At a local university, I recently facilitated a group of family businesses in a discussion about strategy. One of the businesses was in the 10 th year of implementation in its 10-year strategic plan. In that time, nothing in the plan had changed. Reward systems often inculcate past assumptions into implementation, confounding any attempt at measuring substantive change. GAAP accounting measures gross profit as historical pricing assumptions, less historical, subjective allocations of overhead and historical standard inventory cost assumptions.
Productivity is measured as historical levels of demand or output over historical units of effort.
Because we tend to measure the present through past assumptions, we end up rewarding a continuation of the same, when what we need is something new, better and different. The averages that drive standards are often representative of none. The worst deals are often the result of trusting assumptions, based on averages that are anything but representative. They come back because the relationship is evolving, and your company knows their company at many levels, so you are moving to the next level together. I have had many clients over the years that have decided not to do business with the auto industry any longer, or with other large companies, including GE, Home Depot and Wall Mart.