Pietro Micheli Ph.D.

Investments in performance management systems and the measurement of such efforts have been steadily increasing over the past two decades, and there is no sign that this trend will change in the future. Leaders and managers in both private and public organizations regard such systems as a key means to communicate and implement strategies, support decision making, align behaviors and, ultimately, improve performance. While measurement and management systems can help organizations achieve these fundamental aims, current practices show that managers are consistently making mistakes that prevent them from reaping the full benefits of their investments in time, money and effort or those of their company, department or organization. While intentions are usually positive, research shows that managers and supervisors often encourage the exact behaviors their organizations or companies neither need nor want. These flawed assumptions are what I call the seven myths of performance management. 1. The objective nature of data A performance measurement system enables you to gather, analyze and communicate data on both macro and micro performance levels. This way, we can see how each individual contributes to the entire operation to best utilize workers’ abilities. Although we want such data to be objective, that is not necessarily the case in every event. Research shows that performance data is ambiguous and open to interpretation; its use and impact on performance depends on a commonality of interpretations. Therefore, while it is important to have data that is robust and relevant, your efforts should be devoted to fostering similar interpretations through leadership and communication rather than trying to remove individual views — or worse, assuming that numbers are objective and speak for themselves. 2. The vitality of accuracy and precision Once a performance measurement system is introduced, you naturally want a plethora of flawless information, but that might not be the best use of your time. Research conducted in both private and public sectors shows that companies and organizations invest billions of dollars in measuring and managing their performance. Therefore, you should be treating the practice as an investment where the benefits outweigh the costs instead of an expenditure in quality assurance. To find a balance between too much information and meticulous data, the question is not, “Is our data as accurate and precise as possible?” Rather, by connecting your measures to your objectives, you should ask, “Are we getting the proper data for our intended purposes? 3. Data congregation adds value Few would challenge the assumption that gathering and analyzing data is a value-added activity. But, those few would actually be right because, although value is generated when information is put to use, performance data is rarely utilized. In U.S. government-run departments, for example, managers report having more performance indicators than they did 10 years ago, but the influence of such information in the decision making process has stayed virtually the same. Unfortunately, results in the private sector are no different. An overabundance of indicators and reports — in addition to loose connections between strategies and measures — often make measurement systems very expensive pieces of furniture. 4. Aligning objectives makes little difference Your goals and those of your employees should be aligned. But, the ways in which managers attempt to align with subordinates usually ends up generating bureaucracy and negatively affects morale. Recent studies show that, while organizations are making considerable efforts to align behaviors and actions, results are often dismal. Cascading measurement systems in a top-down fashion and rigidly connecting objectives, targets and indicators tends to generate an infinite sequence of unintended consequences. Instead, while designing and implementing performance measurement systems, sufficient discretion should be left at every level to make decisions about which indicators to use and for which targets to aim that mutually benefit everyone. 5. Incentivization will drive results Performance targets, indicators and rewards are often utilized to focus attention and motivate staffs — on paper, at least. In practice, however, levels of engagement in many organizations are falling because of the incorrect uses of performance management systems. Despite all of the good intentions, organizations often generate what can be described as a vicious cycle of performance management. The starting point is usually a difficult situation in which performance has decreased or is deemed unsatisfactory. The usual reaction is to quickly introduce a series of measures to gather objective data and attach rewards to specific targets in order to incentivize employee performance. Unfortunately, this results in workers becoming measurement fixated; they know what they have to do to hit the target, but they often miss the point and fail to understand the underlying objective. Even worse, a culture of performance measurement can start to emerge where employees will blindly follow the objectives on which they are measured and rewarded, often at the expense of personal success and company profitability. To avoid this vicious cycle, organizations should involve people in all levels of responsibility as much as possible while introducing a new system. Then, it is necessary to carefully monitor its use and introduce rewards if necessary to ensure buy-in — but, incentives should only be introduced once the system is operable and has been tested. 6. Measuring performance will facilitate change The introduction of new performance indicators can kick-start the implementation of new strategic objectives and promote different ways of working. When it comes to organizational change, however, measurement systems have often acted as obstacles rather than enablers. Particularly, when a system is pervasive and consists of a large number of indicators, organizational inertia may arise. This may not be a major problem for organizations operating in relatively stable markets, but it could become a serious issue for firms competing in dynamic environments — a building services professional in a large metropolitan area, for example. These organizations should adopt an empowering and flexible approach to the design and use of measurement systems. While alignment processes are needed to ensure that performance indicators and behaviors are in line with the organization’s strategic priorities, empowerment at the managerial level is needed to build sufficient dynamism into

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Pietro Micheli Ph.D.

Associate Professor of Organizational Performance at Warwick Business School

Articles by Pietro Micheli Ph.D.

Flawed Assumptions Of Performance Management

Business and Management

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