Joe’s Journal: On Measuring Performance

“Work implies accountability, a deadline, and finally, the measurement of results, that is, feedback from results on the work. What we measure and how we measure determine what will be considered relevant, and determine, thereby, not just what we see, but what we—and others—do.”

                                             – Peter F. Drucker

In Peter Drucker’s system of management, the “theory of a business”—fundamental notions about customers and competitors, about technology, about a company’s own strengths and weaknesses—is converted into strategies and objectives. But that is not the end of the process. Each objective must then be assigned to a particular organizational unit and then to specific individuals. Objectives are then converted to specific work assignments for which each individual is responsible. Performance is then monitored, and results are compared to objectives. Follow-up is often necessary to ensure desired results.

[EXPAND More]But what are often ignored are the measurements that are used to evaluate performance of individuals and of organizations. These are managerial controls. And they are powerful in determining behavior.

One must ask if the performance of each person for an objective is included within the system of performance measures used to evaluate and reward the person’s performance. If not, the person will be conflicted—what is measured and rewarded is different than what is expected by the objective. This often happens in organizations, and the result is tension and misdirection. A system of controls (i.e., a management control system) should be designed to help people achieve their individual objectives and to help management achieve overall control and validate its theory of the business.

We have a number of proverbs in the field of control systems that are useful generalizations. At the level of controls or performance measures “you get what you inspect, not what you expect.” Second, the management systems of an organization “are designed perfectly to get the actual results experienced.”  Finally, we often fall into the trap so accurately identified in Steven Kerr’s article “On the Folly of Rewarding A, While Hoping for B.” Here people are not rewarded for achieving assigned objectives but for some other behavior. So we’d do well to listen to Drucker’s counsel, articulated above.

We all should avoid the mistake of thinking that controls and control systems are no longer relevant in an age of empowerment. They are always relevant and a point of significant leverage in organizations.

– Joe Maciariello [/EXPAND]