Dr. Pietro Micheli: "Too many indicators and reports, and loose connections between strategy and measures often make measurement systems very expensive pieces of furniture."
Investments in performance measurement and management systems 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 implement and communicate strategy, support decision making, align behaviors, and, ultimately, improve performance.
While measurement and management systems can indeed help organizations achieve all these fundamental aims, current practices show that managers are consistently making mistakes that prevent them from reaping the benefits of their investments. While their intentions are usually positive, our research shows that, in fact, they often encourage exactly the behaviors their organizations neither need nor want.
These flawed assumptions are what I call the seven myths of performance management.
Myth 1: Numbers are Objective
A performance measurement system enables organizations to gather, analyze and communicate data on both organisational and individual performance. And we want such data to be objective, right? Not necessarily. The quest for perfect, objective data is likely to leave us frustrated and disappointed.
My research shows that performance data is in fact ambiguous and open to interpretation, and that its use and impact on performance depends on commonality of interpretations. Therefore, while it is 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, worse, assuming that numbers are 'objective' and therefore speak for themselves).
Myth 2: Accuracy and Precision
Once a performance measurement system is introduced we want information to be as accurate and precise as possible. Or not. Research conducted in both private and public sectors shows that organizations invest billions of dollars in measuring and managing their performance. Therefore they should treat this as an investment in which benefits outweigh costs, rather than something that should be of the best possible quality. And 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
Few would challenge the assumption that gathering and analyzing data is a value added activity. But actually those few would be right. Value is generated when data is used, but unfortunately we know that performance data is very rarely used within organizations. In U.S. federal departments, for example, while managers recently reported having more performance indicators than they did 10 years ago, their use of performance information to make decisions has stayed virtually the same. Results in the private sector are no different. Too many indicators and reports, and loose connections between strategy and measures often make measurement systems very expensive pieces of furniture.
Myth 4: Alignment
Managers and employees should be aligned to achieve the main organizational goals. Sure. But the typical way in which managers try to create alignment ends up generating bureaucracy and negatively impacting on staff morale. Recent studies show that, while organizations are making considerable efforts to align behaviors and actions, their results are often dismal. Cascading measurement systems in a top-down fashion, and rigidly connecting objectives, targets and indicators end up generating 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 over which indicators to use, and which targets to aim for.