According to Pietro Micheli, Warwick Business School, part of the University of Warwick, leaders and managers in both private and public organisations regard performance measurement and management systems as a key means to implement and communicate strategy, support decision making, align behaviours, and, ultimately, improve performance. Yet his research shows that they often encourage the behaviours their organisations neither need nor want. This has led him to outline seven myths of performance management.
Myth 1: Numbers are Objective
The quest for perfect, objective data is likely to leave us frustrated and disappointed. Performance data is ambiguous and open to interpretation – and its use and impact on performance depends on commonality of interpretations. So, while it’s important to have data that is robust and relevant, managers’ efforts should be devoted to fostering similar interpretations through leadership and communication, rather than trying to remove individual views or assuming that numbers are ‘objective’ and therefore speak for themselves.
Myth 2: Accuracy and precision
Organisations invest heavily in measuring and managing their performance – treating this as an investment in which benefits outweigh costs, rather than something that should be of the best possible quality. This balance can only be ensured by connecting measures to objectives. So the question is not: is our data as accurate and precise as possible? But, rather: are we getting data that is good enough for our purposes?
Myth 3: Added value
Value is generated when data is used – not when it’s gathered – but organisations rarely use performance data. Too many indicators and reports, and loose connections between strategy and measures often make measurement systems expensive pieces of furniture.
Myth 4: Alignment
Managers and employees should be aligned to achieve the main organisational goals – but the typical way in which managers try to create alignment ends up generating bureaucracy and negatively impacting on staff morale. Cascading measurement systems in a top-down fashion and rigidly connecting objectives, targets and indicators generate an infinite sequence of unintended consequences. Instead, sufficient discretion should be left at every level to make decisions over which indicators to use, and which targets to aim for.
Myth 5: Motivation
Performance targets, indicators and rewards are often used to engage and motivate staff – yet levels of engagement in many organisations are falling. People get ‘measure fixated’. They understand what they have to do to hit the target but they forget about the underlying objective. Employees focus on ding what they’re measured and rewarded for – at the expense of their organisation’s success. To avoid this vicious cycle, organisations should involve people as much as possible while introducing a new system, monitor its use and introduce rewards – if necessary – only once the system has been tested.
Myth 6: Enabling change
When it comes to organisational change, measurement systems have often acted as obstacles rather than enablers. This may not be a major problem for organisations operating in relatively stable markets but it could become a serious issue for firms competing in dynamic environments. Empowerment and HR management can promote dynamism and responsiveness by building flexibility into the system to allow for local adaptation of the indicators.
Myth 7: Improvement
The goal of introducing a performance measurement system is to improve organisational performance, yet its main role is usually to monitor and report to satisfy internal or external requirements. Impact on performance is often non-existent.
Micheli concludes that organisations spend considerable amounts of time and money developing and using performance measurement and management systems. This is laudable but often ineffective. Rather than spending months designing the perfect system that can produce objective, accurate and precise data, efforts should be put in communicating to all employees the reasons and benefits of such systems, and connecting strategy, measurement and decision-making. Rather than assuming that a tight set of measures, targets and rewards will lead to alignment, motivation and improvement, managers should empower people at different hierarchical levels, build flexibility in these systems and use them for learning, rather than control purposes.
Comment: Micheli’s conclusions are dangerous because (a) they’re a refreshing dose of reality and (b) they strike at the heart of the workplace’s IT and accountant-led structure. Organisations and the communities they service are really about people; not systems and figures. We still see employees in broadly Marxist terms – as merely a factor, along with capital, in the production process.
Thankfully, for the status quo, Micheli has published his research close to the Christmas and New Year holidays. This means that few people will see them; fewer will be stirred by them and, in a few weeks, everyone will have forgotten them – so they can continue making the same mistakes in 2013 and beyond with a clear conscience. Happy Christmas everyone!