is full of metrics that are flawed proxies for what you care about.” Consider what happens when a company makes “delighting the customer” a strategic objective. As Harris and Tayler note, the company will probably track its progress through online customer surveys.…

Like many marketing professors, Bart de Langhe studies the use of data analytics in decision making. But he focuses not so much on the data as on how people interpret it. “I am continually surprised by how often people draw the wrong conclusions,” he says. “To understand these errors and correct them, you need a psychologist’s perspective.” In this issue de Langhe—who has two degrees in psychology—and his coauthor examine how we instinctively categorize information and how that tendency can lead decision makers astray. 80 The Dangers of Categorical Thinking In 1983 the economist Oliver Hart began researching a problem: Contracts are inevitably incomplete, and parties to them don’t always act in a rational manner. His resulting theories earned him the 2016 Nobel Prize in economics (with Bengt Holmström). While in Stockholm…

IN THE FALL OF 2017, when the New York Times and other media began reporting on widespread sexual harassment and assault by powerful male entertainment figures, many people were heartened. The conventional wisdom was that bringing the issue to light and punishing those responsible would have a deterrent effect. Leanne Atwater, a management professor at the University of Houston, had a different response. “Most of the reaction to #MeToo was celebratory; it assumed women were really going to benefit,” she says. But she and her research colleagues were skeptical. “We said, ‘We aren’t sure this is going to go as positively as people think—there may be some fallout.’” In early 2018 the group began a study to determine whether their fears were founded. They created two surveys—one for men and one…

In 2015 the Canadian Armed Forces launched Operation HONOUR, aimed at preventing sexual misconduct and assault among military personnel. As part of that effort Denise Preston, a psychologist who has worked with victims and imprisoned sex offenders, was hired in 2017 as the executive director of the Sexual Misconduct Response Centre, which operates outside the military chain of command to support victims of sexual misconduct and lead prevention efforts. She spoke with HBR about the center’s work. Edited excerpts follow. Do you agree with one of the findings of this research—that most men and women understand what constitutes sexual harassment even though the behavior persists? When you ask most people about sexual harassment, sexual assault, or issues around consent, they understand on a conceptual level when something is wrong. But they don’t…

The economist John Maynard Keynes wrote of the “animal spirits” that can affect the stock market and the economy, and economists routinely monitor consumer and investor sentiment for clues about where the business cycle and markets are heading. A new study highlights another measure of mood: manager sentiment. Drawing on transcripts of quarterly conference calls with investors and management discussions in 10-K and 10-Q filings—more than 375,000 documents in all—researchers used textual analysis tools to count the positive and negative words in all statements for each month from January 2003 to December 2014. They calculated the difference between the two types of words and divided by the total number of words to arrive at a “monthly financial statement tone.” Next they examined aggregate stock returns for the subsequent month, three months,…

We may pride ourselves on our ability to multitask, but cognitive scientists know that strictly speaking, there’s no such thing: Most activities requiring active attention can’t be done simultaneously, and we’re really just rapidly switching between them, generally with poor results. New research shows there’s reason not to shatter our illusions: Across 32 studies, people who perceived themselves as doing two things at once (for example, listening to a lecture and taking notes) outperformed people primed to see the same activity as consisting of a single task (taking lecture notes). Those who identified as multitaskers took more and higher-quality notes in the scenario above; they also proved better at word-search puzzles, video transcriptions, and math problems. This happened, the researchers say, because of heightened engagement: Multitasking is viewed as challenging,…