Many large companies still measure the financial performance of their profit center managers with techniques developed in the 1920s. They are based on return on investment. In this age of fast-paced change in both technology and management information systems, the attachment to these systems is not only strange but debilitating. Over the past 20 years, I’ve discussed the problem with senior and division managers both here and abroad and found that, while they recognize the difficulties such systemic rigidities impose, they do not know how to change their systems.
A version of this article appeared in the September 1987 issue of Harvard Business Review.