Organisations love measurement systems, be they for setting targets, tracking key performance indicators or rewarding and punishing individual behaviours. Performance measurement has attracted huge time and investment and we can now access large amounts of related data.
While acknowledging the usefulness of part of this, the authors of this book question whether all the time spent on collecting, analysing and reporting data is actually worth the effort. Does it actually make governments, corporations and people perform any better?
The authors say Big Data is changing the way organisations operate and this has many positive effects in terms of managing processes and supply chains. This creates major challenges, however. Firstly, managers are required to develop data-oriented management systems to make sense of the phenomenal amount of information being captured. While the amount of data is seductive and potentially very useful, it can also be overwhelming.
Measurement is addictive as well, leading to a phenomenon of measurement madness, where the desire to measure, as a way of controlling everything, becomes all consuming. Tim Ambler, a recently retired scholar at the London Business School, is quoted saying: "Important as financial metrics are, they distort reality and provide the illusion of control. Cannabis does much the same."
Losing the link to performance is all too common. When measurement loses meaning and nobody relies on it for decision-making, those carrying out the processes can become the subject of ridicule.
Whereas the intelligent use of performance measurement systems breathes life into performance indicators and can deliver intended benefits to organisations and stakeholders, excessive reliance on measures can quickly and easily steer management off-course and lead to a number of unintended consequences.
There are many examples of situations when targets go bad, for example. One quoted here is the case of the Ford Pinto from the 1970s. The edict of Lee Iacocca, then chief executive of Ford, was that that this new car should not weigh an ounce over 2,000lbs and not cost a cent over $2,000. While this did result in positive innovations in terms of cost savings, fuel efficiencies and speed to market, these were totally overshadowed by reductions in safety levels which allegedly led directly to loss of human life with huge reputational damage to the corporation.
Other examples here include an NHS Hospital, Mid-Staffordshire, which recorded exceptionally high mortality rates because of an over-focus on achieving targeted budget reductions. According to reports, doctors were diverted from seriously ill patients to deal with minor injury cases to ensure that maximum four-hour waiting-time mandates would not be breached.
Targets are good, the authors maintain, and point to empirical studies that show that goal-setting is beneficial and that benefits can be proven time and again. The problem is that targets are quantitative representations of desired levels of performances. They do not take into account the behaviour and attitudes of the people affected by them. It is at the individual and team level that we need to investigate if we want to understand the causes and the failures in this area and if we want to find possible remedies.
Put simply, all too often, people play the system. Take the case of the salesperson on a simple target system who, on achieving his required number, plays golf for the rest of the month rather than generating new leads lest that eat into next month’s performance. The reverse is also true. Many individuals and teams cram to produce exceptional annual or quarterly results, spurred on by performance-related bonuses. Then there’s the case reported by the UK Financial Conduct Authority (FCA) of the pressure put on staff at Lloyds Bank between 2010 and 2012. Staff were offered so-called “grand in your hand” bonuses for reaching targets. The flip side was severe consequences for those who did not. The investigation by the FCA found that one manager was so terrified of being demoted that he sold protection products to himself, his wife and a colleague to avoid failing to meet his numbers.
While this book finds its angle in highlighting the downsides of measurement, which is naturally more interesting, it takes a fair and balanced look at the pros and cons of work in this area.