Thursday, 17 April 2008

The trouble with performance management …

Many companies run a system of performance management. Compulsive measurement of everything that is done in the course of business. Balanced scorecards are used to ensure that we are directing all our efforts at achieving our strategic objectives. Then there are Key Performance Indicators (or KPIs) cascading through all levels of the organisation to ensuring that employees are focussing their attention on what needs to be done.

Perhaps it sounds like a good idea. Measure whatever is measurable and find a way to measure the rest. Everyone is focused only on their Key Performance Areas. Ensuring that you score well on your KPIs is all that is required to get good increases, recognition and possible promotion.

One very KPI driven major company hit problems but was very late in making the required changes to priorities. Although the company was in trouble the executive got their bonuses. They had achieved all their objectives.

Yes, there is a down-side. What if the KPIs don’t reflect everything that needs to be done? If circumstances change and require some agility? The answer is that it doesn’t matter. As the CEO or financial director you only have to do what the KPIs measure. Then we are assured of our bonus or promotion. Even while the wheels fall off around us.

Many companies achieved great things without these measures in the past. Working without these measures allows us a degree of freedom to innovate, to explore alternatives and to deal with crises. KPIs force us to work with blinkers, within boundaries. They force us to work in a way that earns KPI points. Changing KPIs can be a long and cumbersome process.


Dawtch said...

You know, this is not only a problem in the business world. We are now scoring our children, and by extension their teachers in a similar way with these SAT and other evaluation tests. If the students perform well on the tests they get moved forward, and the teachers are considered to have done their jobs. But this "teaching the test" method leaves a lot to be desired, as far as I am concerned. There should be many things involved in the successful teacher/student relationship that no test can measure, but that are pretty much now non-existent...

Barry M said...

Indeed you are correct. I do believe that measurement is necessary some of the time - but there also must be flexibility and the ability to recognise when you should be doing something that isn't being measured, and to not be pensalised for doing doing it.