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Saturday, May 20, 2006

Theory of Diminishing Marginal Utility of Reports

One thing that I hate about corporate life is the sheer number of reports and managers’ obsession with reports. In a number of organizations, having a plethora of reports on all sort of meaningful and meaningless things is becoming a fashion. I have earlier also written about reports in my post “Reports – The New Corporate Villain”. The sheer annoyance caused by meaningless obsession with reports is forcing me to once again explore it – this time from the frameworks of Economics.

To start with, I have extended the concept of diminishing marginal utility to formulate "The theory of diminishing marginal utility of reports", which states that with increase in number of reports, the marginal utility of reports decreases. The law further states that with addition of reports, although marginal utility declines, the total utility increases up to a point of saturation from where any further increase in number of reports results in negative marginal utility and hence decline of total utility. Simple!

Being an innocent victim of reports since last one year, I can say with quite an authority that excessive reports do more harm than good to an organization. The hidden cost of too many reports is too much.

Reports are necessary and an important tool to manage the affairs of the organization. But beyond a point they become nuisance and create more problems than solve problems. On one hand, a few meaningful reports are helpful in providing insights and aiding decisions; on the other hand, too many reports, mostly meaningless, trigger a chain reaction of decline in productivity in the entire system of the organization.

Here are some insights on how and where too many reports hurt an organization:
  1. Wastage of time: Making reports is generally a time consuming process. It takes time. When the number of reports is large then a significant amount of time goes in making reports while time for doing the real things is reduced. Every manager has only 24 hours in a day. The more reports he has to make, the less time he has to do actionable things.
  2. Execution goes for a hit: Too many reports lead to a general mind-set in the organization where post-mortem analysis, on-paper analysis, etc. gain more importance than execution part. Running a business or any other type of organization is a balanced combination of planning and execution. If one part is missing or if the balance between planning and execution is lacking, then there is a serious problem.
  3. Manager’s motivation: Action is always much louder and interesting than analyzing and planning on paper (read report writing). Of course, analysis and planning are important for making actions decisive. But too much analysis and planning without much action is dull and, over a period of time, can seriously affect the motivation of managers. Results come from actions and managers get motivated by results.

  4. Past haunts, present passes and future is doomed: Most of the reports are basically a post-mortem analysis of something that has happened. Yes, it is important to do it to learn from mistakes, get insights about what worked, and why something worked and something didn’t. But often this insight gathering activity turns out to be an elaborate surgery with anesthesia on dead body. And while the surgery on dead body is being done, the living patients who need surgery to save their life suffer and some even die. Obsession with reports is no different. Too many reports mean living in past, somehow managing the present with divided attention, and never letting the future to come within attention span.
No doubt, the organization suffers as a result of too much focus on reports. Productivity suffers, projects go haywire, deadlines are over-shoot, value addition declines, and chaos sets in.

Though reports are important tool for managing the affairs of organizations, it is more important to effectively manage the reports – its content, context, relevance, and utility – if the organization wants the reports to contribute to value addition and value creation.

Caution: Too many reports are injurious to the health of organizations and people managing them.

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