The validity of a particular metric is irrelevant. The point is, on a broad scale, we're collectively worshiping on an altar of financial indicators instead of managing businesses.
I've worked at a bunch of places where people who are utterly clueless about the business make really lousy decisions by applying magic formulas. Sometimes they are MBAs, other times they are wannabes that read Deloitte magazine on an airplane. In either case, because they are clueless, they have no way of assessing the validity of the metrics they are using to run the business. The right formula with the wrong inputs yields the wrong answer.
From my experience it is often a mixed bag. People use those metrics that support their subjective ideas/gut feelings. If these turn out wrong they can always fall back to some "its all the numbers fault" or "Deloitte said so" explanation.
In my opinion the whole Consulting industry strives substantially on the fact, that they provide management with a third external authority. This is an ideal constellation for a manager since first the consulting firm's suggestions don't have to be implemented if they are not representing his/her interest. But if they are in line with the personal view, they give additional weight to that position. Moreover afterwards if the project is a success the manager can still take the credit for for the project but if it fails it was all the consulting firm's fault.
http://www.npr.org/blogs/money/2011/09/30/140954343/the-frid...
The validity of a particular metric is irrelevant. The point is, on a broad scale, we're collectively worshiping on an altar of financial indicators instead of managing businesses.
I've worked at a bunch of places where people who are utterly clueless about the business make really lousy decisions by applying magic formulas. Sometimes they are MBAs, other times they are wannabes that read Deloitte magazine on an airplane. In either case, because they are clueless, they have no way of assessing the validity of the metrics they are using to run the business. The right formula with the wrong inputs yields the wrong answer.