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Myth #6: You need performance measures in order to drive performance

September 26, 2013

If one has recruited the right staff, there is a clear understanding of what the organization's critical success factors are. And when staff work in a supportive environment with great managers and leaders, the organization will succeed. Performance measures will support and enforce the positive environment that already exists.

I am now convinced that an organization with dysfunctional performance measures would function much better without them, for the following reasons:

Staff Management
Managers would spend time discussing goals with staff. Having one-to-one meetings on a regular basis would ensure progress against goals were monitored, feedback given, and celebrations held.

Performance-Related Pay
Bonuses would no longer be based on very dubious formulae matrixes. Performance would be rewarded based on a retrospective look at performance including a comparison against peers’ performances and that achieved by third parties. It would dispel one of the greatest myths of performance measurement which is by linking pay to performance measures you will increase performance.

Balanced Scorecard Initiatives
All those balance scorecards that are not delivering would be frozen, giving the organization a chance to evaluate how it is using this important methodology.

Measurement of Team Progress
Organizations would monitor progress against milestones achieved and output from the team. Comparisons could be drawn from prior periods of outstanding performance and agreements reached relatively painlessly between the manager and staff concerned.

Ascertaining the Organization’s Critical Success Factors
With no measures, the CEO could take a step sideways and realize that the organization does not in fact know what its critical success factors are. This is a vital realization. Whilst most organizations know their success factors, few organizations have:

  • worded their success factors appropriately
  • segregated out success factors from their strategic objectives
  • sifted through the success factors to find their critical ones—their critical success factors
  • communicated the critical success factors to staff.

Monitoring the Organization’s Performance
The CEO would be analyzing actual performance and would be notified of exceptions which warranted their attention. There would be daily and weekly reporting as well as some instantaneous exception reports beamed on their smart phone where a phone call was needed to chase something up. CEOs would be encouraged to “go out and see” (a Toyota principle) rather than hide behind a bank of data.

The CEO would now need to promote leadership and innovation within the organization and adopt more of the management practices preached by the great paradigm shifters Jim Collins, Gary Hamel, Jack Welch, Peter Drucker, and Peters & Waterman.

Consultancies Rethinking Their Product Range
The abandonment of performance measures would have a profound impact on the bottom line of consultancy firms. Large assignments performed on balanced scorecard implementations would cease for the time being, and clients’ staff would no doubt breathe a sigh of relief.

Gaming of the Performance Management System
The manipulation of performance reporting for the sole benefit of one’s pay packet would no longer be a worthwhile activity. Senior management would now spend more time improving the bottom line. The annual target-setting travesty would be replaced by the setting of big, hairy, audacious goals that motivate and energize staff.

This is the final in a series of blog posts by guest blogger and Decision Day 2013 Keynote Speaker David Parmenter examining the six most common myths related to performance monitoring.

You can catch up on David’s previous posts here: part 1, part 2, part 3, part 4; and read a recent interview we had with him.

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