Gustavo Ballvé on September 5th, 2013
Corporate Strategy, Food for thought, Home, Mental models, Portfolio Management

Great timing by this article, called “Why Investment Performance Is a Distraction”, highlighted with “Quote of the Day” honors at Abnormal Returns. A few days ago we at Edge Investimentos received good news: our fund was one of few equity funds in Brazil granted 5 stars by Exame magazine, and we posted this to our website with this caveat (it was in Portuguese but went something like this:) “we like good news but we are not in the business of placing high in magazine rankings – we are in the business of providing good long-term returns while incurring the least possible risks, always focusing first on capital preservation”. And one of the ways to try to be consistent at this is by obsessing over our processes, all of them – it has been a recurring topic in these pages and in our portfolio management reports…

It’s always great to be reminded to NOT keep our eyes on some performance “goal”, but rather to focus on processes. That said, the article tries to expand the investment-related dangers of setting specific goals to general management situations – and I partially disagree. While there is certainly more than enough literature (and posts) on the dangers of managers focusing on skewed metrics like EPS, sales growth and others, in some more operational areas the benefits of setting more controlled, narrow goals aligned to strategic objectives (think of a well-done balanced scorecard project) can be immense. There is a lot of truth to the “what gets measured gets done” quote after all, especially in the more operational areas of a company – we just have to remember to focus more on the questions we ask than in setting goals and “imposing” metrics that aren’t always well thought-out.

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