Flaws in Performance Measurement

Flaws in performance measurement.

Vanity. One of the most widespread failings in performance measurement is to use measures whose sole purpose is to make the organisation, its people, and especially its managers look good. As one executive said, “Nobody wants a metric that they don’t score 95 on.” This is especially true because bonuses and other rewards are usually tied to performance measures.

Provincialism. This sin permits organisational boundaries and concerns to dictate performance metrics. On the surface, it would seem natural and appropriate for a functional department to be measured on its own performance. That is, after all, what its managers can control. In reality, however, measuring so narrowly inevitably leads to sub-optimisation and conflict.

Narcissism. This is the offence of measuring from one’s own point of view, rather than from the customer’s perspective.

Laziness. This is: assuming you know what is important to measure without giving it adequate thought or effort.

Pettiness. Too many companies measure only a small component of what matters.

Inanity. Metrics drive behaviour, but too many companies implement metrics without giving any thought to the consequences of these metrics for human behaviour and consequently for enterprise performance. People in an organisation will seek to improve a metric they are told is important, especially if they are compensated on it and even if doing so is counterproductive. Managers might keep in mind this variant of an old adage: “Be careful what you measure — you may get more of it than you want.”

Frivolity. Not taking measurement seriously is perhaps the most grievous sin of them all. The symptoms are easy to see: arguing about metrics instead of taking them to heart, finding excuses for poor performance instead of tracking root causes, and looking for ways to blame others rather than shouldering the responsibility for improving performance. If the other errors are sins of the intellect, this is a sin of character and corporate culture.

As with the seven deadly sins, the sins of measurement often overlap and are related; a single metric may be evidence of several sins. A company that commits these sins will find itself unable to use its metrics to drive improvements in operating performance, which is the key to improved enterprise performance. Bad measurement systems are at best useless and at worst positively harmful. And don’t be fooled by the old adage “That which is measured improves.” If you are measuring the wrong thing, making it better will do little or no good.

Excerpted from Faster, Cheaper, Better by Michael Hammer and Lisa W. Hershman © 2010 Hammer and Company.

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