Performance measurement and management systems have proliferated over the past two decades. Executives in both the private and public sectors have relied on performance metrics for strategic planning, and decision-making to drive bottom line results. Yet recent research reveals that leaders are making some fundamental mistakes, and are subject to myths regarding performance management.
So argues Pietro Micheli, Professor of Organizational Performance at he Warwick Business School, based on his recent research. He argues that the myths and mistakes “often encourage exactly the behaviors their organizations neither need or want.” Here’s a brief summary of myths that Micheli identifies:
- Myth 1: Numbers are Objective. Micheli contends that performance data is in fact “ambiguous and open to interpretation, and that its use and impact on performance depends on commonality of interpretations.”
- Myth 2: Accuracy and Precision. Micheli argues that organizations invest huge amounts of money to gather multiple data to manage performance, but as the question, “are we getting the data that is good enough for our purposes?” or in other words, are the data connected to strategic objectives?
- Myth 3: Added Value. Micheli says that performance data is often never used in organizations, or in other words, the data is not used to make new decisions only reinforce old ones.
- Myth 4: Alignment. Recent studies show that, while organizations are making considerable efforts to align employee behaviors and actions, Micheli contends, their results are often dismal because they are initiated top-down in a rigid fashion with no discretion left to employees.
- Myth 5: Motivation. Micheli says that performance targets, indicators and rewards are often used to focus attention, and engage and motivate staff. Yet, despite good intentions, organizations often generate what Micheli calls a vicious cycle of performance management: “The usual reaction is to quickly introduce a series of measures to gather ‘objective’ data and to attach rewards to specific targets to incentivize employees. Unfortunately, as a result of this people get measure fixated.” They do a good job hitting the target but lose touch with the underlying objective or goal. Then over time a culture of performance measurement emerges which employees blindly follow. They work on what is measured, blind to the organization’s overall success.
- Myth 6: Enabling Change. Many organizations which use performance targets and indicators to kick-start the implementation of change, but measurement systems “have often acted as obstacles rather than enablers,” Micheli argues, adding that a rigid system regulated by managers often dampens employee initiative, rather than adopting an empowering and flexible approach.
- Myth 7: Improvement. While the ultimate goal of using a performance measurement system is to improve organizational performance, Micheli’s research shows that the impact on performance is often non-existent, when they are not used to promote employee learning and creative collaboration.
Micheli concludes his research by contending “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.” And more importantly, 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 system and use them for learning, rather than control purposes.”