Measurement an important part of management

Modern management has to establish some method of measuring progress towards pre-established goals. Marketing goals, as we have seen, have assumed prime importance in business. At every stage of the performance, management must be in a position to determine where it is, where it has been, and how much further it has to go to reach the goals set. The activity involved is generally referred to as measurement and control.
One such measurement is that of productivity. Over the years, management has become accustomed to measuring productivity in manufacturing by establishing standards of production. These standards have become part and parcel of management in industry. They measure time, motion, output and cost. The value of time and motion studies in the factory has been recognized for over fifty years. Thus, it has been possible to establish accurately industrial productivity.
We do not have such counterparts in marketing. Time and motion studies have been attempted in some limited fields, such as in measuring the effectiveness of a salesman's effort. But we know now that many marketing activities do not lend themselves to measurement in quantitative terms.
How can we measure, for example, the output of the marketing researcher? Surely, no one would attempt to evaluate the researcher's worth to the company in terms of the number of reports he had written during the year. Similarly, we do not evaluate the services of the engineer who helps design a new product in terms of number of kilowatts of energy consumed in his laboratory, or the number of conferences with his superiors. By and large, industry has accepted as valid the use of the value added concept to measure the value of the manufacturing activities of a company. Thus, for example, a company reports that the cost of raw materials was $2 million. Direct labor to transform these raw materials into finished products amounted to $3.2 million. Overhead and administrative costs added another half- million dollars. The value of the shipments was, therefore, set at $5.7 million. The value added in the plant was $3.7 million.
If the plant had 500 employees, the per capita productivity in that plant was $7,400, arrived at by dividing the total value added by the total number of employees. The calculation is simple and gives a figure which has been generally accepted to measure industrial productivity, despite serious shortcomings which will be apparent as soon as we attempt to measure productivity in distribution by the same method.