Posts Tagged ‘ROI’

A Tale of Two Industries: Contrasting Quality Assessment and Improvement Frameworks

July 8, 2009

Imagine the chaos that would result if industrial engineers each had their own tool sets calibrated in idiosyncratic metrics with unit sizes that changed depending on the size of what they measured, and they conducted quality improvement studies focusing on statistical significance tests of effect sizes. Furthermore, these engineers ignore the statistical power of their designs, and don’t know when they are finding statistically significant results by pure chance, and when they are not. And finally, they also ignore the substantive meaning of the numbers, so that they never consider the differences they’re studying in terms of varying probabilities of response to the questions they ask.

So when one engineer tries to generalize a result across applications, what happens is that it kind of works sometimes, doesn’t work at all other times, is often ignored, and does not command a compelling response from anyone because they are invested in their own metrics, samples, and results, which are different from everyone else’s. If there is any discussion of the relative merits of the research done, it is easy to fall into acrimonious and heated arguments that cannot be resolved because of the lack of consensus on what constitutes valid data, instrumentation, and theory.

Thus, the engineers put up the appearance of polite decorum. They smile and nod at each other’s local, sample-dependent, and irreproducible results, while they build mini-empires of funding, students, quoting circles, and professional associations on the basis of their personal authority and charisma. As they do so, costs in their industry go spiralling out of control, profits are almost nonexistent, fewer and fewer people can afford their products, smart people are going into other fields, and overall product quality is declining.

Of course, this is the state of affairs in education and health care, not in industrial engineering. In the latter field, the situation is much different. Here, everyone everywhere is very concerned to be sure they are always measuring the same thing as everyone else and in the same unit. Unexpected results of individual measures pop out instantly and are immediately redone. Innovations are more easily generated and disseminated because everyone is thinking together in the same language and seeing effects expressed in the same images. Someone else’s ideas and results can be easily fitted into anyone else’s experience, and the viability of a new way of doing things can be evaluated on the basis of one’s own experience and skills.

Arguments can be quite productive, as consensus on basic values drives the demand for evidence. Associations and successes are defined more in terms of merit earned from productivity and creativity demonstrated through the accumulation of generalized results. Costs in these industries are constantly dropping, profits are steady or increasing, more and more people can afford their products, smart people are coming into the field, and overall product quality is improving.

There is absolutely no reason why education and health care cannot thrive and grow like other industries. It is up to us to show how.

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LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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Go Ahead, Just Say NO to Socialized Health Care!

June 11, 2009

But please don’t say YES to more of the same old capitalist health care!!

Instead, we ought to remove the dead weight encumbering the health care market and figure out how to improve its efficiency. Transaction costs are by far the most important costs in a market, and transactions are defined, by and large, by the quality of the information available to the parties in the exchange.  We have the means in hand for making vast improvements in health care information quality. Advanced measurement technologies integrate mass customization with meaningful, universally uniform, and ubiquitously available reference standard metrics and common product definitions.

We desperately need investment in a new infrastructure of metrological standards for every important metric in health care (health, chronic disease, and functional status; quality of life and care; employee and organizational performance, etc.). Such standards could function as a fungible common currency for the exchange of individual and organizational health capital.

If we don’t create these measurement systems, it really doesn’t matter whether the government runs a single-payor health care system or if we stick with the current dysfunctional system. Consumers and payors need to be able to compare products’ value-per-dollar just like we do in grocery stores. Quality improvement specialists and researchers need to be able to compare outcomes across treatments in common metrics. And perhaps most importantly, front-line clinicians need to be able to evaluate a patient’s condition on the spot, at the point of care, in the terms of the same measure that will be used for accountability and quality improvement.

Our long history of successes in science, engineering, and market economics illustrate the astounding benefits that accrue from thinking together in common languages, and from acting together harmoniously, in coordinated ways that do not require choosing between uninformed decisions and negotiating every detail. Our challenge is to figure out how to extend those successes into new domains. The question is how to configure representations of human, social, and natural capital so that their markets work the same way that manufactured, liquid, and property capital work.

Answering this question, and successfully addressing this challenge, are not beyond us. Improved measurement will play a vital role in reducing transaction costs and in taking the health care market to a whole new level of efficiency. Without improved measurement, it really doesn’t matter if health care is socialized or not.

Question of the day

May 6, 2009

The measurement of human, social, and natural capital has progressed to the point where we could have metrological reference standards for performance, ability, attitude, health, trust, and environmental quality metrics, if we cared to take the trouble to create them. My new article in Measurement (Elsevier) documents the science, and makes recommendations. (See

Having such standards would mean we’d be much better able to estimate the value of intangible forms of capital, to price them, and so to include them in econometric models and financial spreadsheets. Our investments in them would give measured returns, meaning we could include their value in stocks, bonds, other instruments, and in the Genuine Progress Index and the Happiness Index. Having this information would go a long way toward redefining profit as value for life.

In the days and weeks to come, I’ll spell out the technical issues involved. I’ll try to keep it jargon-free, and I hope you’ll help with that! Even without jargon, however, we’re moving into new territory, so new terms will need to be used. I’ll explain them the best I can, and I’ll also pay attention to new or special meanings of words that we might assume are already understood.

So here’s the first of many questions of the day:

Given the demonstrated viability of metrological reference standards for human, social, and natural capital, what would you say is the most important thing to do now to advance this cause?

I’ve been trying to answer this question from a fresh perspective everyday for years. It’s your turn.

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LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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